Tax preparation services – Page 30

Multiple taxation, poor infrastructure forcing manufacturers out of business

A member of the OPS has warned that more manufacturers might be in the process of shutting down, if government fails to address the problem of multiple taxation, poor infrastructure and the proposed increase in value added tax (VAT). Managing director of NISPO Porcelain Company Limited, Mr. Afam Ukatu, stated this in his goodwill message at the inauguration of Commerce and Industry Correspondents Association of Nigeria (CICAN), in Lagos. He called on government at all levels to engage the organized private sector (OPS) and chart the ways to eliminating multiple taxation, which is an endemic problem militating against businesses in the country. The NISPO MD said, “If the government does not look into the issue of multiple taxation and harmonizes it as quickly as possible, many more manufacturers would shut down. “The situation has deteriorated to the extent that tax authorities shut down factories because of tax defaulters, but what I do ask them is that if you shut a factory because they are not paying tax, and all their workers are on the street, where are they going to get money to pay the tax? Again, I will advise that the government desist from the proposed increase of VAT”. Ukatu reiterated the need to look into multiple taxation and VAT, arguing that taxes are being paid on turnover. “But what of the situation where a manufacturer is losing money? It is obvious that a manufacturer produces and still loses money and still expected to pay taxes. There should be a system whereby you are evaluated by the tax authorities just like in China. It is a sad story that the country has a very huge gap that directly hampers business. It is obvious that the cost of transport from one end to the same Lagos has gone up more than what you paid as freight from China to Nigeria,” he said. Source: The Sun

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Anglican bishop advises FG against increasing VAT

TAX SERVICES / Tobi Aminu

The Bishop of Ife Diocese, Anglican Communion, Ile-Ife, Osun State, Rt. Rev. Olubunmi Akinlade, has urged the Federal Government to drop the idea of increasing the rate of Value Added Tax by 50 per cent. The bishop said increasing the VAT from its current five per cent to 7.5 per cent would have multiplier economic effects on goods, services and livelihood. Akinlade, in a statement on Friday, observed that implementing the increase would not be ideal in the light of the current economic situation in the country and the hardship most Nigerians were grappling with. The cleric stated that government at all levels needed to carry out economic and social projects that would impact the life of the citizens. He advised the government to focus on policies that would reduce unemployment and increase economic fortunes of Nigerians. Akinlade said, “I will appeal to government to suspend any increase in VAT as the economic hardship is biting hard. Policies that promote job creation and reduce unemployment should be rigorously pursued. People are hungry, so polices that favour massive food production and distribution at affordable rate must be pursued.” The reverend said when government made job creation a priority, “it will automatically reduce the vices we see in the society,” noting that emphasis should be shifted from white collar jobs to skilled labour. He added, “No matter what happens, skilled manpower is needed. Such a person is an entrepreneur and he or she can also be an employer of labour thereby helping to further reduce unemployment.” Source: Punch

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FIRS And Millionaire Tax Dodgers

Tax news / Tobi Aminu

The executive chairman of the Federal Inland Revenue Service (FIRS), Mr. Tunde Fowler has set for the agency a target of N750 billion to be recovered from 55,000 defaulting taxpayers. The money is what millionaire tax debtors are owing and the effort to recover it is coming at a time the government is unveiling plans to woo owners of undeclared foreign assets with amnesty and permanent waiver of criminal prosecution through the Voluntary Offshore Assets Regularization Scheme (VOARS). Fowler said this while addressing the House of Representatives joint committee on Finance, Appropriations, Aids, Loans and Debt Management, Legislative Budget and Research and National Planning and Economic Development on the 2019/2021 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP). The FIRS chairman told members of the committees that the recent substitution exercise carried out by the service led to the recovery of N23.25 billion. He further told the lawmakers that from the bank accounts substitution exercise, the FIRS used banking information to bring non-compliant taxpayers with N1 billion and above turnover to comply. He explained that the exercise has also been extended to cover those with a turnover of N100 million and above and that currently, about 500 of the millionaire debtors have come forward to pay their taxes in the region of about N24billion. This newspaper is gratified that VOARS will complement the Voluntary Asset Income Declaration Scheme (VAIDS). VOARS is a scheme that gives taxpayers, who have defaulted in the payment of their taxes, a platform to voluntarily declare all offshore assets and foreign- sourced income relating to the preceding 30 years of assessment in exchange for a one-time levy of 35 per cent on all offshore assets in lieu of payment of default taxes amongst other benefits. The scheme is scheduled to run for a 12-month period commencing on October 8, 2018. Similar to the recently concluded VAIDS, this Scheme provides some form of clemency to taxpayers who would take the opportunity to regularize their tax affairs. It is sad that in Nigeria today, the low income earners tend to pay more tax than the high income earners. Many millionaires in the country pay little or no tax at all. The government must continue to make efforts to bring them into the nation’s tax net so as to boost its internally generated revenue. Taxation is an issue that concerns everyone. Widening the tax net would help in improving the process. Nigeria, with an estimated population of about 189 million people, almost half of whom are aged 15 to 64, according to World Bank data, still has one of the world’s lowest tax ratios to Gross Domestic Product (GDP) of six per cent, the lowest among the sub-Saharan countries the International Monetary Fund (IMF), an arm of World Bank, has measured. South Africa has 24.7 per cent. This narrative must change. In contrast, the wealthy are being heavily subjected to taxation in Europe, the United States and Australia. Revenue, Ireland’s tax body, offers a sterling illustration. Periodically, these countries publish a list of defaulters. It is our considered opinion that every Nigerian must pay tax. The FIRS and state revenue agencies must continue to act creatively and firmly in bringing in more people into the tax net. It is unacceptable that millionaires who earn much pay unusually meager tax. Government should intensify policies on progressive taxation, in which case, the richer you get, the more you pay, as is the practice in Europe. We also believe that the move to expand the tax base should be accompanied by liberalizing initiatives to stimulate the economy through private sector-led investment, attracting foreign investment and privatizing state-endowed commercial assets. The current effort to widen the tax net for increased revenue generation must go together with improving the ease of doing business. While paying tax is a necessity, the government must intensify effort to address the genuine concerns of Nigerians who complain that they do not see the impact of the tax they pay on the provision of social infrastructure such as good roads, efficient healthcare system, stable electricity supply and others. Government, at all levels, should let the people see what they are doing with the tax revenue. That will make the expansion of the tax base worthwhile. Looting public funds by government officials, including tax proceeds, make compliance a difficult habit to cultivate by most Nigerians. As part of the move to bring more people into the tax net, the authorities must ensure that cases of tax diversion by public officers are eliminated entirely. Source: Leadership

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EFCC begins funds recovery from FIRS officials

Tax news / Tobi Aminu

The Economic and Financial Crimes Commission (EFCC) has begun the recovery of funds from some staff of the Federal Inland Revenue Service (FIRS), who have agreed to return illicit Duty Tour Allowances (DTA) paid into their accounts by the management of the FIRS. Daily Trust learnt yesterday from sources familiar with the investigation that EFCC agents are recovering large sums of money from both the junior and middle-level staff involved in the scam. It was learnt the EFCC initially discovered that over N2.1 billion was paid as DTA in the salary accounts of forty staff. A source said, “However, proper scrutiny was carried out, after normal salaries and normal DTA was deducted and what was paid to them was N1,060 billion.” It was said a substantial amount is already being recovered from the forty staff in this batch after their arrest and interrogation. About twenty of them were detained but all are now on administrative bail. A source said the EFCC seized all their passports, after committing them to pay back what they illegally received within a timeframe. It was learnt yesterday that the Director of Finance, Mohammed Auta was detained and grilled over the payments. Daily Trust gathered yesterday that the anti-graft agency may arrest the Director FIRS support services group Peter Hena who approved and authorized the payments and the main beneficiary of the scam. Sources said Hena, who was supposed to have returned to Abuja on 6 April, sent in his resignation letter, has also claimed to be sick and in need of medical attention abroad. As Coordinating Director, he has supervisory oversight over the Human Capital Management and Development, Finance and Accounts, Revenue Accounting, Facility, Security and Safety Management and Procurement Departments. It was learnt he authorized the payments despite being on N2 million approval limit. It was alleged that Hena authorizes several N1.9 million payments to a particular account in one day, which makes up the huge figures received by some staff. It was learnt some of the staff received varying amounts as DTA within the period being investigated from 2017 to date and did not travel. A source said amounts ranging from N50 million, N40 million, N101 million and N55 million were found to have been paid into the accounts of the staff. It was also learnt the that EFCC may look into the award of contracts and adherence to procurement processes in the FIRS. Source: Daily trust

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Tax Dispute Resolution In Nigeria: Challenges And Practical Steps

TAX SERVICES / Tobi Aminu

Introduction In August 2018, taxpayers were awakened to sudden freezing of their bank accounts for alleged non-payment of taxes and this marked the beginning of an “account- freezing” operation by the Federal Inland Revenue Service (FIRS). Many taxpayers who contemplated challenging the powers of the tax authority to direct the freezing of their bank accounts were faced with the dilemma of whether to approach the tax authorities to resolve the matter or to go directly to the court for an interim order to reopen their account. Generally, tax disputes put taxpayers in precarious situations as they are faced with a commercial dilemma of making prompt business decisions in the face of uncertain tax positions. Thus, speedy resolution of tax disputes is critical to any business. As the Nigerian tax authorities increase their budgetary target on a yearly basis, they continually intensify their tax collection efforts. This tends to result in frequent disputes between taxpayers and tax authorities. The tax issues arising from this range from disputes on a taxpayer’s actual tax liabilities to whether the tax authorities had followed due process in notifying a taxpayer of alleged liabilities amongst other issues. Thus, it is important that taxpayers are abreast of the dispute resolution process in Nigeria and the options that are available to them. This Newsletter explores tax dispute resolution in Nigeria, its challenges and practical steps that taxpayers can adopt in resolving such tax disputes. Reasons for Tax Disputes Interpretation of Tax Laws – The recurring need for interpretation of tax legislations has become a major cause of dispute in tax administration. In instances where the tax authorities’ interpretation of the tax laws differ from that of the taxpayers, disputes are almost inevitable. For example, the Lagos State Internal Revenue Service (LIRS), in recent times, issued a series of public notices stating their position on some tax issues, relying on the provisions of the tax laws. This resulted in a number of tax disputes as some taxpayers had different views from the reading of the same provisions. One of such notices is the LIRS’ circular on Taxation of Employee Loan issued in 2017. In that circular, the LIRS relying on Section 3(1)(b) of the Personal Income Tax (PIT) Act mandates employers to remit Pay As You Earn (PAYE) Tax on Benefits-In-Kind (BIK) relating to employee loans. According to the LIRS, the BIK is to be calculated as the difference between the interest rate on the loan and an adjusted Monetary Policy Rate and PAYE Tax should be applied thereon. A number of taxpayers have disagreed with the position of the LIRS as the law contains no provisions with respect to determining BIK on employee loans. Consequently, this has resulted in varying disputes with the LIRS. While the tax authorities typically tilt towards interpretations that favour revenue drive, the taxpayers tilt towards interpretations that favour tax efficiency. This conflict in the motive of interpretations could result in disputes between the taxpayers and tax authorities. Inconsistency in Tax Authorities’ Position – Where the tax authorities adopt an inconsistent approach in dealing with tax issues, taxpayers are put at risk and this could result in tax disputes. In the case between Federal Board of Inland Revenue (FBIR) v Halliburton West Africa Limited (2014), the FIRS reneged from its earlier published circular on the tax treatment of recharges by non-resident companies and this resulted in a major tax dispute. Although the Court of Appeal resolved the issue in the favour of the FIRS, stating that the FIRS’ earlier position could not supersede the law, taxpayers still rely largely on the decisions and positions of the tax authorities to make certain business decisions. Where the tax authority is not consistent in its position, there is bound to be dispute. Inconsistency in the provisions of the law – Contradictions in the tax laws have frequently resultedin tax disputes. An example of this is Section 19 of the Companies Income Tax Act (CITA) on excess dividend tax, which has led to a number of tax litigations. This is because the literal interpretation of Section 19 contradicts other provisions of the tax laws by allowing for the taxation of income that has previously been taxed or exempt from tax under the law. For example, Section 19 appears to contradict Section 80(3) of the CITA that restricts further taxation of franked investment income and Section 60 of the Petroleum Profits Tax Act that exempts dividends distributed from petroleum profits from further tax. Inability of Taxpayers to keep records – Although the Companies and Allied Matters Act (CAMA) requires companies to retain their accounting records for a period of six years from the date they were made, many companies do not adhere to this rule. Similarly, our tax laws stipulate varying penalties for failure to keep books of account. Failure to keep proper tax and accounting records could pose difficulties to a taxpayer in defending its tax position with the Relevant Tax Authority (RTA). It could also lead to inability to reconcile a taxpayer’s record with the tax authorities’ and this is a trigger point for tax disputes. Audits/Tax Investigations – There are a number of dispute triggers which may attract the attention of the tax authorities during a tax audit or investigation. These triggers include situations where there is an inconsistency in a taxpayer’s filings or where a taxpayer engages in aggressive tax planning. Other triggers include significant unutilized capital allowance, inconsistency in filing of tax returns, frequency of acquisition and disposal of qualifying capital expenditure, related party arrangements, significant Value Added Tax and Withholding Tax (WHT) receivables, high operating expenses ratio to revenue amongst others. Procedure for Exercise of Statutory Powers – The Nigerian tax laws vest certain powers on the tax authorities which could be exercised when taxpayers fail to fulfill their tax obligations. These include the power to issue “best of judgment” assessments, impose penalties, detrain taxpayers’ properties and so on. However, these powers should not be exercised arbitrarily. Unfortunately, the tax authorities sometimes

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Tax payment: Anambra tasks proprietors of private schools on transparency

TAX SERVICES / Tobi Aminu

Proprietors of Private Schools in Anambra State have been charged to run a transparent, accountable, value based and quality education system in the state. The Commissioner for Basic Education, Professor Kate Omenuga made the remarks in Awka during an interactive meeting on what is expected of the proprietors to do in terms of tax payment. Professor Omenugha while commending them for giving Anambra children education that is globally competitive in line with the vision of Governor Obiano said that they need to add their quota in the development of the state by paying their taxes as and when due. The Managing Director and Chief Executive Officer, Anambra State Internal Revenue Service, Dr. David Nzekwu said they have the mandate to work with any organization in moving the state forward, stating that they recognize the importance of education and see schools as a critical area of disseminating information on revenue to future generations. Dr. Nzekwu said they should render annual returns to the Board and enlightened them on personal income and withholding tax, advising the proprietors to always deduct payee from the salaries of their staff and remit to the Board. He explained that every business set up, should within six months register with the Board to open account, conduct tax audit and investigate the operations of the business. In his reaction, the President, Proprietors of Private Schools, Mr. Uzochukwu Nwanonyuo, appealed to the Board to differentiate schools from other businesses. Contributing, a member of the proprietors association, Sir. Sunny Anekwe, maintained that synergy between them and the Board is cordial and called for more sensitization and enlightenment on what they are expected to do. In a remark, the Board of Trustee Chairman of Private Schools Proprietors, Lady Pat Okeke, pledged their support and loyalty to the government assuring that they will continue to work with the Ministry of Education so as to produce intelligent and brilliant children. Source: Apex news

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9 senior FIRS officials reportedly in EFCC detention over alleged diversion of N6bn tax fund.

Tax news, TAX SERVICES / Tobi Aminu

Some officials of the FIRS have reportedly been arrested by the EFCC for alleged fraud. It was reported that N6 billion tax fund meant for the federal government has been diverted . The EFCC also confirmed the arrest of the officials nine senior officials of the Federal Inland Revenue Service (FIRS) have reportedly been arrested by operatives of the Economic and Financial Crimes Commission (EFCC). According to Premium Times, the officials were arrested over the illegal diversion of N6 billion tax funds that should have gone to the Nigerian government. It was reported that the director of finance and accounts of the FIRS, Mohammed Auta, is one of those in detention. Another director of the agency, Peter Hena, is also alleged to be involved in the scandal. Hena is reportedly out of Nigeria but sources within the anti-graft agency reportedly said he would be arrested when he returns. It was learnt that most of the other affected officials are from the finance and account department of the FIRS. All the officials have been in the EFCC detention since April 1. The EFCC spokesperson, Orilade Tony, confirmed the detention of the officials. Meanwhile, a Federal High Court sitting in Lagos ordered the interim forfeiture of a property linked to Diezani Alison-Madueke, Donald Chidi Amangbo and Sequoyah Properties Limited. The former minister of petroleum resources has reportedly been hiding in the UK since the commencement of the administration of President Muhammadu Buhari. Daily Trust reports that court which was presided over by Justice Chuka Obiozor granted the interim forfeiture of the property which is located at Plot 9, Azikiwe Road, Old GRA, Port Harcourt, Rivers state. Source: Legit

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Okocha to resolve tax evasion case

Statutory Audit, Tax news / Tobi Aminu

Ex-Super Eagles’ captain, Austin Jay Jay Okocha has resolved his tax evasion case with the Lagos State Internal Revenue Board with indications rife that the suit may be struck out today when it comes up for hearing. Reports have it that the former footballer has reached an amicable settlement of the case with the authorities which could possibly lead to the withdrawal of the case from a Lagos High Court. The case, which is before Justice Adedayo Akintoye will be heard today but a government source privy to the suit revealed that the case may be struck out since Okocha has reached an agreement with the prosecutor. On January 29, 2019, a Lagos High Court had issued a bench warrant for his arrest for failing to appear in court severally to defend himself on the allegation of tax evasion brought against him. The prosecutor, Dr Jide Martins had on June 6, 2017 filed the charge and when the case came up for hearing on October 5, 2017, the defendant did not appear in court. The prosecution had told the court that the defendant had failed to furnish the Lagos State Internal Revenue Board with a return of Income for tax purposes. He said that the offences contravened Sections 56 (a) and (b) of the Lagos State Revenue Administration Law No.8, 2006 and Section 94 (I) of the Personal Income Tax Act Cap P8 , Laws of the Federation of Nigeria 2004. Okocha is the first high profile Nigerian footballer to be dragged to court for tax evasion. Top stars like Lionel Messi and Cristiano Ronaldo have been sued to court for similar cases in Spain. Ronaldo was handed a suspended jail term recently in addition to paying millions of dollars to the Spanish tax authorities. The ex-Real Madrid super star signed an agreement to pay $21.6 million in fines after he pleaded guilty to tax fraud in a Madrid Court. The Portuguese striker, now playing for Juventus, faced tax avoidance charges from his time as a player in Spain at Real Madrid. Source: Sporting Life

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FG Must Review VAT Law – Tax Expert

Tax news / Tobi Aminu

A tax expert, Taiwo Oyedele, has urged the Federal Government to review its Value Added Tax (VAT) law and better policing of its borders to improve its VAT collections. Oyedele, Head of Tax and Corporate Advisory Services, PricewaterhouseCoopers (PwC), West Africa, gave the advice in an interview with the News Agency of Nigeria (NAN) on Monday in Lagos. He said the government could shore up its revenue through a review of VAT waivers and come up with a framework for VAT on imported services and digital transactions. “At the moment, we have a lot of issues with Nigerian VAT law because most times policymakers talk about the rate alone without saying anything about the rest of the law. `For instance, the country loses lot of revenue from the importation of a lawyer from Ghana who pays nothing for services rendered in Nigeria because he pays no VAT for such services whereas his Nigerian counterpart does. “The implication is that it makes the country’s lawyer less competitive because there is no legal provision in the VAT law that imposes five per cent VAT on such imported services. “The Federal Inland Revenue Service (FIRS) has seen this loophole and it is trying to block the leakage through the back door by issuing circulars to that effect. “The truth is that you cannot use circulars to impose tax, it has to be by law, so the government needs to amend the law to block this leakage and others,” he said. Oyedele said that the government should also have a regulatory framework for generating revenue from digital transactions. NAN reports that digital economy (transaction) is the worldwide network of economic activities, commercial transactions and professional interactions that are enabled by Information and Communications Technologies (ICT). He said that though some of the digital transactions operators such as Uber, Bolt (Taxify), office sharing and even technology platform providers like Facebook, Google, online stores and blogs pay VAT, the taxes were not backed by law. According to him, people place adverts on these platforms. “The government should explore these opportunities and back it up with law to ensure that not just few people pay taxes but all operators,” he said. He said South Africa had just released a regulation on its digital economy, adding that Nigeria should follow suit. Besides, Oyedele noted that four per cent cost of VAT collection by FIRS was too high by global benchmark standards, while 15 per cent allocation of VAT to Federal Government was no longer justified. “VAT law was introduced in 1993 and took effect in 1994; all over the world, including Nigeria, consumption tax is usually a state and local government tax. “But along the line, it was discovered that some states do not have capacity to collect the tax and agreed that the Federal Government should collect the tax on behalf of states. “That is why the Federal Government gets 15 per cent as cost of administering it while states get 85 per cent. “Technically for VAT, Federal Government gets 15 per cent and FIRS gets 4 per cent bringing total accrued to the Federal Government to 19 per cent. “Globally, the standard benchmark for collecting tax is one per cent, even many tax authorities in some countries collect less than one per cent,” he said. He added that should Federal Government take lesser percentage it would free funds for states to meet their financial obligations and become more financially stable. Source: The Pledge

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FG to raise N6tn from petroleum tax, VAT

Tax news / Tobi Aminu

The Federal Government, through the Federal Inland Revenue Service, plans to generate N4.3tn from petroleum profit tax and N1.7tn through the Value Added Tax in 2019, The amount is part of the N8.8tn tax revenue needed by the government to finance the 2019 budget. Details of how the revenue would be generated are contained in the Medium Term Expenditure Framework Tax Revenue Projections for 2019-2021. The document, which was submitted to the National Assembly by the Executive Chairman of FIRS, Mr Tunde Fowler, was obtained on Friday by our correspondent. In the document, the FIRS said the N8.8tn would be realised through two major tax revenue components. They are oil tax revenue, where N4.3tn would be collected and non-oil tax revenue where the service had proposed to generate N4.5tn for the government. Further breakdown of the oil tax revenue showed that the entire N4.3tn is expected to come from petroleum profit tax. For the non oil tax revenue, an analysis of the document shows that N1.7tn is expected to be earned from company income tax, while gas income, capital gains tax and stamp duty are expected to earn N685.63bn, N6.27bn and N17.64bn, respectively for the government. Also, Value Added Tax is expected to contribute N1.7tn; education tax, N275.39bn; consolidated account, N99.78bn and Nigeria Information Technology Development Fund, N20.01bn. The FIRS in the document stated that the tax revenue target for 2019 was based on the Economic Recovery and Growth Plan of the Federal Government. It said that to boost tax revenue, a lot of initiatives would be implemented with support from the government. Some of them are the expansion of Tax Identification database to cover federal, states and local government to establish a reliable VAT tax base across the country. While engaging relevant stakeholders, the service said it would develop and propose tax laws targeted at emerging sectors of the economy such as digital economies. It said a review of existing tax laws to close the legal loopholes for taxes by adopting a sectoral, rules-based approach would be implemented. The FIRS also stated that it would develop a strategy for revenue campaigns targeted at the informal sector of the economy, noting that a unified nationwide tax payer database would be developed. It said a strong incentive programme aimed at encouraging tax payment by Nigerians would be designed. The incentive, it noted, could involve tying government projects to tax revenue collected. Source: Punch

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