Tax news

The International Monetary Fund says the Nigerian economy is recovering with increased Gross Domestic Product (GDP) in 2018 and falling inflation at the end of 2018. The Executive Board of the IMF stated this in its report at the conclusion of the Board’s consultation with Nigeria, according to a statement issued in Washington, DC by a spokesperson for the Fund, Lucie Fouda. IMF said: “Nigeria’s economy is recovering. “Real GDP increased by 1.9 per cent in 2018, up from 0.8 per cent in 2017, on the back of improvements in manufacturing and services, supported by spillovers from higher oil prices, ongoing convergence in exchange rates and strides to improve the business environment. “Headline inflation fell to 11.4 per cent at end-2018, reflecting declining food price inflation, weak consumer demand, a relatively stable exchange rate and tight monetary policy during most of 2018, but remains outside of the central bank’s target range of 6-9 per cent. “Record holdings of mostly short-term local debt and equity and a current account surplus lifted gross international reserves to a peak in April 2018, while the three-times oversubscribed November 2018 Eurobond helped cushion the impact of outflows later in the year”. IMF said, however, persisting structural and policy challenges continue to constrain growth to levels below those needed to reduce vulnerabilities, lessen poverty and improve weak human development outcomes, such as in health and education. The bank said a large infrastructure gap, low revenue mobilisation, governance and institutional weaknesses, continued foreign exchange restrictions, and banking sector vulnerabilities were dampening long-term foreign and domestic investment and keeping the economy reliant on volatile oil prices and production. “Under current policies, the outlook remains therefore muted. Over the medium term, absent strong reforms, growth would hover around 2½ per cent, implying no per capita growth as the economy faces limited increases in oil production and insufficient adjustment four years after the oil price shock. “Monetary policy focused on exchange rate stability would help contain inflation but worsen competitiveness if greater flexibility is not accommodated when needed. High financing costs, on the back of little fiscal adjustment, would continue to constrain private sector credit, and the interest-to-revenue ratio would remain high. “Risks are moderately tilted downwards. On the upside, oil prices could rise, prompted by global political disruptions or supply bottlenecks. Bold reform efforts, following the election cycle, could boost confidence and investments, especially given relatively conservative baseline projections. “On the downside, additional delays in reform implementation, a persistent fall in oil prices, reduced oil production, increased security tensions, or tighter global financial market conditions could undermine growth, provoke a market sell-off, and put additional pressure on reserves and/or the exchange rate,” the Fund said. The Executive Directors, in their assessment, welcomed Nigeria’s ongoing economic recovery, accompanied by reduced inflation and strengthened reserve buffers. They noted, however, that the medium-term outlook remains muted, with risks tilted to the downside. In addition, long standing structural and policy challenges need to be tackled more decisively to reduce vulnerabilities, raise per capita growth, and bring down poverty, they said. Directors, therefore, urged the authorities to redouble their reform efforts, and supported their intention to accelerate implementation of their Economic Recovery and Growth Plan. They welcomed the Nigerian authorities’ tax reform plan to increase non-oil revenue, including through tax policy and administration measures. They stressed the importance of strengthening domestic revenue mobilisation, including through additional excises, a comprehensive Value Added Tax reform, and elimination of tax incentives. Securing oil revenues through reforms of state owned enterprises and measures to improve the governance of the oil sector will also be crucial, they said. Directors highlighted the importance of shifting the expenditure mix toward priority areas. They welcomed, in this context, the significant increase in public investment but underlined the need for greater investment efficiency, while also recommending increasing funding for health and education. They noted that phasing out implicit fuel subsidies while strengthening social safety nets to mitigate the impact on the most vulnerable would help reduce the poverty gap and free up additional fiscal space. With inflation still above the Central Bank target, Directors generally considered that a tight monetary policy stance is appropriate. They also urged ending direct Central Bank intervention in the economy to allow focus on the central bank’s price stability mandate. Directors commended the authorities’ commitment to unify the exchange rate and welcomed the increasing convergence of foreign exchange windows. They noted that a unified market based exchange rate and a more flexible exchange rate regime would support inflation targeting. Directors also stressed that elimination of exchange restrictions and multiple currency practices would remove distortions and facilitate economic diversification. They welcomed the decline in nonperforming loans and the improved prudential banking ratios but noted that restructured loans and undercapitalised banks continue to weigh on financial sector performance. Directors also recommended establishing a credible time bound recapitalisation plan for weak banks and a timeline for phasing out the state backed asset management company AMCON. Directors urged the authorities to reinvigorate implementation of structural reforms to diversify the economy and achieve the Sustainable Development Goals. They pointed to the importance of improving the business environment, implementing the power sector recovery programme, deepening financial inclusion, reforming the health and education sectors, and implementing policies to reduce gender inequities. Directors welcomed improvements in the quality and availability of economic statistics and encouraged continued efforts to address remaining gaps, including through regular funding.   Source: Punch

Individuals and corporate bodies found guilty of tax evasion are to henceforth lose their properties to the Federal Government, the Chairman, Federal Inland Revenue Services (FIRS), Babatunde Fowler, has said. This was as he equally disclosed that the tax agency surpassed its target for 2018 by generating a total of N5.32 trillion. Fowler disclosed this on Tuesday at a roundtable between the House of Representatives Joint Committee on Aides and Loans, Finance and Appropriations and relevant ministries and agencies on the 2019–2021 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Papers (FSP) in Abuja. While appraising his agency’s performance for the 2018 fiscal calendar, Fowler said the court had, for the first time, granted leave to the service to confiscate properties belonging to tax defaulters and liquidate same with a view to recovering government taxes. “We’ve gotten a court order to start the sale of property of tax defaulters for the first time, and we’re working at commencing that to recover what’s owed to government. “We have shown increased sales in the various tax nets, but we had to slow down, and we’re working on over 55,000 accounts and generating an estimate of about N746 billion.  “And, as we continue to use technology to improve the collection process, VAT (Value Added Tax) will continue to improve in remittances and increase revenue flow,” he said. The tax boss also disclosed new innovations being employed to improve tax collection with regards to the deployment of e-services which, he said, were improving ease of compliance by 25 points. “We’re working with the EFCC (Economic and Financial Crimes Commission) on the joint tax board to improve compliance and collection. “Property owners have also been netted and a total of N4.3 billion can be realised in Abuja and Lagos alone,” he said.   Source: Independent

The Anambra State government has lamented that it is being owed as much as N600 million in tax by companies, schools, hotels and other business concerns operating in the state, most of which have bluntly refused to pay up. The Chairman of Anambra State Internal Revenue Service, Dr. David Nzekwu, stated this on Tuesday, during the enforcement of a court order, which empowered the board to seal off some companies that were indebted to the state government. Nzekwu said some of the companies where the order were being enforced owed taxes for years without remitting them, the reason it approached a state High Court to force the companies to pay up. “We are owed N600 million by defaulting companies in the state, and the court has given orders for us to seal the premises of such companies, and that is what we are doing today. We are not molesting anyone, but simply sealing off their premises to ensure they pay up,” he said. The revenue board, which was in Awka, Onitsha and Nnewi for enforcement, sealed off Sabrud Consortium, producers of prepaid electricity meters in Awka, which owed over N5 million from January 2011 to December 2016, Divine Favour Pharmaceutical Company, Nkpor, which also owed N5 million from 2010 to 2015 and Nelly New Town Hotels and Suites which owed N8 million. Other companies also sealed off included: Ejiamatu Microfinance Bank, Ojoto; Eteleson Industries, Ogbunike; and Delendu Aluminium Manufacturing company, Onitsha, said to have evaded tax to the tune of N8 million between 2016 to 2017. Nzekwu lamented that most of the monies owed the state could help the governor, Chief Willie Obiano, in his good works in the state. He explained that the expectation of every new company was to register within six months of operation and render their tax returns in respect to companies and individuals’ financial strength. He also stated that the companies would incur additional cost as a result of the sealing off of their premises, adding that breaking the seal was a huge offence that could land one in prison. The state Governor, Obiano, had recently during a meeting with civil servants promised to pay the new minimum wage, while also urging the state revenue services to work hard to increase the internally generated revenue of the state, which he hoped to make the payment.   Source: Thisdays

Tax administration and the system of taxation in Nigeria was once again brought to the fore when President Muhammadu Buhari on Tuesday reiterated the federal government’s resolve to continue to sensitise and encourage Nigerians to cultivate the culture of paying taxes by ensuring fair policy implementation and effective utilisation of resources. The Special Adviser to the President on Media and Publicity, Mr Femi Adesina, said Buhari stated this when he received the leadership of the Chartered Institute of Taxation of Nigeria (CITN) at the State House, Abuja on Tuesday. The president revealed that the National Tax Policy document had been reviewed with the aim of institutionalising a tax payment culture within the Nigerian workforce. Buhari said the progress made in diversifying the economy, providing social security and securing the country could be further improved with enhanced and expanded revenue base. “We have made some progress in the past four years. However, a lot more can still be done. A key step is to enhance and expand government’s revenue base. Today, we still rely on oil as our main source of income. This simply is not enough to meet our infrastructure, social services and security needs,” he said. While describing Nigerians as hardworking and entrepreneurial, the president said a deeper understanding of the effectiveness of tax on the economy by the populace and fair administration would help in improving government’s revenue shortfalls. In his remarks, the President of CITN, ChiefCyril Ede, congratulated the president for winning his second term in office, and assured him of the institute’s support for a successful tenure, especially in the area of using tax to improve government’s revenue. “Your victory is a clear sign of belief, trust and confidence that Nigerians have in you,” he said. Ede said some higher institutions in the country had started offering taxation as a course, hoping it will also be taught in secondary schools. According to him, nations can only achieve development with mobilization of resources through taxation. The president of CITN said: “Political leaders must set a good example for compliance on tax payment by ensuring that presentation of tax certificates remain one of the central requirements for those who want to contest elective positions.” President Buhari’s remark tends to reignite the debate on the need to review the nation’s tax policy as well as diversification of the economy, which is long overdue. This assertion is particularly relevant owing to the fact that the statement is coming on the heels of media report that the federal government is proposing to raise the Value Added Tax (VAT) from five percent to 50 percent to, among other things, enable it meet obligations to workers following the recent approval of increase in national minimum wage from N18,000 to N30,000. Although the issue of taxation in Nigeria is still a thorny one, remarkably the Federal Inland Revenue Service (FIRS) recorded an all-time high tax revenue collection of N5.23 trillion in 2018, given that it was achieved at a period when oil prices averaged $70 per barrel. VAT stood at N1.11 trillion for the first time. Prior to 2018, the highest revenue figure ever attained by FIRS was N5.07 trillion, in 2012, when oil price hovered around $100-$120 per barrel. Besides, the FIRS will be expanding its dragnet and tightening noose against tax evaders, having been given an N8 trillion target this year. The Chairman of FIRS, Dr. Babatunde Fowler, had during the 2019 Management and Stakeholders Retreat, in Lagos, recently reiterated the need for increased compliance to tax laws, adding that there would not be any serious discussion on diversification of the economy without reviewing the country’s tax regime for optimal performance. The Chairman, House of Representatives Committee on Finance, Babangida Ibrahim, while commending the FIRS on the feat achieved, pledged the lawmakers’ support for every initiative that would lead to efficient tax system in the country. “The taxation of any economy and growth of policies of government depends largely on the revenue generated by the tax authorities. We agree that to achieve effective taxation, the support of the parliament cannot be over-emphasised,” he said. At the retreat with the theme: “Parliamentary Support for Effective Taxation of the Digital Economy,” Fowler said FIRS has adopted initiatives that ensure a robust tax administration that is agile and beneficial to all stakeholders. According to him, with the deployment of various digital innovations, cost of collections in non-oil sector has improved from four per cent per N85.99 billion and N100.3 billion in 2016 and 2017 respectively, to N114.1 billion in 2018. It is our view, however, that the Nigeria tax system cannot operate effectively and efficiently except such burning issues as tax evasion and avoidance are reduced to the barest minimum while several others are also adequately addressed. While tax reforms in consonance with global best practices are inevitable, it is high time the federal government lived up to its billing to diversify the nation’s economy from its overdependence on the dwindling crude oil revenue. This will go a long way to address the contentious and contemporary issues at boosting the revenue earning capacity of government.   Source: Blueprint