BY JIDE AYOBOLU<\/p>\n
The Federal Inland Revenue Service (FIRS) says it will begin to impose
\nvalue-added tax (VAT) on online transactions, both domestic and
\ninternational, with effective from January 2020. Babatunde Fowler, FIRS
\nexecutive chairman, made this known recently at the African Tax
\nAdministration Forum (ATAF) technical workshop that held in Abuja.
\nFowler said a lot of countries that see Nigeria as a good market are
\ninto online businesses, adding that there was a need to tap into the
\npotentials to generate more revenue.<\/p>\n
However, he said the date of commencement of the VAT on online
\ntransactions would be subject to government\u2019s approval. \u201cWe have
\nthrown it out to Nigerians. Effective from January 2020, we will ask
\nbanks to charge VAT on online transactions, both domestic and
\ninternational,\u201d Fowler said. \u201cVAT remains the cash cow in most
\nAfrican countries, with an average VAT-to-total tax revenue rate of 31%.
\nThis is higher than the Organization for Economic Cooperation and
\nDevelopment\u2019s average of 20%. \u201cThis statistics, therefore, is a
\nvalidation of the need for us to streamline the administration of this
\ntax with the full knowledge of its potential contributions to national
\nbudgets. \u201cIt is, however, also bearing in mind the rights of our
\ntaxpayers.\u201d<\/p>\n
Fowler said Nigeria could do better with VAT collection. Giving the
\nexample of Senegal, the FIRS boss said the West African country
\ngenerates 51% of its revenue from VAT while Nigeria generates 17%. He
\nsaid the tax agency wrote a letter to banks in May 2018 requesting for a
\nlist of companies with a banking turnover of N1 billion and above to
\nascertain the companies complying with tax laws.<\/p>\n
Given the sharp drop in oil prices, Federation Account Allocations to
\nstates have dropped by an average of about N2 billion monthly per state,
\nwhich partly explains their inability to meet some basic recurrent
\nexpenditures including payment of workers\u2019 salaries. More worrisome
\nwas the fact that prevailing negative economic environment had a very
\nadverse effect on the performance of the Federal Inland Revenue Service
\n(FIRS), the nation\u2019s most important revenue agency. The FIRS collected
\nonly N1. 207trillion in 2016 compared with a total of N2.92trillion from
\ntaxes in the first nine months of 2015, statistics obtained from the
\nService revealed. The 2015 amount, when compared with the N3.44trillion,
\nwhich the Federal Government had set for the FIRS as target for the
\nnine-month period, represented a decrease of N520 billion. In fact, the
\nrecession has forced the Federal Government to reduce its Company Income
\nTax (CIT) budget for 2017 to N808 billion, representing a 7 per cent
\ncut. A summary of collections indicated that only N 299.802 billion was
\ncollected as CIT, which was a far cry from the expected N867 billion
\ncontained in the 2016 budget. This therefore calls for urgent steps not
\nonly to save the Nigerian economy from slipping into depression, but to
\nboost revenue in order to settle immediate recurrent obligations.<\/p>\n
In this regard, the Federal Executive Council approved a revised
\nNational Tax Policy to address low taxation in the country. According to
\nthe former Minister of Finance, Mrs Kemi Adeosun, the main thrust of the
\ntax policy is to establish fundamental principles to guide and orderly
\ndevelop the Nigerian tax system toward meeting its objectives. It also
\nrecognizes the primacy of the taxpayers and clearly states their rights
\nand duties. Nigeria\u2019s tax contribution to the Gross Domestic Product
\n(GDP) is said to be the lowest in the world with about six per cent. Its
\nValue Added Tax is also said to be the lowest in the world at five per
\ncent. The minister, however, said under the new tax policy, consumers of
\nluxury goods would pay a higher Value Added Tax (VAT).\u00a0 This better
\nexplains why the Value Added Tax budget has been increased from N198
\nbillion in 2016 to N242billion in the 2017 budget, a N44 billion or 22
\nper cent increase. The ex-minister expressed the hope that the new
\nrevised tax policy, which was recommended by the ministry\u2019s National
\nPolicy Tax Review Committee in August 2016, would entrench an efficient
\ntax system. \u201cWhat the committee has shown is that we should look at
\nactually increasing VAT on some luxury items. With VAT of five per cent,
\nwe have lowest VAT; and whilst we don\u2019t think VAT should be increased
\non basic items, if you are going to drink champagne, champagne in the UK
\nhas VAT of 20 per cent, why should it be five per cent in Nigeria?\u201d
\nshe stated.<\/p>\n
Even before the approval, many stakeholders had expressed their strong
\nsupport for exploring tax options especially now that the revenue
\naccruing to the Nigerian Government has been reduced drastically. It
\nwould be recalled that, the immediate past Coordinating Minister for the
\nEconomy and Finance Minister, Dr. Ngozi Okonjo-Iweala, disclosed that
\nabout 30 per cent of those who are enjoying tax holidays in the country
\nhave abused the privilege. She also explained that 75 per cent of
\nregistered businesses were not captured in the tax system. She said
\nbetween 2013 and 2015; 65 per cent of taxpayers have failed to file
\ntheir reports to the authorities in charged. The failure, according to
\nher, is responsible for the low tax to the Gross Domestic Product (GDP)
\nratio of12 per cent whereas countries like South Africa are doing more
\nthan 20 per cent.<\/p>\n
It is important to note that, any country seeking to improve its revenue
\ngeneration would opt for a concept enabling it to best realize its
\nobjectives with due regards to its peculiar socio-economic make-up. One
\nof these ways is by taxation. A tax can therefore, be defined as a means
\nby which, a Government appropriate part of the private sector\u2019s
\nincome. The accumulated revenue is used in meeting recurrent
\nexpenditure. Tax occupies a unique position, because it is an important
\npart of government policies. The ability of a government to generate
\nrevenue from this sector affects services offered by such a government.
\nHence, taxation is a compulsory payment levied by the government on her
\ncitizens to generate revenue and control economic activities and it is
\nbacked by law. Taxation has not only influenced the economy, it has also
\nbecome an important instrument of economic policy.<\/p>\n
It is however very sad to note that, many high profile companies and
\nwealthy people in the society do not pay tax, and tax invasion is a very
\nserious offence, but nobody or corporate entity has ever been prosecuted
\nfor non-payment of tax, which is a horrendous act of economic sabotage.
\nIn fact, from available statistics many foreign companies in the country
\ndo not pay tax and when they rarely do, it is usually underestimated as
\nthere are no full disclosures. It is also important to state that,
\ntaxation must be effective, functional and dynamic. The tax assessment
\nprocess must be made more attractive, even getting the tax form and
\nfilling term can be very cumbersome, which necessitates the hiring of
\nthird party or consultants, this brings about bureaucratic bottlenecks
\nand this discourages people from paying tax as they ought to. Besides,
\nthe use of Best of Judgement and other negotiation procedures breeds
\ncorruption and tax manipulations.<\/p>\n
It is instructive to note that that people pay tax in Nigeria not
\nbecause they are willing to pay tax, but rather because they are
\ncompelled by law to do so. This reason for this is quite fathomable; the
\npeople do not see the good use to which their taxes are being used for.
\nTaxation and tangible development should go hand in hand, without this
\ntaxation will be a burden on the generality of the people. Hence,
\nNigeria must have a tax system that must have all the attributes of a
\ngood tax system such as, fairness, objectivity, equity, certainty etc.<\/p>\n
The social democratic principles of the government is becoming a mirage
\nbecause all these tax initiatives are not skewed to protect the
\ndowntrodden but rather to go a long way to further reduce their
\ndisposable income, because of low incomes and mass unemployment in our
\nsociety, hence, taxation must be done equitably. Taxation should capture
\nevery segment of the society that can pay tax, while leaving out those
\nthat cannot and should not pay tax.<\/p>\n
Another sore point in tax administration in the country has to do with
\nthe oft-repeated complain by Manufacturers Association of Nigeria (MAN),
\nLagos Chamber of Commerce and Industry (LCCI) and NACIMA, of multiple
\ntaxations, which is a great disincentive to manufacturing and
\nindustrialization by the various tiers of government. The tax
\nadministration in the country must be restructured; it must be more open
\nand transparent. There be a system in place where every taxable adult
\nmust be captured, monitored and collected. The tax system must not to be
\narbitrary. The government must have a comprehensive system through which
\nevery corporate entity-big or small, as well as every adult of tax
\npaying age will be captured and offenders will be prosecuted. Besides,
\ngovernment must ensure that those that are appointed to handle tax
\nmatters in the country are not only professionally qualified, but they
\nmust also be who are clearly above-board and beyond reproach. Hence, the
\npresent government is restructuring the tax regime in the country to
\nenable individuals and corporate entities to pay tax with ease as well
\nas account for tax paid for development purposes.<\/p>\n
A public policy analyst, Adebola Olubanjo believes that taxation should
\ncontinue to be a major focus for revenue generation, while also
\nstressing that \u201cthe tax authorities are expected to be more aggressive
\nin enforcing those laws that were hitherto left in the statute books
\nwithout any attempt to ensure compliance.\u201d This means that the tax
\nregimes are already in extant laws but are not or poorly implemented,
\nexcept for a state like Lagos that is adjudged to be doing very well in
\nthis space. Lagos State has been recognized as one state in the
\nfederation that quickly understood the goldmine in taxation as the major
\nsource of Government revenue. But how well the state and other states
\nfollowing its template have been able to apply basic principles that
\nshould guide a good tax system remains a subject of debate. Apart from
\nthe above policy analyst, other stakeholders have even gone a step
\nfurther to unravel hidden areas to be explored.<\/p>\n
For instance, in recommending \u201cPolicy Options for Reversing
\nNigeria\u2019s Economic Downturn\u201d, CBN governor, Mr. Godwin Emefiele at
\nthe 2016 bankers\u2019 night acknowledged that there are several ways the
\nfederal and state governments can raise additional revenue to finance
\nthe increased expenditure that is needed to engender fast and
\nsustainable growth in the economy. One of such is taxation. In his
\nwords:\u00a0 \u201cI think we can consider introducing a negligible telecom
\nsurcharge to be entirely borne by the initiator of a call. In order to
\nprotect the poor and vulnerable amongst us, we could structure it to
\nonly take effect after the third minute of talk. \u201cHe said some
\nanalyses have indicated that the government could earn about N100
\nbillion per annum from this alone since Nigeria at the moment has more
\nthan 216 million registered mobile phones . What Emefiele had in mind
\nobviously is that this surcharge will mainly be borne by middle and
\nupper class people since \u201cI do not know many poor people who make
\ncalls for more than three minutes.\u201d \u201cWe could also consider
\nintroducing minimal property taxes across the country. This not only
\nraises money for the government but also could be a veritable weapon
\nagainst corruption since it creates a database of who really owns homes
\nin this country,\u201d the governor suggested. While some analysts agree
\nwith Emefiele\u2019s suggestion, others differed, saying that\u00a0 it has
\nresemblance to\u00a0 a bill seeking to introduce a communication service tax
\nof 9 per cent\u00a0 introduced by the former National Assembly but was
\nvehemently rejected by telecommunication providers, other stakeholders
\nand the public. There are over 93.2 million bank accounts as at
\nSeptember 2016 according to the Nigeria Interbank Settlement System
\n(NIBSS).\u00a0 65.435 million of the number are savings accounts and about 49
\nmillion registered Bank Verification Number (BVN) as at last quarter of
\n2016. According to the National Bureau of Statistics (NBS), there are
\nover 30 million Nigerians who work in public and private sectors who
\nmeet the criteria of joining the Retirement Savings Account (RSA)
\nsystem.<\/p>\n
Nigeria has 7.2million people in the Retirement Savings Account (RSA)
\nsystem as at December 2016, whose pensions are being remitted. That
\nmeans that the owners of the retirement savings automatically pay some
\nform of taxes to the government while close to 22.8 million working
\npeople do not have retirement savings accounts. A little comparison
\nexposes the fact that somebody is not paying taxes. Someone that has BVN
\nmay not be a minor but must be earning some kind of income apart from
\nstudents. Clearly, if tax authorities begin to mine that BVN data base,
\ndata base on 30 million Nigerians who work in public and private sectors
\nand encourage them to pay something, both states and federal government
\nwill have higher revenue from taxes. Corroborating this idea, Managing
\nDirector of Afrinvest West Africa Limited, Mr. Ike Chioke said: \u201cIf
\nthere is a verification system that ties your BVN to your bank account
\nand to more than 216 million registered mobile phones in Nigeria, it
\nwill also expose more taxable agents. These tell us that Nigerians can
\nparticipate in any programme if there is transparency, efficiency and
\nclear operation.\u201d The move by the executive chairman of FIRS, Mr
\nBabatunde Fowler can be said to be in line with the above discovery. He
\ncreated a new unit early 2016 and the unit was able to add into the tax
\nnet, about 700,000 companies that have not paid taxes. It was then
\npredicted that about 10 million individuals across the nation would also
\nbe added into the tax net by December 2016.<\/p>\n
Hence, taxation in Nigeria, if properly management could be a veritable
\nsource of revenue generation for the country at this trying moment;
\nwhich is the agenda the present administration is pursuing vigorously.<\/p>\n
BY JIDE AYOBOLU The Federal Inland Revenue Service (FIRS) says it will begin to impose value-added tax (VAT) on online transactions, both domestic and international, with effective from January 2020.…<\/p>\n","protected":false},"author":1,"featured_media":69670,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[7],"tags":[],"class_list":["post-69669","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles-opinions"],"yoast_head":"\n