Legal implications of Fed Govt’s activation of NASENI tax

Following President Muhammadu Buhari’s March 1, 2021 directive to the Federal Inland Revenue Service (FIRS) to comply with the tax law on the National Agency for Science and Engineering Infrastructure (NASENI), Chukwuemeka Eze explains the basis and implications of the order.

The National Agency for Science and Engineering Infrastructure (hereinafter referred to as “NASENI”) was established under the NASENI Act of 1992. The Board of the agency is headed by the President, meaning that President Muhammadu Buhari is the chairman of the Board while the Executive Vice Chairman is the Chief Executive.

Section 20 of the Act provides for the Fund of the Agency to wit:

(1)  The  Agency  shall  establish a  fund  from  which  shall  be  defrayed  all expenditure  incurred  by  the  Agency  for  the  purposes  of  this  Act.

(2)  There shall be paid and credited to the fund-

(a)  1 per cent  of  the Federation Account  in  the  first  instance,  to  be increased  to  three  per  cent  by  the  year  2000;

(b)  levy  on  income  or  turn-over  of  commercial  companies  and  firms  with turn-over  of  N4million  and  above,

(c) Which shall be –

(i)  at  the  rate  of  one  per  cent  in  the  first  instance;

(ii) collected  by  the  Federal  Board  of  Inland  Revenue  or  by  any  other suitable  means  as  may  be  specified  by  the  Agency;  and

(iii) credited  to  the  account  of  the  Agency;   contributions  from  the  organised  private  sector;

From the above provisions, section 20(2)(b) and (c)(ii) of the Act should be of interest to the taxpaying community. Subsection (2)(b) of the principal Act provides that commercial companies and firms shall pay 1 per cent of their income or turnover as NASENI Tax.

TheCable reported on March 1, 2021 that President Buhari has directed FIRS to comply with the tax law on NASENI.

In a letter signed the President’s Chief of Staff Ibrahim Gambari, Buhari asked the FIRS to remit the deducted levy on turnover of commercial companies and firms.

“I write to inform you that on 24th January 2021, Mr. President approved the prayers of the Executive Vice Chairman (EVC) of the National Agency for Science and Engineering Infrastructure (NASENI) on the funding of NASENI activities,” the letter said.

“In accordance with the NASENI Establishment Act, one of the prayers of the Executive Vice Chairman relates to the funding of the agency via a levy on income or turnover of commercial companies and firms with turnover of N4million (later increased to N100million) by the NASENI Governing Board) at the rate of a quarter per cent (1/4 per cent) of turnover.

“Accordingly, you are kindly requested to act on the implementation of this provision of the NASENI Act as soon as possible.”

The directive was also communicated to Zainab Ahmed, Minister of Finance, Budget and National Planning.

In the NASENI Establishment Act 2004, FIRS is expected to deduct and remit to it a quarter per cent of the levy on turnover of firms earning over N100 million and above.

Although NASENI was established in 1992, the law guiding its funding has not been complied with by successive governments.

But in January, President Buhari decided to ensure compliance with the NASENI Act.

He also approved the placement of NASENI directly under the supervision of The Presidency instead of the Ministry of Science And Technology.

The directive was said to be due to seven key projects (inventions) being undertaken by NASENI with funding as a major hindrance.

One of the key projects is a made-in-Nigeria helicopter which the President has mandated NASENI to produce.

Others are:

• Establishment of first made-in-Nigeria transformer plant and high voltage testing laboratory to be located in Okene, Kogi State.
• First made-in-Nigeria plant for the manufacturing of Silica which is the major material needed for local manufacturing of solar panels to resolve alternative/renewable energy supply for the nation.
• Funding of the plant for the first made-in-Nigeria smart prepaid energy meter (SPEM), which is already patented, before transferring them to private sector entrepreneurs as stipulated by its mandate.
• Establishment of zonal (six geo-political zones) agricultural machinery & equipment development institutes which had already been approved by the president.
• Completion of work on first made-in-Nigeria e-voting solutions designed and produced by Nigerian engineers in NASENI.

. Completion of work on the reverse engineering process of five-kilowatt small hydro-kinetic turbine. This project is to facilitate energy supply to Nigerian rural areas as an alternative to the national grid.

Tax implications

1. Commercial companies and firms with an annual turnover of N100 million shall pay 0.25 per cent of their turnover to the FIRS.

Those excluded are: companies and firms with a turnover of less than N100 million; companies limited by guarantee.

2. The collection agency shall be FIRS.
3. FIRS may likely release guidelines for its collection.
4. It is not a new tax because the Act provides for it, but this is the first time the federal government has activated its collection.
5. NASENI has been removed from the Federal Ministry of Science and Technology to the Presidency.
6. This is a new tax burden for large companies.

• Eze is the national legal adviser of the Chartered Institute of Taxation of Nigeria.