TAX SERVICES

Much has been written about the need for African countries to collect more tax revenue from citizens and businesses. The IMF has been imploring sub-Saharan countries, particularly over the last decade, to focus on expanding and diversifying their tax bases. Some countries have taken heed of the advice. Yet most haven’t moved beyond lip service. When it comes to new taxes, we often see African governments (especially those led by new administrations) setting their sights on commodity players like mining companies and oil multinationals. Now there’s also a growing trend of governments looking to their fastest-growing sector of the past two decades: the mobile phone industry. In most countries, phone companies and mobile operators already pay taxes. The more recent trend is to initiate or raise specific mobile consumer taxes—particularly for devices and transactions. Just over a year ago, Uganda’s regulators introduced a so-called social media tax and a levy on mobile money transactions. Uganda is not alone: Industry research from 2017 shows up to 26% of the taxes paid in the mobile industry in 12 Sub-Saharan countries were industry-specific. Kenya, often highlighted as the leading light of mobile money sector, has also been increasing taxes on transactions and on airtime use, which can result in double taxation—you can’t have a mobile money transaction without already having paid for airtime.   Source: QZ

The chairman of in the council include University of Lagos (UNILAG), Yaba College of Technology (YABATECH), West African Examination Council (WAEC), Federal College of Education (Technical), Psychiatric Hospital, Queen’s College, three military barracks, State CID, among others. According to the council boss, none of the institutions occupying half of the council’s land is paying a dime into its purse. “We spend a lot of money to provide infrastructure, maintain them and make workers of these institutions comfortable.” Omiyale spoke during a business summit organised by the council to provide a forum for interpersonal relationship between the council and the business community. He said: “Very few of the businesses operating within Yaba LCDA pay our rates; some of those paying are doing it after being compelled. We have shown them what the resources we get is spent on, and we are very prudent in our spending.” The chairman further urged business owners to prioritise youths in Yaba for employment as part of their Corporate Social Responsibility (CSR). Facilitator of the summit, Prof. Abiola Sanni, a tax consultant, advised the councils to embrace e-payment and reduce physical contact and cash payment. This, he said, would ensure prompt issuance of receipt. A call was made for heads of the institutions to pay the required rates for the businesses operating within their institutions.   Source: Guardian

Namibia has joined a consortium of over 130 countries seeking to tackle tax avoidance, improve the unity of international tax rules, and ensure a more transparent international tax environment. This was revealed by the Organisation for Economic Cooperation and Development (OECD) last Friday in an announcement made on its website. Namibia’s joining follows the European Union’s listing of countries which were non-cooperating in 2017 around the strengthening of local taxation rules in combating tax avoidance, which in certain cases fosters illicit financial flows and money laundering. The EU removed Namibia from the list in 2018 after the government made sufficient commitments to address the taxation concerns. Among the commitments made were subscribing to an inclusive framework, or implementing the base erosion and profit shifting (BEPS) minimum standards. The Namibian reported in June this year that Cabinet had directed the finance ministry to ensure that such commitments were attended to within this year. The BEPS project was founded in 2012 to address tax planning strategies used by multinational enterprises which exploit gaps and mismatches in tax rules to avoid paying tax. “Developing countries’ higher reliance on corporate income tax means they suffer from BEPS disproportionately. These practices cost countries US$100-US$240 billion in lost revenue annually”, read an explainer on the OECD website. The 15-action plan initiative addresses taxation challenges arising from digitalisation, limitation of interest deductions, harmful tax practices, the prevention of treaty abuse, permanent establishments, transfer pricing and mis-pricing, mutual agreement procedures, as well as multilateral instruments and mandatory disclosure for countries, amongst others. Minister of finance, Calle Schlettwein said in his budget speech this year that his ministry would be working on measures which would ensure tax loopholes costing government are closed off. “Key tax administration reforms will be implemented, such as leveraging regional and international tax cooperation as a mechanism to enhance national technical capacity in various areas of tax administration such as transfer pricing and illicit financial flows,” he stated. BENEFITS According to the OECD, the joining of countries such as Namibia ensures inclusiveness and participation in the development of international standards on corporate taxation. “As such, capacity-building support for developing countries is core to the inclusive framework, prioritising active, equal participation in the BEPS process, ” the explainer added. Other benefits include the deployment of tax inspectors without borders that aid in building tax audit capacity around the world, as well as assist developing countries to successfully implement their BEPS priorities. The OECD has 130 countries worldwide subscribed to its BEPS inclusive framework, with over 20 African countries such as South Africa, Zambia, Angola, Botswana and Mauritius also involved, while the Global Forum on Transparency and Exchange of Information for Tax Purposes has 154 members.   Source: All Africa

The Edo State Governor, Mr. Godwin Obaseki, has said that the state government will partner with the Chartered Institute of Taxation of Nigeria (CITN) to drive advocacy campaigns so as to widen the tax net in the state. Obaseki said this during a courtesy call by members of the Benin District Society of the CITN, at Government House in Benin City. He explained that the collaboration will help the state government deepen advocacy programmes to sensitise members of the public on their civic responsibility as regards taxation. The governor noted that the state government needs to expand its tax net so it could sustain its developmental strides, adding that focus in the past was corporate organisations while neglecting about 70 per cent of the employed labour force and those who operate small and medium enterprises (SMEs) in the state. “Government relies on the economic activities of its citizens for sustenance. This is done through taxation. We need to emphasise the need for citizens to develop a habit of paying tax. We also need to tweak the system so that owners of SMEs will be conscious of the fact that they need to pay taxes,” he added. Obaseki also noted that people who earn more in the society should pay more taxes while urging political leaders to pay stipulated taxes based on their income. He assured members of the institute of government’s support and promised that the state would allocate a parcel of land for the institute to build its Benin Secretariat. Earlier, the President of the institute, Dame Gladys Olajumoke Simplice, commended the performance of the Obaseki-led administration in setting-up industrial clusters in the state to encourage production. She noted that the institute was ready to partner with the Edo State Government in its initiative to improve revenue collection, urging the state to support some of its programmes, which includes exchange programmes and study tours.   Source: The Nation

According to KRA, this tax should be deducted from the total payout; for example, if ones stakes Sh1,000 and wins Sh500, the 20 per cent withholding tax should be applied on the Sh1,500, amounting to Sh300 in tax. However, betting firms argue that KRA is erroneously lumping together the customer’s stake and the winnings. They say the withholding tax should only apply to the Sh500, therefore the amount to be remitted is Sh100 and not Sh300. KRA’s position is flawed. Its interpretation of the word “winnings” as the item upon which the 20 per cent withholding tax should be levied, is extortionist because, if one stakes Sh100 and wins only Sh20, the withholding tax will be Sh24, meaning the winner receives Sh96, a lesser amount than what he/she staked. This is taxing consumption before the consumption happens. Withholding tax principally applies to payments of income and gain, therefore the stake is not a taxable item. Studies on gambling taxation reveals that it is low-income households who contribute relatively more gambling tax revenue in relation to their income. In Kenya, and according to a joint survey recently conducted by Ipsos and Geopoll, the average spend on betting is Sh1,550 a month, which is Sh380 a week, or Sh55 a day. Apart from the 20 per cent withholding tax, KRA also collects another 15 per cent betting tax levied on betting firms’ gross gaming revenues, and a further 30 per cent corporate tax. In Germany, the tax levied on gross gaming revenue is at 5 per cent; United Kingdom at 15 per cent, and South Africa at 9.6 per cent. The understanding is that the gambling sector should attract tax rates over and above the ones applied to other businesses. But is high gambling tax good economics? Gambling activity has an elastic demand; an increase in gambling taxes leads to low betting activities and reduced tax revenue collection. Consistent increase in gambling tax is not desirable if gross gaming revenue goes toward public revenue, since technology has allowed tax havens like Malta to house online gambling operators.   Source: Nation

If next year’s target for the kick-off of the tax or levy on online transactions sails through, there certainly would be interesting figures and government would be smiling to the banks for fat Cheques.  On the other hand, there is an expectation of corresponding reactions, coupled with intuitiveness by many Nigerians, who would be plotting its evasion or avoidance. But most possible, there would be continued agitation for alleged “over tax” of the citizenry without corresponding evidence of adequate utilisation. Indeed, beyond the quest for the expanded fiscal regime and business of revenue mobilisation for acclaimed national development, it would be another period of putting to test the country’s level of compliance with the non-negotiable social contract, as inequality takes new height, while poverty level gets global reckoning. Of course, if there is one thing that the current administration under President Muhammadu Buhari had consistently done in the last four years, it is majorly tax project – from reforms, awareness, and enforcement to the creation of new ones. But there is still raging argument over the motives, save for the dwindling fortunes of the crude oil prices and its attendant effects on the country’s fiscal performance. There have been inventions and invocations of laws as a necessity, under which the ongoing hunt for whatever is called revenue in the face of dwindling economic fortunes is unavoidable. The volatility in oil prices — the country’s major revenue and foreign exchange earner, has been used as excuse. To cover the tottering revenue profile, three things have become outstanding and more pronounced, as well as recurring over these years, with similar historic pattern. They are “Diversification”, “Stamp Duties Act” and “Treasury Single Account (TSA)”. Almost, if not all the administrations, have played around them. In the last one year, the Value Added Tax (VAT) has been on the front burner, with a back and forth movement in respect of what should be included in the regime and what the percent should be. The rate consideration is currently rested. The latest in the discourse, is the plan to introduce a five per cent charge on online transactions with effect from 2020, entangled in not only its acceptance by the citizenry, given the biting economic challenges and disputations over government’s accountability, but also the observed misunderstanding of whether the charge is VAT on the transactions itself or levy on the medium of the transactions. Or whether it is the product to be purchased that will deserve the VAT. According to the National Bureau of Statistics (NBS), Web transactions in the first quarter of 2019, were estimated at 20.38 million, with a value of N107.64 billion. If the operations of eBillsPay and Remita, both found in the quarterly statistics of the agency, currently with a volume of 316,534 and 1.46 million, valued at N141.65 billion andN19.25 billion respectively, qualifies as online transaction, then there would be more to feast on by government. The Executive Chairman of the Federal Inland Revenue Service (FIRS), Babatunde Fowler, had recently said that the agency is currently tinkering on ways to bring the rising digital economy under the tax net, even though it been a difficult task.“We will address the issue of the digitalised economy very soon. Nigeria has not taken a position yet. But, we are meeting to see if we can come up with a global solution that we can all adapt to,” he said. But since the unveiling of the plan to effect the five per cent VAT on all online purchases from next year, it has not only been a mixed feeling, but major reactions from Nigerians are tilting towards outright rejection.The New Tax; THE Partner/Head of Tax and Corporate Advisory Services at PwC Nigeria, Taiwo Oyedele, said the proposal is part of measures being introduced to address issues bothering on the digital economy, generally believed that huge economic activities are being conducted without the payment of commensurate taxes.In an exclusive chat with The Guardian, the tax expert also said that the overriding objective of the latest move is to shore up government’s revenue. “The proposal is to charge VAT on all online transactions carried out by individuals and companies based in Nigeria regardless of whether the transactions are sourced from Nigeria or outside the country.“The intention is to appoint payment settlement institutions such as banks, credit and debit cards providers as agents of the FIRS for the purpose of charging and accounting for VAT on online transactions.  “The VAT will apply on all online transactions that are liable to VAT, including goods and services. In principle, VAT is already being charged and collected on online purchase of goods. In the case of products supplied within Nigeria, the sellers would already charge VAT on the goods failing which they can be audited by the FIRS. “In the case of goods ordered from foreign online suppliers like Amazon, the applicable VAT should normally be collected by customs upon importation except where the goods are VAT exempt or below the chattel exemption threshold. “There is also no problem with online services provided by suppliers based in Nigeria such as Multichoice since FIRS can enforce VAT on their sales where applicable.“The major challenge is therefore with respect to online services and purchases relating to intellectual property from foreign suppliers such as Netflix and Facebook,” he said.   Source: Guardian

MTN Nigeria has said it took the Federal Inland Revenue Service before the tax tribunal to seek clarification over its right to deduct tax from the regulatory fine imposed by the Nigerian Communications Commission (NCC) in 2015. In its reaction to PREMIUM TIMES enquiries Monday last week, the tele-mobile firm said the decision to approach the tribunal followed a technical disagreement with the tax agency. The MTN said the dispute was rooted on how the fine should be treated for tax purposes by the FIRS. In October 2015, the NCC imposed a N1.04 trillion (about $5.2 billion) fine on MTN for failure to disconnect 5.1 million unregistered subscribers from its network. However, following the intervention of the presidency in the matter, the fine was reduced to N330 billion. MTN completed the payment on May 31, 2019. Dispute with FIRS But, in anexclusive interview with PREMIUM TIMES, the FIRS Chairman, Tunde Fowler, disclosed that despite that MTN has since paid the fine to the Federal Government, the matter was not yet resolved. According to Mr Fowler, the unresolved issue with FIRS has to do with MTNs dispute whether it has a right to deduct tax from the fine or not. The MTN took a position that the fine or penalty should be tax-deductible. (But), the FIRS said that does not make sense. One cannot be given a penalty or fine, which is a punitive measure, and the company is saying it is tax-deductible so that it will get a tax credit on that, Mr Fowler told PREMIUM TIMES in his office in Abuja. He said the FIRS told the MTN management such deductions cannot be made, as fines and penalties for regulatory infractions are revenues to the federal government and are not subject to any tax deduction. The FIRS Chairman said although the MTN made the payment in protest, the position of the revenue agency on the fine and penalty will not change until a court of competent jurisdiction gives its final ruling on it. Initially they (MTN) made the payment on account. The FIRS said, no, it is not on account, but it is tax due to government, he said. The alternative is for MTN to go to court and let the court (maybe Supreme Court) say the FIRS was wrong, and that such fines or penalties are tax-deductible, Mr Fowler said. MTN reports to NSE. The MTN did not respond to PREMIUM TIMES enquiries on the matter. Its spokesperson requested time to cross-check the information and revert. He did not. But, on Friday, the telecoms firms made a regulatory filing with the Nigerian Stock Exchange titled: Announcement regarding status of taxes relating to the 2015 Fine. The filing on Tuesday, dated August 2, was signed by its Company Secretary, Uto Ukpanah, read: Our attention has been drawn to media reports regarding the status of taxes relating to the 2015 fine imposed on MTN Nigeria Communications Plc (MTN). We acknowledge that there is a technical disagreement between MTN and the Federal Inland Revenue Service (FIRS) as to how the fine should be treated for tax purposes.  However, while the monies have been paid to FIRS, we have taken the disagreement to the Tax Tribunal set up by FIRS Chairman and Minister of Finance, and are awaiting a decision. MTN remains fully compliant with Nigerian tax laws and will abide by the findings of the tribunal. The company is committed to meeting its fiscal responsibilities and contributing to the social and economic development of Nigeria. Since incorporation in 2001, MTN has invested more than NGN2 trillion into the Nigerian economy and has paid more than NGN 1.7 trillion in taxes, levies and other regulatory fees.a   Source: xtreme