Tax news

Taiwo Oyedele, head of tax, PwC Nigeria, says Nigeria is one of the most difficult places to pay tax despite the government’s need for taxpayers’ money. Speaking at the recently held Tax Academy Clinic, the tax master advised the tax authorities to make technology the platform for paying taxes; not as an option. “Technology makes things faster, more efficient and more cost-effective. It’s no longer acceptable for authorities to live in the past. Even though Nigeria is starting late, they say better late than never,” he said. “Nigeria doesn’t rank very well on the ease of paying taxes. Nigeria’s tax revenue to GDP ratio is one of the lowest in the world, yet it is one of the most difficult places to pay tax. It is a contradiction: you need tax money but you make the process very difficult. “So, the idea now is to make technology the platform, not an option, for tax compliance in terms of calculating your taxes, making your payments, and filing your returns. In the past, getting your tax clearance certificate used to be like rocket science. “When you need it to buy a plot of land or get a contract, getting the TCC is difficult. With technology now, one should be able to get that immediately. We know that these platforms are not perfect yet; so, our role as PwC, helping so many people to pay their taxes and also paying taxes ourselves, is that once we identify what the problems are, we get the stakeholders to come together to see how we can fix the problems.” He said the use of technology will ensure that the cost of tax compliance is reduced, making it easy to pay taxes. “So, if you simplify it by using technology, what that does is you encourage more people to pay. There is something about compliance cost; it is something that does not benefit the government and the taxpayer. “It is actually the money the taxpayer pays that doesn’t get to the government. So, both the taxpayer and the government have an objective to reduce that cost. “So you can get more people into the tax net and you can get data which is important within the economy for planning government policies that support taxpayers. At the end of the day, taxes are the way the government gets a fraction of the prosperity of people and businesses.” During the tenure of Kemi Adeosun, former minister of finance, the federal government had embarked on the Voluntary Assets and Income Declaration Scheme (VAIDS) to widen the tax base and encourage tax compliance.   Source: Thecable

President Muhammadu Buhari has said that the Federal Government will continue to sensitize and encourage Nigerians to cultivate the culture of paying taxes by ensuring fair implementation of policies and effective utilisation of resources. Mr Femi Adesina, the Special Adviser to the President on Media and Publicity, said Buhari stated this when he received the leadership of the Chartered Institute of Taxation of Nigeria at the State House, Abuja on Tuesday. The president revealed that the National Tax Policy document had been reviewed with the aim of institutionalizing 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.   Source: Punch

PWC Nigeria has stressed the need for tax administrators to simplify tax payment process in Nigeria, to increase compliance level. The Head of Tax, PwC Nigeria, Taiwo Oyedele, while speaking at the firm’s Tax Academy in Lagos, on Wednesday, said Nigeria’s tax revenue to GDP ratio ranked among one of the lowest in the world. Oyedele expressed worry over the enormous challenges taxpayers face in the process of paying taxes in Nigeria, underscoring the need for simpler process through the use of technology. He argued that the adoption of technology would fast-track the processes, and ultimately check tax evasion and avoidance in Nigeria.“Nigeria does not rank very well on the ease of paying taxes. So, Nigeria’s tax revenue to GDP ratio is one of the lowest in the world, yet it is one of the most difficult places to pay tax.   “It is a contradiction when you need tax money, but you make the process very difficult. If you simplify it by using technology, what that does is you are encouraging more people to pay. “There is something about compliance cost; it is something that does not benefit government and the taxpayer. It is actually the money the taxpayer pays that does not get to the government. So, both the taxpayer and the government have an objective to reduce that cost. That is something that technology does for you.” He continued: “Everything we do today is impacted by technology, which is making things better and faster and more cost-efficient and cost-effective. So, it is no longer acceptable for authorities to live in the past. Even though Nigeria is starting late, they say better late than never.”   “So the idea now is to make technology the platform, not an option, for tax compliance in terms of calculating your taxes, making your payments, and filing your returns. Even when you need your tax clearance certificate in the past, this used to be like rocket science. But with technology, one should be able to get that immediately. We know that these platforms are not perfect yet, so our role as PwC is to help many people to pay their taxes and also paying taxes ourselves,” he added.   Source: Guardian

Taxation globally is seen as a way of mobilising and supporting a nation’s financial resources. In this vein many nations have been taking the initiative to ensure that the tax administration is efficiently operated. The Nigerian tax system is beset by myriad of challenges, such as non-availability of tax statistics, inability to prioritize tax effort, poor tax administration, multiplicity of taxes to mention a few. In the quest to make tax payment stress-free and convenient, and to improve the doing-business environment in Nigeria, the tax management agency has introduced some reform initiatives to reduce the time for filing and paying taxes by 50% and to improve transparency and efficiency in tax administration. Already, the new tax reform initiatives are beginning to bring significant benefits to the government. The new tax reforms by the Federal Government has impacted tax revenue profile of the government as a record N5.3 trillion tax revenue was generated in 2018 based on data released by the Federal Inland Revenue Services (FIRS) recently. The tax reforms majorly centred on ease of filing federal taxes, tax amnesty for voluntary asset declarers (VAIDS) and getting more people into the tax net. The data released by the FIRS Chairman, Mr. Babatunde Fowler, recently showed that the N5.320 trillion collection is the highest revenue ever generated by FIRS in history. The highest in FIRS was N5.07 trillion generated in 2012. FIRS’ generation of N5.3 trillion is significant as it was at a period when oil prices averaged $70 per barrel. The oil price was at an average of $100 to $120 per barrel between 2010 and 2013. The non-oil component of the N5.320 trillion is N2.467 trillion (53.62 per cent), while oil element of the collection is N2.852 trillion (46.38 per cent). Mr. Fowler said: “I believe that if we continue with the same pace, we can reach 20% of the tax mix comprising of revenue from SMEs by 2019. The government fully supports us. Some projects may take a year or more to develop, but citizens’ belief in the tax system is uplifted even when they see work in progress. “Just like some of the other oil-rich countries, we never imagined that taxation would be the main way to generate revenue. Now we appreciate the fact that oil is a resource with a price determined by more developed countries, and with that, we are disadvantaged. “There is a 2026 agenda for African countries to be able to fund their budgets internally without grants or aid. It is something we can do right now. Nigeria can show the rest of the world that it can transform within a short time and fund its own budget with taxation as a primary source of revenue.” This reform initiatives, driven by the Presidential Enabling Business Environment Council (PEBEC), the Federal Inland Revenue Service (FIRS), the Kano State Inland Revenue Service (KIRS) and the Lagos State Inland Revenue Service (LIRS), include: stating the timeline to complete corporate income tax (CIT) audit on the website; registering companies on the E-filing platform and creating a simplified single schedule for each tax type on the platform, an FIRS report recently indicated. Thus with these reforms, the report said taxpayers now file and pay federal taxes online from the comfort of their offices or home; taxpayers now make electronic payment and filing of state taxes including PAYE, etc. and employers now remit statutory deductions on behalf of personnel online. In addition, corporate income tax (CIT) audits is now done within a 63-day timeline and there is access to e-platforms for all classes of tax payers. The report also indicated that the process is simple and seamless as all that the tax payer needs to do is visit the FIRS website, file all federal taxes online and to pay for Value Added Tax and Company Income Tax. Other benefits of these online tax payment platforms include; improved transparency and efficiency in tax collection and administration and improved tax revenue to even make tax payers experience better, the report said, adding that continuous improvement on the e-platform for better taxpayer experience is based on feedback received. For Lagos and Kano states, which represent the two hubs of business in the nation, tax payers can also visit the Lagos Inland Revenue Service (LIRS) and Kano Inland Revenue Service (KIRS) websites to make electronic payment of taxes including monthly PAYE. To enhance service delivery, electronic self-service help desks are available at all FIRS offices for payment of taxes. Dr. Jumoke Oduwole, Senior Special Assistant to the President on Industry, Trade and Investment said: “We are pleased with the results the reforms are achieving, and we hope that as we work to deepen these reforms they will further strengthen the system to truly drive economic growth.”   Source: Dailytrust

Minister of Budget and National Planning, Senator Udoma Udo Udoma and Executive Chairman of Federal Inland Revenue Service (FIRS) Mr. Babatunde Fowler of government’s intention to raise the rate of value added tax (VAT) before the end of 2019 is presently causing ripples among various categories of Nigerians. But experts have warned that such a move will further hurt the Nigeria’s economy and make the people poorer. At a Senate hearing on 2019-2020 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) last Tuesday, served the notice on the lawmakers that in view of imminent wage increment stemming from increase in minimum wage from N18,000 to N30,000, the Federal Government intends to hike the current rate of value added tax (VAT). Udoma recalled “that as a result of agitations from the unions that the President set up a tripartite committee to look at the Minimum Wage. Every five years, it is supposed to be reviewed. It has not been reviewed even though there is no doubt that for both the Federal Government and states; it is a tough time to review wages. But the N18,000 is really too low and it is difficult for people to live on N18,000. The President supported a revision but it is important that as we are revising (the minimum wage), we make sure that it can be funded that is why we set up the Bismark Rewane Technical Committee. So we will be coming to you. There may be some changes maybe in VAT and other things. But we will be coming to you in order to make sure that we can fund the minimum wage.” On his part, Fowler told Senate Committee on Finance “I believe that by the end of this year, government and Nigerian people should be ready for an increase in VAT. A lot of Nigerians travel to Ghana and other West African countries and they can see that theirs’s much higher. They pay when they go for those trips. We should be ready for an increase in VAT. I can certainly see an increase in VAT of at least 35 per cent to 50 per cent this year based on our enforcement activities. There, certainly will be an increase in Company Income Tax and also on Petroleum Profit Tax.” Although Udoma tied the plan to planned wage increment, talks about raising VAT rate in Nigeria has been perennial. As late as January this year, Minister of Finance, Mrs. Zainab Usman at the launch of the Strategic Revenue Growth Initiative in Abuja, targeted at improving revenue sources for government the move had become imperative as a result of the fiscal challenges the government is confronted with in providing infrastructure for its people. “There will be a VAT increase. During the course of 2019, we will have clarity as to which items and what the rate will be and we will have to take a request to the National Assembly for amendment before it takes effect. “There is also going to be luxury tax. Already, there is luxury tax imposed on things like jets, yachts and few exceptional items that are classified as luxury and the Chairman FIRS will speak to that but we are contemplating increasing excise duties on carbonated drinks just like we have excise duties now on Tobacco and alcohol. But this is going to be a subject of study because we have to identify which ones will be affected and the best way in which to apply the taxes”, she stated. However, in a fragile economy just returning to growth trajectory after a biting recession, discouraging consumption by increasing VAT may be counterproductive to the economy. There has thus been a cacophony of voices against the move. Governor of Ebonyi state, Mr David Umahi in criticizing the plan described the concept as digging a hole to fill a hole. “Today, I read in the papers where the federal government is lifting VAT from five percent to 35 percent to pay salaries. For me, it’s all about digging a hole to fill a hole. We have not come to the point of realization of how to solve our problems. So, if VAT is lifted from 5 to 35 percent which means that any of us going to buy anything will pay 35 percent more. So, no one should celebrate (election victories) yet. We are in for deeper problems all over the nation. No governor will make magic or President will make magic until we sit down to solve our problems. If they give us N2 billion and the wage bill is N2 billion, you cannot make any other magic. The most important thing we can do for civil servants is what I have done for you by giving loans to you”, he said. Organised Private Sector (OPS) cautioned against the plan warning that it would hurt manufacturers, businesses and consumers alike. In a statement by Nigeria Employers’ Consultative Association (NECA), umbrella body for OPS and Voice of Business in Nigeria insisted that manufacturers and businesses were already saddled with so many challenges, such as infrastructural decay, power, among others. The statement by NECA’s Director-General, Mr. Timothy Olawale, said “the planned increase would erode the gains of minimum wage for low earners, and further weaken their purchasing power, among others. The planned increase of VAT will have far-reaching implications for manufacturers, businesses and consumers alike. Manufacturers and businesses are already saddled with several challenges, such as infrastructural decay, power, etc. “Some companies are closing shops due to some of these challenges while others are still struggling to stay afloat. The proposed increase in VAT would definitely lead to an increase in the cost of doing business, and would likely be passed to the consumers whose purchasing power is already weak. Government does not have to increase VAT in order to enable it pay minimum wage. However, in the event that government must increase VAT against the will of the people, it should be limited to luxury or

Summary Following the suspension of lien placed on the bank accounts of alleged non-compliant taxpayers in February 2019, the Federal Inland Revenue Service (FIRS) has directed banks in Nigeria to resume restriction of bank accounts of a number of taxpayers for alleged non-payment of taxes effective 15 March 2019. Details Earlier in the year, the FIRS had directed a number of commercial banks to place a lien on the bank accounts of a number of taxpayers for alleged non-payment of taxes. However, on 15 February 2019, the FIRS, in a letter, directed banks in Nigeria to suspend the lien placed on the bank accounts for a period of 30 days. (Read our tax alert on the suspension of lien here). Following these events, the FIRS has issued a Public Notice (PN) stating that the restriction on the bank accounts of alleged non-compliant taxpayers would continue effective 15 March 2019. In addition, the PN specifically requires companies that have a minimum annual banking turnover of ₦100 million and have failed to remit Withholding Tax and Value Added Tax to the government to register for tax before the 15th of March to avoid restriction of their bank accounts. Implication The powers of the FIRS to direct the freezing of taxpayers accounts still generates a number of controversies as there are concerns that this FIRS’ approach to recover unpaid taxes may not be consistent with the relevant provisions of the legislative framework in Nigeria. (Read our article on the powers of FIRS to freeze taxpayer’s accounts here). Notwithstanding the above, taxpayers whose accounts have been frozen are advised to liaise with their tax consultants to resolve any issues with the FIRS amicably. Andersen Tax has a hands-on Tax Dispute Resolution Desk that is available to provide information to taxpayers regarding tax reconciliation and assist with tax dispute resolution.   Source: Andersontax

Anderson Tax Wednesday launched its review on Transfer Pricing (TP) Development in Africa, in Lagos. The 45-page report was aimed at providing tax payers and investors with the required insight into TP in Sub-Sahara African countries, particularly Nigeria. Addressing journalists, the Chairman, Anderson Tax Africa, Mr. Seyi Bickersteth, said the “report presents our findings from our survey of Nigerian taxpayers.” “The survey was administered to persons in various positions including tax managers/directors, chief financial officers and heads of finance in leading organizations across major industry sectors. He said: “Prior to the release of the revised TP regulations, the survey was administered on 24 participants while after release of the regulations, 100 people participated in the survey. The survey elicited responses in respect of TP compliance, TP risk assessment, TP audit, dispute resolution as well as APA.” In his address, the Partner and Head, Transfer Pricing Group, Anderson Tax Nigeria, Dr. Joshua Bamfo said: “What we have tried to do is to do an in-depth review and research, that we would be able to present to multinational enterprises and other foreign direct investors, as to; what are the requirement when it comes to transfer pricing of the agency across the sub-regions, what are some of the compliance issues, what are some of the challenges be it audit as pertaining within the sub-region? “With these information, we believe that they will be well equipped in factoring when they are making planning decisions in other to enter this market. “If you look at it from the above perspective, one of the objectives of this particular report is to help multinational enterprises to make informed decisions when they decide to make investments in the Sub- Saharan African sub-region. “In the same token, when we look at it from the perspective of the government of this same sub-region, this is very helpful to them. This is because most sub-Sahara countries wants foreign direct investments as a means of creating job opportunities for their citizenry, and to do that, you will want foreign direct investors to be comfortable and confident that when they come in, they are not going to face cynical obstacles. “So in the area of Transfer Pricing; in particular, the area of taxing, we want to be able to help government to ensure that there is clear ease of doing business, and there is clarity in terms of the challenges that foreign direct investors would face.”   Source: Thisdays