TAX SERVICES

With the resumption of Value Added Tax (VAT) collection from stock market transactions, investors will return at least N60.11 billion into government coffers in one year. The move, however, has drawn criticism from some stakeholders who said it would amount to double taxation. The Federal Government had in 2014 granted a tax holiday on all stock market transactions, a deliberate attempt at reducing the high cost of transaction in the market and making it more attractive to investors.On the expiration of the tax exemption on July 24, 2019, dealing members were mandated to charge VAT on all commissions applicable to capital market transactions with effect from July 25, 2019. The estimate, based on the N1.20 trillion total equity turnover of 2018, is in addition to the Withholding Tax (WHT) of 10 per cent applicable to dividend payments in Nigeria. The tax is deducted by the investee company before remittance of dividends to shareholders in line with Section 80 of the Companies Income Tax Act (CITA). Analysts, operators and investors however argued that the development is equivalent to multiple taxation; citing the withholding tax on dividend being collected by government and other charges paid to regulators. The stakeholders estimated that investors might lose about N2.47 billion yearly, especially with the listing of high cap stocks like MTN Communications and Airtel Africa, both of which have increased the capitalisation of the stock market.VAT is a tax on consumption especially of luxury items. Essentials like basic foodstuffs, healthcare and education are exempted. The Federal Government, meanwhile, has assured that it is tackling the issues of stamp duties collection and the extension of VAT exemption on capital market transactions. Vice President Yemi Osinbajo, at the Awards Night of the Association of Issuing Houses of Nigeria (AIHN) in Lagos recently, said these and other problems were being addressed and a resolution would be announced very soon. But the stakeholders insisted that urgent measures must be taken to forestall further loss of investment especially at a time investors’ confidence in the market has been eroded due to macroeconomic headwinds and other external factors.They said the return of VAT would further dampen investors’ appetite for stocks, trigger migration of investment to money market instruments, and deter foreign participation in stock market. They noted further that transaction cost in the Nigerian capital market is one of the highest in the world, saying this has made it difficult to attract global investors to the equity market, thus reducing its capacity to contribute meaningfully to capital formation in Nigeria.The managing director of Highcap Securities, Imafidon Adonri, said the elimination of VAT in 2014 was a deliberate action to reduce the high cost of transaction in the market, which was one of the major disincentives to investing. According to him, at the time government took the action, the capital market was already showing signs of fragility arising from economic distress. He posited that the return of VAT and contract stamp would continue to put equities at a competitive disadvantage. “At the twilight of the President Goodluck Jonathan administration, when the Nigerian economy was threatened with stagflation, the Federal Government suspended charging of VAT and contract stamp for transactions in the secondary market of the capital market. “The policy was a fiscal measure enunciated to reduce the cost of transaction, prevent capital flight, and make the Nigeria capital market attractive. It was to secure the capital market against the adverse consequences of a falling economy,” Adonri said.He continued: “Transaction cost in the Nigerian capital market is one of the highest in the world. Strangely, the capital market in Nigeria is an arena for fees to government, regulators and various operators, all loaded on the investors. “As a result, it is overcharged and globally uncompetitive. Huge transaction cost has made it difficult to attract global investors to the equities market, thus reducing its capacity to contribute meaningfully to capital formation in Nigeria.”He added: “For the equities market to flourish and contribute meaningfully to capital formation, withholding tax, VAT and contract stamp should be abolished from the capital market. Nigeria should stop subsidising consumption and also stop penalising investment through counter-productive taxation.” The head of research, FSL Securities, Victor Chiazor, said the reintroduction of the tax charge on market transactions was expected to cause some form of lethargy towards the already bearish market.“The tax exemption granted to the NSE in 2014 was done towards improving market participation and encouraging interest from the investing public, especially given that the market performance prior to that period had been largely bearish. “Going forward, the reintroduction of the tax charge on the market is expected to cause some form of lethargy towards the already bearish market as a few investors already complain of the high transaction charge on their stock market transaction. If this cost is added, it will further drive the cost of each transaction higher.   Source: Guardian

The Federal Inland Revenue Service (FIRS) has said that it would start charging Value Added Tax on online transactions, both domestic and international, with effective from January 2020. The Executive Chairman of FIRS, Mr Tunde Fowler, disclosed this at the African Tax Administration Forum Technical Workshop on VAT on Monday in Abuja. Fowler said that a lot of countries in the world had identified Nigeria as a good market and many of them were into online businesses, adding that there was the need to tap the potentials to generate more revenue for the country. He, however, said that that the date of commencement of the VAT on online transactions would be subject to government’s approval.  “We have thrown it out to Nigerians. Effective from January 2020, we will ask banks to charge VAT on online transactions, both domestic and international. “VAT remains the cash cow in most African countries, with an average VAT-to-total tax revenue rate of 31 per cent. This is higher than the Organisation for Economic Cooperation and Development’s average of 20 per cent. “This statistics, therefore, is a validation of the need for us to streamline the administration of this tax with the full knowledge of its potential contributions to national budgets. “It is, however, also bearing in mind the rights of our taxpayers,” he said. According to him, in Nigeria, for example, VAT is critical to the development of projects at all levels of government. “VAT revenue is shared 15 per cent to the Federal Government, 50 per cent to state governments and 35 per cent to local governments. “FIRS wrote to all commercial banks in May 2018, requesting for a list of companies, partnerships and enterprises with a banking turnover of N1 billion and above. “This activity is aimed at ascertaining those companies that are compliant with the tax laws and those that are not,” he said. Fowler, who is also the chairman of ATAF, said that the African tax outlook gave some starting points on the questions to ask regarding some aspects of VAT.   Source: Punch

Experts List Ways To Rev Up National Revenue Aside observed economic challenges, the failing strategies deployed by the Federal Inland Revenue Service (FIRS) in the collection of tax revenue is leaving billions of naira out of government coffers, thereby shorting the country’s revenue budgets. Furthermore, other revenue generating agencies like ministries of Finance; Industry, Trade and Investments, as well as that of Budget and National Planning are increasingly tardy with reports of financial dealings, remittances of revenue, and avoidance of accountability. The nation’s tax authorities should, however, learn not to overstate facts, as it appears that tax expectations are not actually based on agreed liabilities, but estimated liabilities, which create false hopes and mostly result in disputes with associated costs to government. Meanwhile, tax and financial experts have proffered ways of ending the ongoing financial malfeasance, loss of revenue through leakages, lack of proper financial reporting and how to increase collections and remittances. The latest report of the Auditor-General of the Federation (AuGF), Anthony Ayine, which pointed out several infractions amounting to hundreds of billions, also spotted eight major ones in the Ministry of Budget and National Planning; 11 in the Ministry of Finance; four in the Ministry of Trade and Investment, and huge uncollected tax revenues by FIRS, all of which amounted to hundreds of billions of naira and creating dire fiscal crisis. The report also deplored the level of financial recklessness perpetrated by several government agencies, citing many violations of fiscal laws that have imprisonment and refunds as penalty. “As at April 2018, 109 agencies have not submitted financial reports beyond 2013, 76 agencies last submitted for the 2010 financial year, while 65 agencies have never submitted any account since inception,” the report said. In the Ministry of Budget and National Planning, N36.75m advances granted to some officers of the ministry were still not retired as at March 2017, with most of them granted amounts up to N4m and multiple advances without retiring the previous outstanding. “The above development is a contravention of extant regulations, which stipulates that advances in excess of N200, 000 should not be granted to any officer and that all procurement of stores and services costing above N200, 000 shall only be made through the award of contract by Local Purchase Orders (LPO), or Job Orders. “Non-compliance with this extant rule deprived government of revenue that would have been generated from VAT and WHT if contracts were awarded,” he said. About 42 payment vouchers with amounts totalling N30.93 million were raised and payments effected to members of staff and contractors for various services without relevant supporting documents, contrary to Financial Regulation 603(i). At the Budget Office of the Federation, about N4.96 billion was made available to the Budget Office of the Federation for Special Purpose Vehicle (SPV) Fund, however there were no records maintained for the receipt and disbursement of this huge amount. “Accounting books such as Vote books and Cashbooks were not maintained. Payment vouchers were not even raised while making payments. The only information available was the memo to the Director of Expenditure requesting for the release of the amount from the schedule officer stating that a committee had been set up for the management of the fund. “This act contravenes Financial Regulations 405 and 406 which require the sub- accounting officer of the benefiting MDA to maintain an appropriate record and ensure that the amount on the AIE is not exceeded,” he said. Also, four MDAs were paid the sum of N19.09 billion from the Service Wide Vote without the approval of the Minister of Finance, some of which were made on a purported verbal directive from the Director- General, contravening the Financial Regulations 301 and 302 which state that “recurrent expenditure is paid from the Consolidated Revenue Fund and no expenditure may be incurred except on the authority of a warrant issued by the Minister of Finance”. Among the 11 major infractions of the Ministry of Finance include the N48 million paid through a payment voucher dated October 12, 2016, to Federation Accounts Allocations Committee (FAAC) Post Mortem Treasury Single Account(TSA) account being payment for re-appointment of Consultants to the Post Mortem Sub-committee of FAAC. The payment for the consultants was made to a Sub-committee of FAAC and not directly to the Consultants, while the identity of the Consultants was not disclosed and there was no evidence that due process was followed in the engagement of the Consultants. Furthermore, the mandatory 10 per cent Withholding Tax and five per cent Value Added Tax (VAT) worth N7.2 million was not deducted from the payment made to the four Consultants, contrary to VAT Act No. 102 of 1993 and Financial Regulation 234, which says failure to comply would result in sanctions, including fines and/or imprisonment. At the Ministry of Trade and Investment, 13 payment vouchers with amounts totalling N60.39 million were raised for payment of estacode and air tickets to members of staff of the Ministry. However, all the payment vouchers, which were raised after the journeys had been embarked upon were without relevant supporting documents, as required by Financial Regulation 603, while all the efforts to get the supporting documents did not yield result. Source: guardian

Tunisian police arrested presidential candidate Nabil Karoui on Friday on what local media said were charges of financial crimes, but his party said it was a politically motivated attempt to exclude him from the election race. Karoui’s own Nessma TV channel reported he had been arrested as he traveled to Tunis and broadcast a video showing the police detaining him in his car. The 56-year-old media magnate is one of the main candidates contesting the Sept 15 election following the death of President Beji Caid Essebsi. A judge ordered the detention of Karoui to face charges of tax evasion and money laundering, Mosaique FM radio reported. Judicial authorities were not immediately available for comment. A judge decided in July this year to bar Karoui from traveling abroad after weeks of investigation on suspicion of money laundering. “The police arrested Karoui while we were on our way back from the city of Beja to Tunis,” said Osama Khelifi, a political adviser to the candidate. “They kidnapped the most prominent candidate in the presidential election so that (Prime Minister Youssef) Chahed can win the election in an open way,” he added. Samira Chaouachi, spokeswoman of Karoui’s Heart of Tunisia Party, said it was “a political arrest aimed at keeping Karoui out of the presidential race”. The prime minister’s office was not available for comment. Chahed and Karoui are among 26 candidates running for the presidency following Essebsi’s death last month aged 92. Esebsi was the first head of state to be democratically elected in Tunisia following the popular uprising of 2011. Other candidates include former president Moncef Marzouki and Abd El Fatteh Mourou vice president of the moderate Islamist Ennahda party. Tunisia’s president controls foreign and defense policy, governing alongside a prime minister chosen by parliament who has authority over domestic affairs. Karoui founded the Khalil Tounes Foundation in 2017 to fight poverty, the main theme in his campaign. Nesma channel promotes his candidacy and career. In April, police stormed the offices of Nesma and took it off the air over accusations that it had breached broadcasting rules. Nesma said it was a move to stop it criticizing the government.   Source: African Quarter

Upon its inception, Bitcoin was envisioned as a borderless currency that could be used by its owners without being affected by the regulatory impositions of any centralized agency or government body. And while this idea in itself is quite grand, the fact of the matter is that today’s crypto owners (across the globe) are subject to varying tax restrictions on their digital holdings by local regulatory bodies. Also, over the course of the past few months, a number of tax agencies around the globe, (such as the United States Internal Revenue Service) have been in the process of creating new guidance frameworks for overseeing their respective crypto industries. For example, Japanese tax authorities have been sifting through data obtained from various local exchanges so as to nab evaders and cheats, while the Australian Taxation Office (ATO) is currently operating a number of investigations regarding tax-avoidance ploys that involve large volumes of digital currencies. These developments clearly point to the fact that crypto is a matter of concern for a number of tax departments around the world — primarily because they provide people with an avenue for commerce that expands beyond today’s existing financial systems. So, here are  some crypto-centric economic frameworks that are being used by countries across the globe.   Source: Sleekarena

Former President Olusegun Obasanjo has been mocked by the Buhari Media Organisation (BMO) for being indicted by the Federal Inland Revenue Service, FIRS, as a tax defaulter. Obasanjo Farms Nigeria Limited, a company owned by the former President was among the 19,000 tax defaulters recently listed by the FIRS. Through a statement issued by the Chairman, Niyi Akinsiju and Secretary, Cassidy Madueke, BMO said it was shocking that someone who prides himself as the father of modern Nigeria was a tax defaulter. The group told him that not only should he write open letters to Buhari on how to govern the nation, he should also pay his taxes when due. The statement by the BMO reads; It is a big surprise that a company owned by a former President who sees himself as the father of modern Nigeria is on a list of companies that have run afoul of the nations tax laws. We also consider it a thing of shame for General Obasanjo not to pay taxes as at when due, especially as he is known to pontificate either at public fora or through open letters against societal ills, aside from launching scathing attacks against all sitting Presidents after him. We do not see why he should stop writing letters or speaking out against societal ills, but it would be hypocritical for him not to pay his companys taxes as at when due. So, our message to former President Obasanjo is: Keep writing open letters to Nigerians but do not forget to pay your taxes, the BMO said.   Source: Xtreme news