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.