TAX SERVICES

The Federal Government’s aggressive pursuit of increased non-oil revenue to pare huge budget deficit, which has remained a yearly routine over the years, gained further traction last week, with plans by the lawmakers to enact Communication Service Tax (CST). But the move, like others, is still testing the controversial waters over its morality, workability and economic viability.        Following the most recently tax initiatives, which controversies are yet to settle, include the planned online transactions tax for 2020 and 44 per cent rise in Value Added Tax (VAT). The CST, according to the nation’s lawmakers, is an alternative to VAT.Already, “fast fingers” among the nation’s financial analysts are seeing a shortfall with CST’s revenue capacity and rising cost for telecommunications’ users, while VAT holds sway over potential inflationary pressure, among others. In both ways, they signify additional burden for the citizenry and represent government’s great “hunt without barriers.” The CST Bill is back from the dead but now repurposed. The 2016 version was meant to help boost government revenues from non-oil taxes in the wake of the collapse in oil prices between 2014 and 2016.In the 2019 version of the bill, which passed the first reading in the Senate this week and it proposes a nine per cent Communication Service Tax (CST) to replace the planned increase in VAT from five per cent to 7.5 per cent by the FG.The CST, when passed into law, will be levied on the consumers of voice calls, Multi-media Messaging Service (MMS), Short Message Service (SMS) data usage and Pay per View TV services provided by mobile telecommunication and Internet service providers. While the companies must provide the government access to network nodes, non-compliant service providers could suffer penalties, including five per cent of gross yearly revenue from the last audited financial statements or a revocation of their licence.Failure to file returns by due date will attract N50,000 as well as 10,000 per day until compliance while non-remittance of the tax by the due date will attract a monthly interest on the unpaid tax at 150 per cent of the average of prevailing lending rates by commercial banks. The Par trillioner/Head of Tax and Corporate Advisory Services at PwC Nigeria, Taiwo Oyedele, while reacting to recent developments in Nigeria tax system, said the positive side for government is additional revenue, which on the other side, will leave the citizens with more difficulties, unless palliative are quickly scripted. Noting that government must not only go about taxing Nigerians, he recalled that the fundamental principle of taxation is that people should pay according to their abilities, which presently is questionable, as regards how many people that can pay.“To limit the impact of an increase government should implement counter measures and palliatives to protect businesses and the poor. Ensure transparent reporting and efficient utilisation of the revenue for public services and infrastructure to act as palliatives and catalyst for growth. “Government should lead by example,” he said, ensuring that all its Ministries, Departments and Agencies (MDAs) fully comply.For analysts at Arinvest Securities Limited, the CST would overburden consumers who already bear five per cent Value Added Tax (VAT) on telecommunications services.“As Nigeria plans to boost digital connectivity and derive the attendant benefits, this could slow progress as consumers readjust spending patterns given the level of poverty in the country. For the telecommunications sector, the proposed CST worsens the issue of tax multiplicity. “In addition to existing taxes, companies would bear increased costs of compliance and lower patronage as consumers react negatively to new taxes. With the sector contributing 1.2 per cent to the real GDP growth of 1.9 per cent in Q2:2019, there is the prospect for even slower economic growth. “Similarly, considering that the penetration of telecommunications services is lagging in rural areas, the planned tax would slow progress towards expanding national coverage. This could have negative implications for financial inclusion which is expected to be driven by mobile money services,” the Managing Director of company, Ayodeji Ebo, said in the Weekly Update made available to The Guardian at the weekend. The analysts noted that the CST may not generate as much as the proposed VAT of 7.5 per cent, which we conservatively estimate to bring in additional N545.1 billion as additional revenue. They said that an analysis of data on the sectoral distribution of VAT collections, showed that VAT from professional services, which includes collections from the telecommunications sector, was N86.3 billion in 2018. Revenues from the CST of nine per cent would clearly fall short of the Federal Government’s expected increase in VAT, even without considering the changes to consumer demand and growth in the sector. “Our analysis of the 2019 budget performance in half year shows that the FG’s deficit continues to rise given the slow increase in revenue. Between January and June 2019, the FG incurred a deficit of N1.3 trillion, which is 63.5 per cent of its proposed budget deficit (N2.1 trillion).   Source: Guardian

Special Adviser to the President on the Ease of Doing Business, Dr. Jumoke Oduwole, has given reasons for the delay in the signing of the much-awaited National Automotive Industry Development Plan bill. Oduwole, who also doubles as the Secretary, Presidential Enabling Business Environment Council, in an interview with News Agency of Nigeria on Thursday in Lagos, said the auto policy was critical to Nigeria’s economy.      Oduwole, the keynote speaker at the launch of the Autoprenuer Programme by Nigeria’s leading automotive trading platform, Cars45, said the government was doing all within its power to set the economy on the right path. On the Auto Policy, she said the president knew the importance of the policy to the manufacturing sector in Nigeria, hence, there was a need for wider consultations to make it all-encompassing. NAN reports that President Buhari had declined assent to the NAIDP bill after four years of legislative process. The bill provides for a 10-year tax incentive for the auto industry and other incentives to attract investment in the sector. Oduwole, however, argued that the bill should be in tandem with the realities of comparative economic values. “There is need for a policy that will take us to where we want to be. Nigeria just signed African Continental Free Trade Area Agreement. “We need an auto policy that will be enduring; we don’t want a policy that we will have and after a few years, we will need to change it and that is why we are calling for more contributions. “We are doing that so as not to take away from those that have invested in it now. “We are looking at the sector now because we want to compete with the whole continent. “We are using this opportunity to shape things in the way we want it to be for the future, because the auto policy is not only critical but pivotal for the growth of the economy,” she said. The Chief Executive Officer of Cars45, Etuk Etop, said the reason for the launch of Autoprenuer Programme was to give hope to the teeming youths faced with unemployment. He said the programme had been designed to accommodate as many youths as possible that want to be part of the scheme. “Within a month of opening the portal for the registration on Autoprenuer Programme, we already have 10,000 people signed up. Nevertheless, we want every home to be part of it. “This is a programme that can accommodate all citizens without asking for educational qualifications and very easy to access. “We want to give all Nigerians another source of income.”   Source: Punch

The Academic Staff Union of Universities (ASUU) has rejected the decision of the management of Ekiti State University (EKSU) Ado-Ekiti to introduce a new tax regime to be paid by staff. Addressing newsmen on Friday in Ado-Ekiti, the ASUU-EKSU chairman, Dr Kayode Arogundade said members of the union had been subjected to poor treatment with non-payment of their nine months salaries, adding that the new tax regime must be aborted. He described the introduction of the tax regime as an act of insensitivity, noting that if the university must continue to enjoy relative peace their yearnings must be adequately addressed. The ASUU chairperson revealed that what their members pay as the tax was too high compared to other universities, urging management to device other means if they desired to raise revenue. He threatened that the lecturers would no longer cooperate with the management and the state government if they failed to place more priority on their welfare. Dr Arogundade said, ” We are obliged to reiterate that, if the university must continue to enjoy the relative peace presently prevailing then, the outrageous and obnoxious tax regime being planned for implementation should be aborted outrightly. ” We do not understand the logic of Government or EKSU administration and its attempt to commence on implementation of a prohibitive tax regime, even when they are still owing us various sums of money including salaries and allowances, Excess workload and Earned Academic allowances and four months statutory government’s subventions to the university. ” With these developments, let it be known that we are prepared to go all length at protecting the interests and welfare of our members. However, all our members have been put on red alert for a possible action if the university administration continues to exhibit its cruelty and nonchalant behaviour towards our welfare. “It surprises us that the university is owing nine months salary when we are being owed four months subvention. We found out that it was because the wage bill has increased to N502 million when the subvention is  N260m. The shortfall comes from our IGR, which will be difficult for the university to meet monthly.” Meanwhile, the authorities of the university have suspended the controversial tax policy and presentation of primary six certificates imposed on the staff of the institution. The decision was reached after the management of the institution under the leadership of the Vice-Chancellor, Professor Edward Olanipekun met with the Non-Academic Staff Union of Educational and Associated Institutions (NASU) of the University In a statement, the Head, Directorate of Information & Corporate Affairs of the institution,  Bode Olofinmuagun said the management would further deliberate and meet with concern stakeholders so as to resolve the matter.   Source: Nigeria Headline

The big pot of water half buried at the middle of Malam Bizi’s expansive compound has served the family and guests for about two decades, providing cool water for drink especially during the dry season in northeast Maiduguri, known for its hotness in dry season. But something unusual is happening to the mud pot. It appears to be ‘drinking up’ the quantity of water kept in it and sometimes leaves the family in dire need of the natural gift. On the day Sunday Sun visited, Hajara and Hauwa had filled the pot with about four buckets of water in the morning but were surprised to note that the pot was half filled an hour later. Ironically, none of the family member had drank from the pot. In fact, the plastic cup usually placed on the pot for use still lay on a small table in the kitchen. Surprisingly too, the surrounding of the pot had remained unusually wet in recent time. “I eventually discovered the pot was licking,” Bizi told Sunday Sun during a visit to the family compound at Njimtilo, a suburb of Maiduguri. “The more my children fetch water into the pot, the more the water ends up in the soil around the pot. It is as if the pot is drinking the water,” he added. The case above clearly illustrates how officials siphon public funds through tax diversion without the authority knowing – in much the same manner that the Bizis couldn’t detect the water in the big pot was drying up. Millions in revenue had been reportedly diverted from the points of collection in Borno State. Sunday Sun investigations show that some officials collect taxes (water) in the name of government (big pot). Sadly, either half of the revenue is remitted or in most extreme cases, never get to the government coffers. Borno State Board of Internal Revenue (BSBIR) is empowered to collect all taxes on behalf of the state government. It is one of the busiest public offices in the state with more than 300 staff both in the state capital and local government areas. Human movements, brief conversations and movement of documents characterized activities at this office as the reporter observed for two weeks. There are also over a dozen racketeers around the building ready to procure various documents ranging from vehicle particulars to motor license for a fee. It is such a business centre but behind this lay a profiteering move by some officials, Sunday Sun gathered. According to information on the website of the board, www.bornosirs.bo.gov.ng,  BSBIR collects both income and personal taxes. Taxes are collected from individuals either in employment of the state government or from those running their own small businesses under any business name or partner, a Lagos-based banker and tax analyst, Bamidele Bello told Sunday Sun. “The state government is responsible for collecting such taxes,” he explained. He said banks and commercial institutions also remit their taxes based on their profits. The Personal Income Tax Act (Cap P8 LFN 2004) guides the current taxation of personal income. The law empowers the federal and state tax boards to identify persons living in or earning income from the areas of their abode who are required to pay tax, assess incomes and tax their incomes using specified guidelines and rules. The law also guides tax officials to identify the residence of potential taxpayers, the sources and origins of their incomes for the purpose of taxing them based on their income. However, there are alleged leakages in the process of collecting these taxes by some officials of government, very credible sources in the tax offices revealed to Sunday Sun. Double invoicing/receipts. Some officials of the board have developed strategies to circumvent tax collection in Borno State. A source revealed that one of the ways is double invoicing. “It is a common thing and it has been happening for a long time,” the well placed said. “We have receipts for ourselves, sometimes we give return to our bosses in the office,” another official added. “It is not a new practice,” he insisted. A copy of the receipt shown to the reporter indicated a marked difference between the government own and the one done by the officials. The Nigerian coat of arms on the government’s receipt is bold and darker. Likewise, the receipt is thicker while the other one is lighter. Though, the board was said to have introduced e-payment few years ago to block leakages but it was gathered that some officials still found a way around it especially with taxes on businesses. Sunday Sun discovered it is one of the worst affected. Some officials also charged payees, especially owners of businesses, different amount without checking any income book. “Taxes are charged based on income and gains,” Bello explained but the approach of these officials differs. The poor collection system has not helped the matter,” a tax officer said. Taxpayers speak; The Board of Internal Revenue has a form which tax officials use in assessing amount payable by payee especially owners of business as part of the revenue to the state. “They have a form. They look at the shop and calculate what I will pay. Sometimes they charge higher and then we negotiate like from N15,000. You can beat down to N6,000,” Yohanna Ali (not real name) revealed. Sunday Sun probed further on why taxes would be negotiated without checking the book. “The men collecting aren’t remitting to government. This is why they are not following the right process,” he added. It was gathered that often times, receipts are not provided for the payment made. But many of the taxpayers alleged the officials often made promises to return with the receipts but never surfaced until another year. “It is a very clumsy situation but we can’t question them,” he said further. Taxpayers said they are sacred they could be victimized if they demanded explanation from officials. “We are here doing business. We don’t want problem with government people,” Aminu Ibrahim said.

The Federal Government recently announced plans to increase Value Added Tax from five per cent to 7.5 per cent. Do you feel this is appropriate? It is appropriate. There is no right time for it. The problem in this country is that we fail to face reality. The VAT Act was promulgated in 1993 and came into effect in 1994. Our VAT is the lowest when compared with other countries. The idea then was that, let us start from there and continuously, we will move it up. But 25 years on, nothing has been done. In 2007, when the idea was moved, it was killed. Earlier this year, when it was moved, it was killed. So when is the right time? You know it is a consumption tax, so it is very easy to collect, it is very easy to pay because you pay without knowing that you are paying tax as you are enjoying what you are collecting. There are exempted items that affect everyday life of the common people. All those things have been exempted, leaving virtually the luxury items. It is the middle people and the rich that will buy the luxury items. What are the other side effects of this increase? The problem is that it will affect cost of goods and items in the fact that manufacturers will have to pay higher VAT. And what should be done is to amend the tax law. There should be threshold for registration for VAT. Companies with less than N10m revenue should be exempted from registration. For manufacturers, they should exempt raw materials from VAT, so it will not affect the cost of production. We need to look at the areas of the companies income tax to amend. We can reduce the companies income tax and personal income tax. That will release more money to employees and they will have more money to spend, and they will pay tax. I think what we need to do is to request for accountability because we are doing our obligation to the country. The government should reduce the cost of governance. Going by the query that tax collection between 2012 and 2014 was better than 2015 and 2018, is that not an indication that the decline was caused by the bad economy under the present administration? They need to make some research before they come out to condemn somebody. Between 2012 and 2014, how much was oil price? Oil was over $100 per barrel. And if you look at the figure for collection for those years, oil majorly was over 50 per cent. While in the period of Babatunde Fowler, we saw oil price falling below $50; look at the disparity. Of course, collection will be low. When things like that happen, you are forced to look inward, and that was what Fowler did. What were the areas he looked at? He looked inward by looking at the Value Added Tax. He looked at what was happening, looked at the people who were outside the tax net, and brought them in. By that, he succeeded in moving the number of tax payers from 10 million to 20 million. If you look at collection now, we are moving from oil revenue to non-oil revenue. And that is the way it should be. He is institutionalising taxation away from oil revenue. This is what the government should appreciate. People who are making noise are making noise because they are not looking at the economic climate of the nation. It is very bad. I don’t have the figures now, but I can tell you non-oil revenue is over 50 per cent, oil revenue is less than 50 per cent. That is the way it should be and going forward. He has given us indices of how to go about it. Look at people who are not in the tax net. Issues of Voluntary Asset Income Declaration came, issues of bank statement, using data, that is what this country needs. Bringing out people who have millions in their accounts and are not paying taxes. How will you have billions in your accounts and you are not contributing to the economy that gave you those billions. How can you have N100m in your account and you are not even paying a kobo to the coffers of the government that gave created a conducive environment and the enablers for such person to make that money. As far as I am concerned, I think it is the people that Fowler has touched that are fighting back. He is fighting them and they want to fight back. I know that Fowler means well for this nation, and it will be sad if he is sacrificed just like that. Voluntary Assets and Income Declaration Scheme was being implemented before it was stopped. How will you describe the impact of this on the revenue? VAIDS was just for a period, it was a targeted period of one year. The Federal Government started it on the first of July 2017, and it was meant to end in March 2018. But it was extended till 30th June 2018. With the Voluntary Assets and Income Declaration Scheme, they said ‘if you have not been paying taxes, come and pay. This is my asset, this is my income, I want to pay tax.’ And the opportunity came that once you do that for those periods, ones you pay the taxes and you are cleared, you will not be audited for that same period again. For instance, ‘you come out to say since 2014, I have earned N1bn; I have not paid taxes on this N1bn, now I want to pay. This is the value of my assets and my income and it is taxed,’ you now pay tax on it, that is from 2014 to 2015. What the law says is that for those periods, you will not be audited again. You are forgiven. But beyond that period, 2015 to 2016, you can still