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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

Tax experts at PwC Nigeria have said digitising the processes of tax payment in the country will increase compliance level, among other benefits. The Head of Tax, PwC Nigeria, Mr Taiwo Oyedele, said this on the sidelines at the PWC Tax academy held in Lagos recently. He lamented the stress and some of the issues associated with the paper tax filing and its proneness to several losses of documents or mix-ups, adding that the earlier “we sort full digital alternatives in tax filing processes, the better.” Oyedele said: “I think it is no longer a question of tax; everything we do today is impacted by technology and technology 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, such that even when you need, say for example, your tax clearance certificate, in the past, this used to be like rocket science. “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, it is to say once we identify what the problems are, we get the stakeholders to come together to see how we can fix it. It is not enough to criticise, we must find the solution together.” He further added: “With our experience dealing with other countries, we know things that work in other places. So, it is very good that we have the Federal Inland Revenue Service, the Lagos State Internal Revenue Service and PEBEC. It is the beginning of the process, and we hope that by this time next year, all these processes will be much better such that the experience of the taxpayer will be a lot better.” He further pointed out that technology would increase tax compliance and in turn increase contribution to the Gross Domestic Product. He added: “Nigeria doesn’t 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. “So, it is a contradiction: you need tax money but you make the process very difficult. 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 government and the taxpayer. “It is actually the money the taxpayer pay that doesn’t 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. It reduces your cost of compliance, and therefore you can get more people into the tax net.”   Source: Thisdays

Abuja, March 20, 2019 (TNE) The Tax Appeal Tribunal sitting in Abuja on Wednesday adopted the terms of settlement entered by 44 insurance companies and the Federal Inland Revenue Service (FIRS) over N579.5 million overpaid stamp duties charged the companies. The companies on Nov.19, 2018, filed a motion for an order for variation of a consent judgment delivered by the tribunal on May 10, 2016, having noticed the shortfall in the judgment amount. They averred that the overpaid stamp duties to FIRS occurred during the re-capitalisation of insurance companies between 2002 and 2006. In her ruling, the tribunal chairman, Mrs Alice Iriogbe, held that the tribunal carefully studied the terms of settlement entered by the parties. “The tribunal has now adopted the terms of settlement as its judgment as full and final settlement of the claims in the suit.” She said that the appellants had applied for the sum of N579.5 million being the balance of the admitted excess stamp duties paid to FIRS in 2012. Iriogbe said that FIRS also admitted on the grounds that it was due to arithmetic errors and the amount had a shortfall of N579.5 million. She said in their terms of settlement the parties have agreed to the provisions. The tribunal noted that the Executive Chairman has approved the said amount and will be paid to the appellants counsel Bayo Osipitan and Co. in full and final settlement of the claim for excess stamp duties refund.   Source: Thenigerianexpression

Plans are underway by the Federal Government to increase Value Added Tax, VAT, by up to 50 per cent (from current 5 per cent to 7.5 per cent), a move that would stoke-up inflationary pressure in the economy. The move is coming as a measure to raise funds for the implementation of the new minimum wage about to be passed into law by the National Assembly. Also to be increased, according to the government officials, are Company Income Tax, CIT, and Petroleum Profit Tax, PPT. These were disclosed, yesterday, when Minister of Budget and National Planning, Udoma Udo Udoma, and Executive Chairman, Federal Inland Revenue Service, FIRS, Babatunde Fowler, appeared before the Senate Committee on Finance for an interactive session over 2019 to 2021 Medium Term Expenditure Framework and Fiscal Strategy Paper, MTEF/ FSP. They hinted that the tax increases were inevitable, arguing that the new national minimum wage will further increase the size of the 2019 budget already in deficit Fowler particularly told the Senator John Enoh (APC, Cross River Central) led Committee on Finance that the proposed payable VAT by Nigerians based on the increment would be between 35 per cent (6.75 per cent) and 50 per cent (7.25 per cent). The FIRS boss, who noted that the set goal of the revenue generating agency was to achieve N8 trillion revenue target this year, of which N3 trillion is expected from VAT, just as he puts total tax revenue for 2018 at N5.3 trillion; N4.03 trillion in 2017; and N3.31 trillion in 2016. He stated: “By the end of this year, we should be ready for an increase in the VAT. A lot of Nigerians travel to Ghana and other West African countries and they can see that their’s is 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.” FG sets up c’ttee on funding new minimum wage On his part, Udoma who disclosed that the Federal Government had concluded plans to set up a committee to look into ways of increasing revenue to fund the new national minimum wage, however, stressed that in view of this, government was considering to forward requests to reflect slight adjustments to the 2019 budget especially as regards sourcing revenue to foot the bill for the new national minimum wage. The minister also disclosed that the committee was expected to enter into negotiation with those who are already above the minimum wage bracket and lower the burden on government. Udoma who noted that the Technical Advisory Committee on the minimum wage would submit its report to President Muhammadu Buhari this week, said: “It will be 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.” The MTEF, the document on which the 2019 budget is predicated, was sent to the National Assembly on November 7, 2018, although with slight differences on the expenditure. While the MTEF has an expenditure framework of N8.7 trillion, the budget shows a figure of N8.826. The Minister of Budget and National Planning however attributed the difference to recent upward review of the salaries of the police and expressed concern that the New National Minimum Wage will further increase the size of a budget already in deficit. How FG’ll implement 2019 budget Meanwhile, Udoma told the Senate Committee that some slight adjustments were effected on the 2019 MTEF/FSP between when it was approved by the Federal Executive Council and the finalization of the 2019 budget proposals. The minister, who was briefing the Committee on the 2019 Revenue and Expenditure Projections said the adjustment only affected the expenditure levels as it was done to reflect some unanticipated expenditure items and the consequences of those adjustments. Before giving an overview of the 2019 Expenditure Framework, the Minister briefed the Committee on the 2018 expenditure outcomes. He stated that of the total appropriation of N9.12 trillion, N7.24 trillion had been spent as at December 31, 2018; representing 79% performance. He indicated that Debt Service and the implementation of Non-debt Recurrent Expenditure, including payment of workers’ salaries and pensions, were on track.   Source: Punch

If resources from tax revenue are properly harnessed, Delta state could sustain itself, the State Coordinator Tax Justice and Good Governance, Mrs Bridget Anyafulu, has said. Anyafulu stated this on Thursday while presenting a report on “Taxation in the Informal Sector in Delta State,’’ at a meeting of the Platform in Asaba. According to the coordinator, the report was a research work in 2017 by the International Centre for Women Empowerment and Child Development (ICWECD), a Non-Governmental Organisation in the state sponsored by OXFAM. She said that other countries in the world lived on tax revenue, while Nigeria lived on oil earnings, adding that the situation needed an urgent change. Anyafulu explained that Nigeria should not rely totally on oil as it could come to an end some day, urging the country to follow the changing global trends. “Tax revenue drives other economies in the world, while the Nigerian economy has continued to depend on revenues from oil. “In 2015, this current administration came in with lot of challenges arising from recession due to a fall in oil price in the international market. “Other countries in the world live on tax revenue but we live on oil revenue; this has to change because oil will go some day, and we must follow the world. “The Gov. Ifeanyi Okowa-led administration looks into accountability and the only reason the people can demand for accountability is when they have done their part by paying their taxes,’’ she said. Anyafulu called for transparency among the people and charged all stakeholders to create the needed awareness to sensitise those in the informal sector to pay their taxes and get value for their money. “The platform is for organisations, individuals and groups interested in engaging issues related to tax justice and promoting a fair, just, equitable and progressive tax regime in Nigeria. “We intend for all parties to work together, involve all relevant stakeholders through information sharing and pulling available resources to undertake some reforms in the tax system in Nigeria, particularly in the informal sector. “Our objective is to facilitate the development of an effective legal and policy regime that promotes a fair, progressive and transparent tax system and administration in Nigeria. “It is also necessary to undertake research and evidence-based campaign against all forms of harmful tax practices that undermine government ability to generate maximum tax revenue to fund development, among others. She said that the era of engaging tax contractors were over, adding that the state Board of Internal Revenue should train and equip its staff to take up their responsibilities for fairness, equity and accountability in tax collections. On his part, Mr Paul Itawansa, Director of Operations, State Board of Internal Revenue, said that the platform would enable the informal sector become properly captured into the tax system, to ensure equity and fairness. He noted that with adequate information and a workable system, everybody would be carried along without being embarrassed in the process of tax collation because in the new reform tax law, all adults must pay tax. Mr Martin Bolum, State Vice Chairman, Trade Union Congress (TUC), pledged the unions’ commitment to driving the tax system in the state, adding that the union was in the forefront of enforcing tax payment in the state in 2015. “This administration has given a lot of benefits to tax payers, particularly for those in the informal sector. “The governor has captured these groups in the health insurance scheme and with massive roads construction in all the nooks and crannies of the state, it is also of benefit to the tax payers,’’ he said. Mr Chuks Iku, Consultant, State Board of Internal Revenue, said the benefits in payment of taxes were enormous, adding that Delta Government had maintained peace and security which has enabled the people to do their businesses without fear. He said that work on documentation of the operators in the informal sector was on, adding that the data would be utilised for proper tax assessment in the state. “Okowa’s administration has built markets and provided other facilities from the revenue available to it and if it gets more, it will do more. “We are currently collecting data on the informal sector and the information collected is submitted to the state contributory health commission for the enrollees to access healthcare. “But the determination of what the informal sector owns remains a challenge, unlike the formal sector which is being taxed appropriately. A representative of the Market Women, Mrs Grace Mragbozo, called on government to check the issues of double taxation and the menace of “Development Levies’’ among other challenges being faced by traders and women. She pledged the resolve of the traders to key into a new tax regime in the state that would ensure transparency, fairness and equity.   Source: Thenigerianvoice