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Chairman, Federal Inland Revenue Service, Babatunde Fowler, has advised accountants against colluding with tax evaders, warning that they have no power to substitute accounts. Fowler gave the advice on Wednesday at the ongoing 49th Annual Conference of the Institute of Chartered Accountants of Nigeria, where he was the keynote speaker at a panel discussion on FIRS Power of Substitution. Critical Review and Matters Arising. The discussion was chaired by former FIRS Chairman, Ifueko Omoigui-Okauru. While explaining the dynamics involved in the substitution of accounts, Fowler urged accountants at the conference to partner with FIRS in order to improve the revenue collection efforts of all tax authorities. Before the FIRS decided to place lien on bank accounts of defaulting taxpayers, noted Fowler, it granted a waiver of penalty and interest for three years (2013-2015), followed by the Voluntary Assets Income Declaration Scheme. According to him, it was when millionaire and billionaire taxpayers, with turnover of between N11 million and N1 billion, passed up the opportunity to pay their taxes that the FIRS decided to place lien on defaulting taxpayers’ accounts. He said: “All defaulting taxpayers were considered, provided that such taxpayers came forward to declare their indebtedness; pay at least 25% of the outstanding amount and present a payment plan on the outstanding tax liability that was acceptable to the Service. This window was opened from 5th October to 24th November, 2016. A total of 2,400 companies took advantage of the window, from which FIRS realized about N98.8 billion.” He noted that without chartered accountants, it will be very difficult to ensure that adequate taxes are being paid and called on accountants to be diligent and forthright when reviewing clients’ financial status. He said: “Do your own internal assessment on what your clients should pay; drop accounts that are not willing to do the right thing.” He explained that the revenue collected by the FIRS is distributed among the three tiers of government, adding that over 30 states rely on that monthly collection without which the service delivery in those states would have been considerably poorer. He said: “We are all here for this conference, certain that chartered accountants came from various states across the nation. If in your state, we were not able to support your revenue drive, what level of security would you have in your state? The FIRS boss explained that the Service has been empowered Section 8 (1) (a) of the act establishing it to assess persons chargeable with tax under the extant tax laws and enforce payment of taxes as may be due to government.  Section 8 (1) (c) of the FIRS Establishment Act, he said, empowers the Service to collect, recover and pay to the designated account any tax under any provisions of the Act, while Section 8 (1)(g) of empowers the Service to adopt measures, to identify, trace, freeze, confiscate or seize proceeds derived from tax fraud or evasion. He added that Section 31 of the FIRSEA provides for the power of substitution, which is one of the enforcement powers of the Service. However, his position was rejected by accountants and lawyers at the conference. Wole Obayomi, Head of Tax, KPMG in Africa, maintained that Sections 33 of the FIRSEA and Section 49 of Companies and Income Tax Act do not grant the FIRS such powers. Omoigui-Okauru, who chaired the session, insisted that the FIRS is acting within the law and suggested that FIRS and disaffected taxpayers should seek a middle ground, possibly through an Ombudsman to  address the complaints.   Source: Eagle

ARMED with a twin-argument on the need to raise revenue and match the continental standards, the Federal Government is about to implement a hike in value-added tax rate from five per cent to between 7.2 and 7.5 per cent. First, the Minister of Finance, Budget and National Planning, Zainab Ahmed, said the sub-national governments in particular would need to fund the new minimum wage with the extra income from VAT. Second, at the current rate, government argues that Nigerians are paying the lowest VAT in Africa. It is a truism that modern governments run on tax, but beyond the mere increase of the VAT rate, the most critical issue for the authorities is to implement a wider, holistic tax reform. An increase in VAT now will hurt low-income Nigerians the most. If the controversial proposal sails through in the National Assembly, VAT revenue will shoot up to N2.09 trillion in 2020, Ahmed stated. She said, “The Federal Government will be receiving proposed aggregate of N4.26 trillion from the Federation Account and the VAT pool. The states and local governments are expected to receive N3.04 trillion and N2.27 trillion respectively.” On the surface, this looks sound. To the government, the upward VAT adjustment is enough to meet the increased personnel costs of the three tiers of government. Currently, with N18,000 as the minimum monthly wage, a majority of state governments find it difficult to pay wages and pensions so the extra funds will come in handy. Already, without the implementation of the new minimum wage, the personnel cost of the Federal Government rose from N1.7 trillion in 2017 to N2.1 trillion in 2018. So, the new rate is also essentially to cater to the new wage of N30,000, the implementation of which is being delayed by the consequential adjustments for senior civil servants. In all this, government is emboldened by the situations in other climes. At five per cent, the authorities collected N1.1 trillion in 2018, amounting to 0.09 per cent of Gross Domestic Product compared to about 3.8 per cent in the Commonwealth and ECOWAS, a PwC report notes. The government is disingenuous when it cites higher VAT rates in other countries. A World Bank report argues that VAT potentially distorts consumer behaviour less than many forms of indirect taxes and may therefore be comparatively efficient in generating government revenues. However, they involve some drawbacks, both in terms of efficiency and equity. By law, the European Union member countries are required to levy a standard rate of at least 15 per cent, but permit a reduced rate of at least five per cent, thus enabling members to have several rates to protect the lower income earners. Cyprus has a standard rate of 19 per cent, but charges only five per cent on basic foods, medicines, books and newspapers while charging nine per cent on catering and hospitality, its mainstay. Germany, Montenegro, Malta and several other EU countries also charge far less on food and medicines. VAT is used creatively elsewhere to meet national economic goals. But that is only half of the story. In most of these countries, social infrastructure is available and works efficiently. The tax net is inclusive and evasion and leakages are punished maximally. Here too,  23.9 per cent or over 20 million of the working population is jobless, inflation at 11.37 per cent by first quarter 2019 and GDP grew a disappointing 1.9 per cent in 2018, while foreign transactions on the Nigerian Stock Exchange dropped by N106.31 billion and domestic transactions dropped by 71.16 per cent. At a time like this, revamping the economy and creating jobs should be the primary goal; government should avoid policies that will translate into higher cost of living, higher costs for business or more factory closures and job losses as enunciated by the distraught private sector. It is a simple economic principle that keeping more money in people’s pockets is one sure way to get the economy back on track and reduce poverty. Nigeria is already the poverty capital of the world and the current figure of 94.35 million extremely poor could rise. An increase will invariably raise the inflation rate as VAT, a tax on all goods and services in the country, including imports, will hit the most vulnerable in a country that is import-dependent, even for food. The cynical resort to across-the-board tax increase to meet the increased wages of less than two per cent of the population is defeatist. Generally, poorer households spend a larger proportion of their income. A VAT is therefore regressive if it is measured relative to current income and if it is introduced without other policy adjustments. The government’s argument that it will make more money available to the states, who take 85 per cent of it, is also puerile as it imposes an unfair burden on Lagos that contributes 55 per cent of VAT, the FCT 20 per cent, while the remaining 35 states generate only 25 per cent.  To be sure, VAT rate, after 25 years, ought to be reviewed in line with current realities and national aspirations; It can be raised for some goods and services, lowered for others or the increase could be graduated over a period. The trouble with our public finance is mostly one of excessive spending, not inadequate VAT.  Corruption and waste define governance here. Wealthy Nigerians hardly pay tax. No serious government should feel comfortable in a situation where only 14 million of the 69 million taxable Nigerians file their tax returns annually. It is unimaginable that only 214 Nigerians paid up to N20 million or more as tax in Africa’s largest economy, according to the Vice-President, Yemi Osinbajo. The government should summon the political will to ensure that the well-heeled who are currently not captured in the tax net are brought in. In functioning countries, government takes serious exception to tax evasion, for which reason the offenders are seriously punished. National Assembly members are set to buy cars with public funds; the

Osun State Governor, Adegboyega Oyetola, has solicited the support and cooperation of traditional rulers on the need to mobilise their subjects to pay taxes regularly. He said the call was necessary to help the administration actualise its dreams of boosting the revenue profile of the state. Governor Oyetola spoke, yesterday during the presentation of staff of office and instrument of appointment to the newly appointed Olulamokun of Yakooyo, Oba Oyewole Oyediran, at Ife-North Local Government Area. He said the government will remain faithful to its avowed commitment to make life bearable for all citizens. The governor urged the monarchs to support the policies and programmes of the administration designed to move the state forward. He further implored the them to work in partnership with the government and security agencies, saying the government would continue to count on their support in the maintenance of peace, security, law and order. “I solicit more of your cooperation and prayers. The task of governing Osun and delivering the dividends of democracy is not a one-man show. It is the responsibility of all, which calls for involvement of all. “I, therefore, enjoin you to pay your taxes and rates as and when due,” Oyetola said. Earlier, Ooni of Ife, Oba Adeyeye Enitan Ogunwusi, lauded the administration for being responsive and responsible to the people’s needs. Yakooyo Progressive Union President, Adewale Oyebowale, called on the residents to be united to move the town forward. In his response, Oba Oyediran thanked Governor Oyetola, the Ooni of Ife and people of the town and promised to put in his best to advance the socio-economic life of the people of the town and the state as a whole. Meanwhile, the state government has disclosed that, as from today, it will begin the inauguration of 100 revitalised Primary Healthcare Centres (PHCs) across the state. The government said the revitalisation exercise would cover 332 PHCs, which is one per ward. It, however, disclosed that100 of them had been completed, some of which had already been put to use from the day they were completed because of exigency. The government noted that 21 PHCs would be inaugurated in the first phase, while the remaining would be done later. This was disclosed by members of the Osun Health Revitalisation Committee, Rafiu Isamotu, who was the immediate past commissioner for Health and Remi Omowaye at the Conference Room, Ministry of Health, Government Secretariat, Osogbo.   Source: The Sun

Tax authorities in the country have been warned against scaring off foreign investors from the country in their efforts to shore up government revenues. The Managing Consultant, Pedabo Associates Limited, Mr Albert Folorunsho, said the global tax compliance drive would have implications for Foreign Direct Investment in Nigeria. Folorunsho stated this while delivering a keynote paper at the investiture of Dr Titilayo Fowokan as the third state chairperson of the Society of Women in Taxation (Lagos Chapter) on Saturday. “Nigeria is not isolated from the global tax drive to boost revenue and prevent base erosion and shifting of profit from Nigeria to other tax jurisdictions,” he said. He said Nigeria and over 100 countries signed the multilateral instrument on prevention of profit shifting, adding that some measures were adopted by the Federal Inland Revenue Service from the global tax approach. Folorunsho noted that the FIRS had introduced other measures aimed at increasing tax revenue including plans to start charging Value Added Tax on all online transactions and strict enforcement of tax payment by placing lien on taxpayers’ accounts. He said, “Tax-related issues that can affect Foreign Direct Investment in Nigeria negatively are dividend tax; multiplicity of taxation by various organs of government; lack of advance tax rulings on certain issues; ambiguity in tax laws; wrong interpretation and application of the tax laws; uncertain tax regime, and circle of unending tax audits/investigations by tax authorities.” According to him, for Nigeria, FDI will be more affected by the approach of local tax regulators than the global tax drive. “This is because the global approach to tax drive is yet to be enacted into our local laws to make them applicable and effective in our environment,” Folorunsho said. He said the implication of the global tax drive by other jurisdictions for Nigeria might be positive if the country could operate a more friendly tax environment based on the existing tax laws. “However, aggressive tax drive by tax authorities can impact FDI negatively. Unhealthy approach to tax drive will scare investors from Nigerian economy. Though there has not been significant decrease in FDI to Nigeria for some years, tax drive cannot be said to be the factor responsible for the decreased inflow. Uncertain tax regime or hidden taxes will discourage FDI,” he added. According to Folorunsho, as the impact of the current global tax reform takes root, mobilisation of capital across jurisdictions will become fairer and more competitive. “Nigeria cannot achieve her full potential by increasing tax revenue alone. Government, in its effort to increase revenue generation through taxation, should always be mindful of its impact on the economic growth drivers, one of which is foreign direct investment,” he added. The President/Chairman of Council, Chartered Institute of Taxation of Nigeria, Gladys Simplice, said the CITN would continue to collaborate with relevant stakeholders towards sensitising all Nigerians on the need to pay their taxes. She said, “There is no hiding place for tax defaulters any more, in view of the increased collaboration among tax authorities and agencies towards ensuring that all corporate entities and individuals are brought into the tax net. “The recent launch of the taxpayer identification number registration system underscores the seriousness government accords to this.”   Source: Punch

Imo State governor, Emeka Ihedioha has said that less than five per cent of the state’s workforce of over two million pay taxes, saying that such a situation is unsustainable and unacceptable. Ihedioha, who stated this at the occasion of his 100 days in office, also banned tax payments in cash throughout the state and introduced PayDirect platform with a single account. He explained that the action was part of steps taken by his administration to ensure transparency and accountability in the state’s governance process. He also noted that that the state could not achieve growth without a sustainable revenue generating system, pointing out that his administration had adopted other measures designed to plug leakages and increase the state’s internally generated revenue (IGR).   Source: Guardian