The Nation Newspaper

Category: Taxation

  • Collection procedure (1)

    Collection procedure (1)

    For self-assessment filers, the “due date of payment” is determined as follows:

    •For companies with accounting year ending on 31st December, the due date of payment is 30th June of the succeeding year;

    •For companies with accounting year ending on 30th September, the due date of payment is 31st March of the succeeding year;

    •For companies with accounting year ending any time between January 1 and  June 30, the due date of payment is 1st January of the succeeding year; and

    •For all other cases the due date of payment is six months after the accounting year end.

    Under the self-assessment system, a corporate taxpayer is expected to attach a draft/cheque for the tax payable to the returns filed. However,under the provisions of theAct, it has up to two months from the due date of payment within which to settle the assessment. This latter arrangement applies to lump sum payments only. Self-assessment filers who file their assessments promptly and attach drafts/cheques may be granted, on application, the concession to pay the remaining tax due in not more than five monthly instalments commencing from the month immediately following the due date of payment. Such payments may not extend beyond November 30 of the year the assessment and the tax payable relate.

     

    Undisputed government assessment

    Government-assessed tax will continue to be payable within two months from the date of the assessment. However, where the two-month period expires after December 14, such tax must be paid not later than that date.

     

    Example 1

    ABC Limited was assessed on July 1, 1992 for 1992 current assessment for N500,000.

     

    Comment

    The assessment is expected to be paid between July 1, 1992 and August 31, 1992 and not by December 14, 1992.

     

    Example 2

    ABC Limited was assessed on December 1, 1992 for 1992 current assessment for N1m.

    Comment

     

    The company has two months within which to pay the assessment but since the two-month period expires after  December 14, 1992, the last date for the payment of the tax should be December 14, 1992.

    Disputed assessment

    An amount payable in connection with a determined formal objection or appeal must be settled within one month from the date on the notice of amended assessment, but where the one month period expires after December 14; such tax must be paid not later than that date.

    Terms of Payment:

    Lump sum payment

    All assessments and the provisional tax are payable in one lump sum.

     

    Instalment payments

    A taxpayer may arrange with the Service the payment of the current self-assessment by instalments. The maximum number of six monthly instalment payments may be enjoyed by a self-assessment filer provided the taxpayer remits at least one instalment with the self-assessment tax return. However, where the period of the instalment payments expires after the 30th November of the year of assessment, the balance of the payments must be paid not later than that date otherwise interest at commercial rate is payable on the balance.

     

    Government assessment

    Government assessments are payable in one lump sum only except where interest at commercial rate is payable for deferment of payment.

     

    Qualification for instalment concession

    Granting instalment payment concessions is not automatic. It is at the discretion of the Service. It must be applied for and approved in writing. To qualify for the grant, a company must prove to the satisfaction of the Service that the payment of the tax due in one lump sum will impose financial hardship on its operations. In other words, the company should convince the Service that it is unable to pay the whole tax due in one lump sum. The application must also be lodged with the relevant office of the Service before the due date of payment. Additionally, an application for instalment payments not backed up with at least the first instalment as evidence of cooperation may not be considered.

     

    Example 3

    ABC Limited was assessed N100,000 on July 1, 1989 for 1989 year of assessment. 50 per cent was paid at the end of that year and the balance remained unpaid till June 30, 1992.

    Comment

    Penalty starts to count from the date the notice of assessment was issued.

     

    1/7/89                                –            31/12/89-  6 months

    1989  100,000 at 10% for 6 months                      =5,000

    1990                           50,000 at 10% for 1 year     =         5,000

    1991   50,000 at 10% for 1 year                              =5,000

    1992  50,000 at l0% for 6 months                        =2,500

    Total penalty due on 30th June, 1992        17,500

    Self Assessment, Provisional Tax and Penalty

    A self-assessment filer is exempted from the payment of provisional tax. However, a company that is so exempted but fails to file the self-assessment on the due date of filing or having filed, fails to pay on the due date of payment, will be required to pay the provisional tax together with the statutory penalty.

    Interest

    The interest is to compensate the government for the use, by the taxpayers, of the funds that legally belong to it. It is also to prevent the creation of an unfair financial advantage for those who do not pay their taxes as and when due.

    Interest will therefore accrue fewer than two conditions:

    •Where penalty is payable (i.e. where the payment of government assessment, self -assessment or provisional tax is late); and

    •Where the taxpayer has the formal approval of the Service to defer the payment of the tax.

    In the first case, the interest is charged together with the penalty for late payment. In the second case, only the interest is chargeable for the period of the deferment.

    Reckoning of Interest

    Interest is due from the date of reckoning. The date of reckoning is determined as follows:

    Self Assessment

    The reckoning of interest starts from a day after the due date of payment.

    Government Assessment

    The reckoning of interest would start a day after the date the assessment was issued.

     

    Collection procedure (2)

    Interest & Penalty for Late Payment

    The interest is not an alternative to the penalty. Interest is for late and deferred payments while penalty is charged for late payment of tax. Interest is therefore charged in addition to the penalty in cases of late payment.

     

    Self-Assessment

    Penalty starts to count from the due date of payment but interest starts to count from a day after the due date of payment.

     

    Government assessments

    Penalty is charged from the date the assessment was issued but interest is reckoned from a day after the assessment was issued.

    Example 4

    A company was served a notice of amended assessment for N500,000 to replace a disputed government assessment on May 1, 1992. The tax remained unpaid till October 31, 1992.

    Comment

    Penalty for late Payment

    Note:                                                                                      

    1/5/92 to        31/10/92              6 months

    Penalty = 6/12 of 10/100 of 500,000 =N25,000

     

    Interest

     

    Due date of payment       –               01/05/92

    Day of Reckoning                         –   02/05/92

    Interest rate                                    –  20% per annum

    02/05/92 to 31/10/92      –              183 days.

    Total Payment

    Tax               –                500,000.00

    Penalty       –                25,000.00

    Interest       –                50,000.00

    Amount Payable        575,000.00

     

    Deferred Payment: Interest & penalty

    When a company arranges with the Service to defer the tax due, interest is chargeable but penalty may not be imposed if the application is approved. The interest is calculated on reducing balance basis.

     

    Interest on payments in excess of approved instalments

    When a taxpayer seeks to pay the tax due in a number of instalments greater than that approved for self assessment  as specified above, interest is payable on the excess number of payments, also on reducing balance basis.

     

    Example 5

    XYZ Limited, with March 31 applied for the payment of the tax due, amounting to N100,000 in 10 equal monthly instalments.

     

    Comment                                                                                                    a.)Since the company is entitled to six instalments in the year of assessment, the first six payments terminating on August 31, 1993 will not attract interest.

    However,  interest  will  be  charged  on  the  balance  of  four  months  on  reducing balance basis as follows:                                         b.) April 1 to September 30 (6 months)                                                  N           6/12 of 40,000 x 20/100       =4,000.00

    c.) Oct 1 to Oct. 31 (1 month)                                                                                                                                                   1/12 of 30,000 x 20/100       =500.00

    d.)Nov. 1 to Nov. 30 (1 month)                     

                      1/12 of 20,000 x 20/100     =333.33

    e.) Dec. 1 to Dec. 31 (1 month)                                                                     

            1/12 of 10,000 x 20/100              =166.67

    Table of Payment                                                                                                                         

    Due Date      Tax            Interest             Amount Payable

                                                                           (Tax + Interest)

                             N                   N                            N

    30th Sept.      10,000           4,000.00               14,000.00

    31st Oct.         10,000            500.00                  10,500.00

    30th Nov.       10,000           333.33                  10,333.33

    31st Dec.        10,000          166.67                     10,166.67

     

    Default in payment of approved instalments

    When a company defaults in the payment of the instalments as approved, the concession stands cancelled. Interest starts to count from the date the default occurs. The calculation of the interest is also on the reducing balance basis.

     

    Interest on arrears

    As from January 1, 1991, arrears of tax are to carry interest at commercial rate. The interest is in addition to the annual penalty and both are to be charged annually.

     

    Lateness in filling application for instalment payments

    Where a company is late in applying for instalment payment arrangement, interest should be charged from the date of reckoning (a day after the due date of payment) to the date of commencement of the payments. The accruing interest should be added to the tax and spread over the number of instalments allowable under the circumstance.

     

    Petroleum Profits Tax (PPT)

    In view of the fact that transactions in the oil industry are in dollars and the operators are allowed to keep their proceeds of sale in accounts overseas, government has directed that the estimated tax of an accounting period under the provisions of Section 27 of the PPT Act, 1959 shall be made and submitted to the Service in US dollars and when payments are being made, each monthly payment shall be in US dollars and shall be equal to one-12th of the estimated tax or of the fraction of the remaining months of the accounting year for which a revised estimated tax becomes necessary and is so estimated.

    The  final  PPT  payable,  that  is,  the  13th  instalment,  shall  be

    ascertained as provided for in Section 38 (4) of the same Act such that so much of the amount of instalments of estimated tax that had already been paid in US dollars shall be deducted from total PPT computed in US dollars based on the annual accounts.

    Litigation

    As explained above, instalment or deferred payments, as the case may be, will be approved for companies with convincing proof of serious financial problems. However, where the arrangement fails to yield the desired result, legal action may be instituted against defaulters to enforce payment.

    Withholding Taxes (WHT)

    Payments made to companies and certain categories of individuals are to suffer deductions at source as follows:

     

    Rates

     

    Type of Payment         Applicable WHT                                                             Applicable WHT

                                             Companies *a        Individual *b

    (i)Dividend, Interest and Rent  5                        5

    (ii) Royalties                                15                      15

    (iii) Commissions, Consultancy

    Technical & Management        10                    5

    (iv) Construction                          2.5                   2.5

    (v) Contract Supplies*                2.5                     2.5

    The Payment of withholding tax is now in the currency of the contract agreement.

    The individuals covered by the Federal Inland Revenue Service are the non-residents, residents of Abuja, members of the Police & Armed Forces and External Affairs Officers. Other individuals are under the tax jurisdiction of the State tax authority where the individuals reside.

    *The term ‘contract supplies’ covers all forms of supplies, deliveries, or the like through competitive bidding, tenders, LPOs or other arrangements, whether oral or written. The term does not cover across-the-counter cash sales or supplies in the ordinary course of sales.

    WHT on Investment Income

    (i) Non-Residents: WHT on dividends, interests, rents and royaltiespayable to non-resident remain the final tax.

    (ii) Residents: With effect from January 1992 the provisions in the Act regardingthese payments as final tax have been amended. They are now to be regarded as payments on account.

    Remittance of WHT to tax authorities

    Failure of an agent of deduction to remit WHT within the statutory time-limit will attract:

    (iii) Interest at commercial rate on the amount not remitted by the agent,

    (iv) Prosecution of the agent for default, and

    (v) Denial of Tax Clearance Certificate to such an agent.

    Furthermore, where the agent is a government ministry, parastatal or department or a local government, the Service may authorise the Accountant-General of the Federation in writing to deduct such tax plus interest at the prevailing commercial rate from any allocation due to such agency.

    WHT  as tax credit

    Withholding taxes are advance payments and they can only be applied as tax credit to settle the assessment of the year to which the income that suffered the deduction relates. Where the withholding tax credit exceeds the assessment for a given year, the excess may be carried forward as future set-off.

    Refund/set-off

    Where it is proved that the person who suffered the deduction is not liable to tax or that tax withheld is in excess of the assessed tax, the service will grant a refund or a carry-forward, as the case may be, after the claim has been confirmed by tax audit process.

     

     

     

  • The CGT: An untapped goldmine

    The CGT: An untapped goldmine

    Taxation is arguably as old as mankind. In his book, Income Tax Law and Practice in Nigeria, Ola, C. S. said apart from revenue to the government, taxation is important to everyone and taxes collected come back to the taxpayers in the form of social amenities.

    Almost everything we own and use for personal or investment purposes is a capital asset. Examples include a home, personal-use items like household furnishings, and stocks or bonds held as investments. Capital gains are the profits realized from the sale of assets at a price that is higher than the purchase price. When a capital asset is sold, the difference between the cost sale and the sales price is a capital gain or a capital loss. You have a capital gain if sales price is higher than cost of sale. The reverse is the case for a capital loss.

    Capital Gains Tax (CGT) is a type of tax levied on capital gains accruing to individuals and corporations. The Federal Inland Revenue Service (FIRS) and State Boards of Internal Revenue are responsible for the administration of the CGT in Nigeria. It is a tax applicable to capital gains accruing to any person (company or individual) on the disposal of a chargeable asset. Capital gains taxes are triggered when an asset is realized, not while it is held by an investor. An investor can own shares that appreciate every year, but the investor does not incur capital gains tax on the shares until they are sold.

    Not all disposals are subject to CGT; only chargeable assets are. Chargeable assets are all forms of property, including options, debts and any form of property created or acquired by the person disposing it, or otherwise coming to be owned without being acquired. Landed properties and buildings are the main income yielding assets in Nigeria.

    Most countries’ tax laws provide for some form of capital gains taxes on investors’ and individuals’ capital gains, although CGT laws vary from country to country. In Nigeria, CGT was originally introduced by the Capital Gains Tax Act of 1967 with a rate of 20 per cent but effective from 1998, the CGT rate was revised down wards  to 10 per cent. The legislation currently governing taxation of capital gains is the Capital Gains Tax Act CAP C1 LFN 2004.

    Capital gains are excluded from taxation under the Companies Income Tax Act (CITA) to avoid double taxation since such gains are subject to tax under the CGT Act. Assets situated outside Nigeria are chargeable to CGT on the amount received in or brought into Nigeria.  In the case of a non-resident, CGT is charged on any part of the gains received or brought into Nigeria.

     

    Disposal to a connected person

     

    When a taxpayer transfers his capital asset to say, his wife, this is seen as a transaction between ‘connected persons’. In this case, the chargeable gains will be calculated on the basis of the market value of the asset at the date of transfer. Section 24 of the CGT Act, 2004 provides that a person is ‘connected’ if:

    a.That person is the individual’s spouse.

    b.A trustee of a settlement with any individual who in relation of the settlement is a settler.

    c.A person is connected with any person with whom he is in partnership and with any person the spouse or relative of any person with whom he is in partnership.

    A company is connected with another company if:

    a.The same person has control of both or he and persons connected with him has control of the other.

    b.Where a group of two or more person has control of each company and the group either consists of the same persons or could be regarded as consisting of the same persons by treating a member of either group as replaced by a person with whom he is connected.

    c.A company is connected with another person if that person has control of it or if it and that person connected with it together have control of it.

    d. Any two or more persons acting together to secure or exercise control of a company shall be treated in relation to that company as connected with another and so will any person on the directions of any of them to secure or exercise control of the company.

    Capital gains is the net consideration accruing to a person on the disposal of capital assets after the sum of the total consideration and expenses for acquiring the asset has been deducted. It is arrived at by deducting from the proceeds accruing to any person on disposal the following:

    a) The amount or value of the consideration (in money or money’s worth) given wholly, exclusively and necessarily incurred in providing the asset.

    b) Expenses wholly, exclusively and necessarily incurred on the asset for the purposes of enhancing its value being expenditure reflected in the state or nature of the asset at the time of disposal.

    c) Expenses wholly, exclusively and necessarily incurred on the asset in establishing, preserving or defending the title or right over the asset.

    d) The incidental cost of making the disposal, incidental costs of the acquisition of the asset or of its disposal includes fees, commissions or remuneration paid for  professional services of any surveyor or valuer or auctioneer or accountant or agent or legal adviser and cost of transfer or conveyance, including cost of advertising.

     

    Expenses allowable and computation of CGT

     

    Expenses allowable as a deduction in computing the gains or losses of a trade, business, profession or vocation for income tax purposes are not to be deducted in the course of determining the applicable CGT. So also are premiums or other payments made under a policy of insurance against the risk of any kind of damage or injury to lose or depreciation of any asset. This does not prevent the deduction of expenses allowable in the computation of capital gains under the CGT if the assets have qualified for capital allowances.

    According to Ayua, I. A. in his book, The Nigerian Tax Law, the above position on deductions is to the effect that capital gains are liberally calculated for the purpose of the CGT law. In practice, capital gains are calculated by deducting the  total cost of acquisition from net sales proceeds.

    Example: Ola sold his  property for N150,000 on June 2, 2005. He incurred the following expenses in the course of the sale:

    Adverts (online and print):                             N  8,000

    Legal service charge:                                       N15,000

     

    He bought the property on 13th December, 1981 at N60,000 and incurred the following expenses:

     

    Agency:                                                                              N10, 000

    Renovation        :                                                               N 10, 000

    .

    Here is a computation of the amount of CGT due from Ola:

     

    N                                                N

    Proceeds from sale:                                                          150,000

    Less expense:

    Adverts:                                              8,000

    Legal service charge:       15,000

    Agency:                                              10,000

    Renovation:                       10,000

    (43,000)

     

    Net sales proceeds:                                                           107,000

    Less cost of acquisition:                                                   (60,000)

     

    Gains                                                                                   47,000

     

    Capital Gains Tax = 10% of N 47,000

    = N 4,700

     

    Exemptions

     

    The CGT Act exempts gains accruing to the following:

    a) Ecclesiastical, charitable or educational institutions of public character.

    b) Any statutory or registered friendly society.

    c) Any co-operative society registered under the Trade Union Act, in so far as the gain is not derived from any disposal of any asset acquired in connection with any trade or business carried on by the institution or society and the gain is applied purely for the purpose of the institution or society as the case may be.

    d) Gains accruing from any local government council.

    e) Companies being purchasing authorities established under any law in Nigeria empowered to acquire any commodity in Nigeria for export.

    f) Superannuation funds (pension provident or other retirement benefits fund, society or scheme approved by the Joint Tax Board under Section 20 (1) (f) of the Personal Income Tax).

    g) Decorations, stocks and shares (the Act provides that where a person disposes a decoration awarded for valour or gallant conduct which he acquires otherwise than for consideration in money or money’s worth, such is not a chargeable gain. The Act also recognizes disposal of Nigerian government securities, stocks and shares as non-chargeable gains).

     

    Reliefs

     

    To prevent double tax relief on disposed assets, the Act provides that relief would be given in respect of replacement of business assets, compensation for assets lost and destroyed and in respect of delayed remittances from abroad. The relief would be in the form of tax deferred.

     

    Offences and penalties

     

    With regards to the FIRS’ jurisdiction, offences and penalties under CGT is as provided for by Part VI of the FIRS Establishment Act 2007. On failure to deduct or remit taxes, Section 40 of the FIRSEA 2007 provides that “any person who being obliged to deduct any tax under this Act or the laws listed in the First Schedule of this Act but fails to deduct or having deducted fails to pay to the Service within 30 days from the date the amount was deducted or the time the duty to pay arose, commits an offence and shall upon conviction be liable to pay the tax withheld or not remitted in addition to a penalty of 10 per cent  of the tax deducted or not remitted per annum and interest at the prevailing Central Bank of Nigeria  minimum re-discount rate and imprisonment for a period not more than three years”.

    On penalty, Section 49 (1) stipulates that “any person who contravenes any provisions of this Act for which no specific penalty was provided, commits an offence and shall be liable on conviction to a fine not exceeding N 50,000 or imprisonment for a term not exceeding six months or to both fine and imprisonment”.

     

  • Assessment procedure(1)

    Assessment procedure(1)

    The overriding objective of assessment function is to ensure that all taxpayers, within a defined tax jurisdiction, are brought into the tax net and assessed correctly in order to plug all possible leakages. Generally, taxpayers are categorised according to the legal status of their businesses which includes the following:

    • Individuals/Enterprises, usually sole proprietorship or self-employed

    • Partnership, association of two or more persons coming together in business to make profit.

    • Corporate entities/public companies, usually limited by shares

    • Non-Governmental Organisations (NGOs), usually unlimited or limited by guarantee.

    A brief description of each of the above business entities will help in the understanding of their respective duties and obligation under the tax laws.

    Individual/Enterprises: This is a taxable person who is chargeable to tax in his own name or in the name of a receiver, or his agent. Usually, the tax affairs of this category of taxpayers are to be handled by the State Internal Revenue Service (SIRS), where the taxable person domiciled or resides. Individuals are assessed to tax under the Personal Income Tax Act (PITA).

    Partnership: This category of businesses is assessed to tax under the Personal Income Tax Act (PITA) in the same manner as individuals/enterprise. In Nigeria, Partners are assessed in their individual names, based on the share of partnership profits allocated to them.

    Non-Governmental Organisations: These are non-profit making organisations which are qualified for income tax exemption under Section 23(1)(i) of CITA C21 LFN, 2004). They are often unlimited or at best limited by guarantee. These types of organisations have duty to apply for exemption. The form in which NGOs are registered determines which Tax Authority will handle their tax affairs.

    Corporate Entities/Public Companies: These are limited liability companies or public companies registered with profit – motive in mind. Their tax affairs are being handled by the Federal Taxing Authority.

    Assessment function in an Integrated Tax System is agreed to include filing and assessment duties with respect to all taxes being collected by that office among which are: PPT, CIT, VAT, WHT, CGT etc.

     

    Classes of assessment

    Assessments are normally raised on the Income or Profit of companies or corporation raising from trade or business carried on in Nigeria. Assessment is to be imposed on the ‘‘Profit’’ of an enterprise in relation to an accounting period. There are two (2) principal classes of assessments, namely;

    Self-Assessment:- This assessment scheme aims at shifting the duty of raising of assessment to the taxpayers themselves. Under this system, the taxpayer is expected to accompany its tax returns with self-assessment notice and an evidence of payment to the FIRS through appropriate designated collecting bank.

    Government Assessment:- This is an assessment raised on behalf of the Government by the Tax Authorities, examples of which are:

    • Assessment raised in accordance with audited accounts and computations filed by the taxpayers.

    • Administrative assessment based on physical assessment of the company or profit perceived to be fair and reasonable.

    • Protective/jeopardy assessment.

    • Amended/additional assessment.

     

    Types of assessment

     

    Assessments based on taxpayers’ returns

    These are assessments based on the information contained in the taxpayer’s returns. The tax computations together with the capital allowances computations are enclosed along with the audited accounts and such assessment could either be self-assessment or government assessment.

     

    Minimum tax

    Minimum Tax is payable by every company in Nigeria when the total profits of the company from all sources have produced on tax, or tax payable which is less than the minimum tax specified by the law. However, the followings are exempted from the payment of minimum tax:

    • Companies engaged in agricultural trade or business.

    • Companies with at least 25 per cent imported equity capital.

    • Any company for the first four (4) years of its commencement of business.

    The rates applicable to companies which are liable to minimum tax is the highest of any of the following:

    • 0.5 pwe cent of Gross Profit

    • 0.5 per cent per cent of Net Assets

    • 0.25 per cent of Paid-up Share Capital

    • 0.25 per cent of Turnover of up to N500, 000.

    If however the turnover is higher than N500, 000, the minimum tax payable will be the highest of the above plus 0.125per cent of the excess of the turnover above N500, 000.

    Treatment of Capital Allowances when Minimum tax is applicable

    It is important to note that in any year of assessment when minimum tax is chargeable, the capital allowance due in that tax year must be adjusted against the profit of that year along with the unabsorbed balances brought forward. This treatment is adopted to ensure that the charging of minimum tax does not preclude the deduction from assessable profit and the utilisation of capital allowances for that year. The position of the law is that capital allowances should be deducted as far as possible, from the assessable profit of that year and the unabsorbed portion, if any, shall be carried forward.

     

    Minimum tax on dormant cases

    Minimum Tax is justified on the theoretical premise that every asset should generate an income and it is applied as an anti-tax avoidance measure. This tax is sometimes referred to as asset tax. Already, it is being applied in that manner during periods of dormancy in the sense that minimum tax is computed and charged on net asset or share capital, whichever is the higher of the two. The aim of this clarification is to ensure uniformity in the application of the law on minimum tax with respect to dormant cases. Minimum tax should be computed although the assessment may be raised when the business eventually recommences.

     

    Best of judgment assessment

    This is raised where audited accounts and other relevant returns are not submitted within the stipulated time in line with the tax law. It is usually based on “fair and reasonable’’estimate of income/profit of the preceding year’s results reported by the company.

     

    Amended/revised assessment

    Where accounts are submitted and the basis of the assessment is faulted, the original assessment earlier made is revised or amended in line with the new information as disclosed in the tax computations.

     

    Additional assessment

    The Board is empowered to examine the returns submitted by taxpayers in order to ensure that the presentation of the accounting details conform with provisions of the Income Tax Act. Unapproved claims and allowances discovered are disallowed and added back to profit. This, in addition to other information will form the basis for additional assessment. All rules and regulations governing other assessments also apply to additional assessments.

     

    Jeopardy/protective assessment

    These assessments are raised on the ground of expediency. If the relevant tax authority is of the opinion that such assessments are necessary for any reason of urgency, which may include the following:

    • Where a case referred to the Board for ruling is yet to be determined.

    • Imminent liquidation of a company or an intention to dispose of its valuable assets, the result of which may cripple its operation.

    • Imminent sale or transfer of trade/business of the company to another.

    • Intended remittances to foreign partners.

    • Payment being made to a taxpayer who had hither to been evading tax.

    • Imminent escape by a taxpayer to foreign counties.

    • in all other cases of emergency.

     

    Assessment on turnover

    Under Section 30(1) (a) and (b) of CITA C21 LFN, 2004, the Board is empowered to assess on the turnover of the taxpayer’s business. Where it appears that the trade or business produces no assessable profits or declare turnover that is less than might be expected to arise from such trade or business. Such an assessment is made by assuming a fair percentage of turnover as assessable or adjusted profit for the year to which capital allowances and other deductions are charged before arriving at total profit, And then applying the current rate of tax to determine tax due for the year.

     

    Assessment levied on dividend provision where no tax is computed or payable

    Section 19 of CITA empowers the Board to raise assessment on amount of dividend paid to shareholders as if such dividend declared is the total profit of the company for the year of assessment to which the accounts relates. Such a situation may arise where a company declares dividend to its shareholders when it has no tax payable reported as a result of:

    • No total profits; or

    • Total profits which are less than the amount of dividend paid.

    In all case where dividend is declared, officers should always compare the total profits to the amount of dividend declared.

     

    Other assessments/levies

    There are other levies or imposition usually encountered in the course of assessment duties, among which are:

    Penalty for late returns:

    Penalty is normally imposed when a taxpayer’s audited accounts and tax computations are submitted late to the Revenue Authority. The amount of penalty at present is N25,000 for the first month in which the failure occurs and N5000 for each subsequent month of failure. It is a form of assessment raised whenever the returns are submitted late. The amount is subject to review from time to time at the discretion of government.

     

    Pre-operational levy:

    This is levy imposed on companies which fail to commence business within six months after their incorporation. The levy is N20, 000 in the first instance and N5000 for any other year, if it still has not commenced business.

    It is to be levied when the taxpayer applies for the Tax Clearance Certificate (TCC). Pre-operational levy should not be imposed for any previous years when the company did not apply for TCC; neither should it be raised in arrears to cover earlier years.

     

    Education tax levy:

    This is a levy being imposed on all taxable companies in Nigeria to assist Government in the development of education in Nigeria. It is charged at the rate of two pwe cent of the assessable profit and should be assessed alongside the normal tax assessment for each year. Pioneer Companies are usually not assessed to Education Tax in view of the income exemption status from tax payment that they enjoy during the pioneer period.

     

  • ‘Procurement vital to management’

    ‘Procurement vital to management’

    An institute DACA Consults Procurement Academy has held its maiden human resource development programme in Ikeja, Lagos.

    Its Managing Consult, ‘Bayo Ayoade, said because procurement experts play a vital in an organisation, there is need to train them continuously.

    He said the school would operate in three phases: holding monthly programmes, a professional institute and a research centre.

    Speaking on theme Examining the legal framework of public procurement management in Nigeria, he said for transparency, the Federal Government enacted the Procurement Act 2007, as recommended by the World Bank, and that 10 states so far have domesticated the Act. They include Lagos, Ekiti,Niger, Rivers, Bayelsa, Edo, Delta, Anambra, Cross River and Alkwa Ibom.

    President, Chartered Institute of Purchasing and Supply Management of Nigeria (CIPSMN), Alhaji Mohammed Jimoh Aliyu, canvassed professionalism as a panacea for the ‘rapid development’ of Nigeria, noting that his colleagues should be given a major role in a top management. He berated professionals who dump their core values for the filthy lucre.

    General Manager, Lagos State Procurement Agency, Niyi Onimole, said procurement has a bright future, adding that chief executives are vital to the industry.

    He urged his colleagues to attend to complaints and put in place a review mechanism to handle problems that might arise from tenders.

     

  • UK sees more scope for refinery closures

    Britain said there was scope for more United Kingdom (UK) refining capacity to close without undermining energy security but set up a new task force to help the struggling sector fend off overseas competition.

    The government’s long-awaited review of Britain’s refining and fuel imports sector comes a week after Murphy Oil said it could be forced to close its loss-making Milford Haven plant in Wales after talks with a potential buyer collapsed.

    In a 44-page report, the Department of Energy and Climate Change said environmental regulation along with the United States shale boom and the rise of new refiners in Asia made it harder for Britain’s seven refineries to compete.

    “Looking to the future, given current overcapacity in product supply there is scope for further rationalisation in the UK without impacting on supply security,” the review said.

    “Government recognises … the benefits of ensuring that refining and imports business sectors are able to operate successfully in the UK, whilst also recognising that ultimately market forces will decide what supply configuration prevails.”

    It announced the creation of a new joint government and industry Midstream Oil Task Force to look at ways of easing the regulatory burden and market distortions to help refiners meet global challenges that have seen their profits dwindle.

    European refiners have struggled with stagnant demand and increased overseas competition which has crushed margins and seen several plants closed or idled in recent years.

    Wednesday’s review into the sector was held after the Coryton plant in the east of England closed in 2012 following the collapse of its owner Petroplus.

     

     

     

     

    That followed the shuttering of the Teesside refinery in 2009, while last year, Grangemouth refinery in Scotland was brought to the brink of closure during a bitter industrial dispute between workers and its owner PetroIneos.

     

    Another 2 million barrels per day of capacity, more than 10 percent of Europe’s total, is expected to shut over the next five years, analysts at Vienna-based JBC Energy have said.

     

    The review said some of that capacity could be British.

     

    “Within the EU itself the UK refineries face particular challenges,” it said. “Some indications to government from industry are that UK refiners can face higher operating costs than equivalent refineries elsewhere in the EU, which has the potential to impact on competitiveness.”

    The challenges facing British refining are structural.

    Older refineries were originally geared to meet gasoline demand. As motorists have shifted to more efficient diesel in recent decades, the sector has been left with a surplus of gasoline and shortage of diesel made up by imports.

     

    The review found this trend was likely to continue, while overall demand for fuel products would fall as Britain moves towards lower carbon sources. Britain’s domestic refineries met 61 percent of overall demand for fuel products in 2012, it said.

     

    That level is healthy by the standards of the International Energy Agency (EIA) whose model for short term energy security, sees domestic cover of less than 55 percent as higher risk.

     

    Broken down into individual products, however, Britain imported a much higher 64 percent of its jet fuel in 2012.

     

    “A mix of domestic and global suppliers, brought about by having domestic refining capacity and a strong import infrastructure helps diversify risk and source of supply, helping ensure resilience to supply disruptions and maintaining security of supply,” the review said.

     

    The government will also establish an industry-owned and operated entity to manage Britain’s emergency oil stocks as it seeks to ensure the UK approach was “efficient and fair for obligated companies in the UK downstream sector”.

     

  • ‘Africa needs to refine its oil’

    Thiopia’s leading private oil marketer plans to expand into neighbouring east African economies and is interested in part financing a refinery after commercial discoveries in the region.

    Chief Executive Officer (CEO) of National Oil Ethiopia, Tadesse Tilahun, said untapped crude deposits in Kenya and Uganda handed governments and investors the opportunity to construct a refinery able to compete with cheap imports from India, the Gulf and beyond.

    Doing so would help African countries extract more value from their resources and cut their import bills, Tadesse said.

    “Africa’s demand for refined products is growing hugely because of its economic growth. The crude findings are also increasing. That is the opportunity,” Tadesse said in Addis Ababa as part of the Reuters Africa Summit.

    “We want to (build) a refinery. We have already discussed this in principle with our shareholders, who are very much committed.”

    National Oil’s (NOC) shareholders include Saudi billionaire Mohammed Hussein Al Amoudi, whose investment portfolio in construction, gold, hotels and energy has helped amass an estimated fortune of over $15 billion, according to Forbes.

    Tadesse said other private and public investors would need to come on board.

    Eastern Uganda has become the latest frontier in the global hydrocarbon hunt after gas finds off Tanzania and Mozambique and oil discoveries in Uganda and Kenya.

    Even so, Sub-Saharan Africa faces headwinds supplying more of its own refined petroleum products. Regional cooperation and funding for oil-related infrastructure are proving slow, while foreign oil refiners and traders are flooding the $80 billion market with imports.

    Existing pipelines also tended to run to the coast, Tadesse said, either for the export of crude or the import of refined products from small-scale refineries found near ports.

    “That has to change,” Tadesse said. “Refineries are now needed inland so that Africa can supply itself.”

     

     

    Tadesse acknowledged the price tag was problematic for many African countries. Oil production in Uganda has been delayed in part due to a row between the government and investors over the size – and thus cost – of a refinery in the country.

     

    “It would be in our own interest, for all countries in this area, to have a common refinery, a joint facility, where we can take our own product,” Tadesse said.

     

    Kenya plans – but has made little progress towards – a new $2.8 billion refinery on its northern coast. Industry experts say Ugandan and Kenyan oil exports could reach 500,000 barrels per day – oil Tadesse would rather see stay in the region.

     

    Founded in 2004, NOC now claims a 35 percent share of a market tightly controlled by the Ethiopian state. So too are other key sectors including banking, retail and telecoms, which the government says need shielding from foreign investors while the economy diversifies away from its agricultural base.

     

    Tadesse said NOC had secured a license for fuel stations in neighboring Djibouti and targeted expanding its downstream operations into Kenya within five years. Plans to enter South Sudan have been shelved due to the four-month conflict there.

     

    “We want to be a regional player,” Tadesse said.

     

    Oil consumption has doubled in 10 years in Ethiopia, one of Sub-Saharan Africa’s fastest-growing economies and now the region’s fifth-largest after leap-frogging Kenya.

     

    Demand for oil in Ethiopia is seen tripling by 2025, indicative of the economic transformation under way in Africa’s second-most populous nation which is still better known abroad for the famine of 1984 and communist-era purges.

     

    But the pace of NOC’s expansion at home hinges on the government relaxing its grip on the industry.

     

    Tadesse said the government imported all fuel products and set the market price, allowing fuel stations a margin of just 4 U.S. cents per liter. Land rights issues also hindered growth.

     

    “In no way can that be attractive to investors,” he said.

     

  • E-government: Anambra embarks on resident identification programme

    To improve public service delivery to her citizens in the areas of health, welfare and transportation, among others, the government of Anambra State is investing in residents’ identification programme. The project being executed by Chams PLC will enable the government of Anambra State to provide better public services at less cost to residents across rural and urban areas of the state.

    Commenting on the project, Mr. Demola Aladekomo, Managing Director, Chams PLC said, “The utilisation of information and communication technology to improve service delivery in the public sector in Nigeria will make governance inclusive – bringing it closer to the people. It implies improved access to public service and drastic reduction in the high incidence of fraud and wastage often associated with public sector welfare programmes”.

    Aladekomo stated that, globally, governments are investing in meeting the identity management needs at city, state and regional levels. Because it provides exceptional opportunity to cut capital and recurrent administrative costs, while also protecting citizens such as pensioners by making it difficult for dishonest persons to steal their benefits. He added that, “It is a welcome development that Anambra is at the forefront of heralding access to improved public services through e-government channels”.

    Mr. Olufemi Williams, Deputy Managing Director, Chams Plc said, “The ongoing implementation of residents’ identity management programmes by Anambra State will enhance the ability of the state government to make short, medium and long term plans for the benefit of their people.

    Upon completion, the state government will no longer depend on sketchy data in their bid to formulate and implement policies, projects and programmes because the number of people to cater for across sectors, and in rural and urban areas is known”.

    According to Williams, adoption of resident identity management programme by state governments will ensure appropriate allocation of resources to various sectors of a state economy in a manner that meets the real needs of residents of the state. “For instance, using data from its resident identity management project, a state government will be able to classify neighbourhoods based on their population thereby making adequate provision for public utilities in each neighbourhood based on the number of residents,” he disclosed.

    It would be recalled that Lagos State Government has invested in an ongoing residency registration project with the aim of enhancing economic planning through the use of accurate population data in the formulation and implementation of public service policies.

  • Global trade unbundled, says report

    Global trade patterns have changed dramatically in the last two decades. Emerging markets now account for 42 per cent of world exports, up from 19 per cent in 1990, or 52 per cent excluding intra-EU trade. Asia has firmly established itself as the centre of the “made in the world” vertical global supply chain, with China emerging as a mega-trader.

    Trade is increasingly “unbundled” with countries no longer trading in goods so much as in “tasks”, such as design or assembly. Services trade is expanding faster than goods trade driven by improving communications; it cannot easily be measured at the border and some estimates put services at 40 per cent of total trade now.

    Historically trade growth has averaged about 1.4 times GDP growth. But since the 2008 peak, world exports have risen only five per cent, while nominal GDP has grown more by than10 per cent. Some fear that this slowdown is structural. We, however, believe trade growth will pick up and this ratio can be restored.

     

     

    Growth in developed countries is accelerating while manufacturing, still the driver of goods trade, is coming out of the doldrums. Constraints such as lower trade finance availability and rising protectionism are fading. New multilateral trade pacts are in the works.

     

    The next leg up in trade is likely to be fuelled by a further unbundling of the supply chain, by continuing growth and opening in emerging countries and by increasing horizontal trade in both intermediate and finished goods.

     

    The report’s main findings include:

     

    Emerging markets now account for around half of global trade; most countries have seen a big rise in the share of their trade with EM. From 1990-2012 the share of US trade with EM rose to 46% from 25%, Brazil’s to 57% from 25% and Korea’s to 60% from 16%.

     

    Goods are increasingly “made in the world”, with global supply chains; the import content of exports has risen from 20% of total exports in the 1990s to 40% of total exports currently and is expected to rise to 60% by 2030.

     

    Services trade is growing fast and is more important than it looks; trade in services has grown at an average 9.0% since 1990, higher than the 8.0% for goods trade.

    The slowdown in trade growth since 2008 is mostly temporary; the ratio was highest in the 1990s – a golden decade for trade fuelled by the creation of the WTO and liberalisation in China and India.

     

    Trade is set to accelerate but patterns will change; China is now a mega-trader – a position last held by colonial Britain, with trade significant not only as a share of world trade (11.5%) but also of its own GDP (47%).

     

    Madhur Jha, Senior Global Economist at Standard Chartered, commented: “Trade is unlikely to grow as rapidly as it did in the 1990s or 2000s but we think that concerns about the lack of trade finance and a sudden end to supply chain expansion are overdone; we believe the trade-GDP ratio can regain the 1.3 to 1.5 range longer term.

     

    “South-South trade and services trade are likely to gain importance over the coming years; in the WTO’s “high” scenario, South-South trade balloons to around 43% of total world trade, more than doubling from current levels. China would augment its position as the mega-trader of this century, raising its share from a tenth to about a quarter of total trade.

     

    “Asia remains the centre of inter-regional trade and we expect it to maintain its importance in world trade over the coming years, with the fastest growing trade routes likely to remain centred on Asia.”

  • Tax relief for pioneer firms

    Tax relief for pioneer firms

    The government has over the years put in place different and overlapping incentive schemes to attract both local and foreign investment. Tax exemption is regarded as an industrial investment device; developing countries, such as Nigeria offer it as one of their major incentives.

    Basically, tax incentives are designed to encourage investments in certain preferred sectors of the economy and sometimes geared towards attracting inflow of foreign exchange to complement domestic supplies for rapid economic development.

    Tax exemption otherwise known as tax holiday is one of the most widespread tax incentive. Tax exemption simply means a period of exemption from payment of taxes imposed by the government and this may be complete or partial. The grant of pioneer status, therefore, gives a company a preferred position in getting established, usually through exemption from income tax.

    A pioneer company is a firm that is engaged manufacturing, processing, mining, servicing and agricultural industries whose products have been declared pioneer products on satisfying certain conditions in as determined by Industrial Development Coordinating Committee (IDCC) of the Government under the Industrial Development (Income Tax Relief) Act Cap 179 LFN 1990. The pioneer Tax holiday is for an initial period of three years or subject to further extension of two years or five years (ones and for all without further extension).

    Enabling Act

    Act Chapter 179 laws of the federation of Nigeria (LFN) 1990 but first enacted by Decree No22 of 1971 and commenced on 1/4/1970.

    Commencement date April 1, 1970

    •“An Act to repeal and re-enact, with major changes, the industries Development (Income Tax Relief) Act and to make provision for Tax relief for certain industries that may be issued with pioneer certificates by the minister and other matters ancilatory there to”.

    Conditions

    •Industry is not being carried out on a suitable scale as required and there are prospects for further development in the country or its product.

    •If it is in the public interest to encourage the industry or its product.

    •Application may be made for the inclusion of a product on the pioneer list

     

    Mode of application

    •All application to be addressed to the Minister

    •State the status of the company

    •Give details of qualifying capital expenditure to be incurred

    •Give sources of qualifying capital expenditure and estimated cost

    •Specify location of Assets

    •Date of production of pioneer products

    •Any by product not being a pioneer product

     

    Terms of pioneer certificate

    •Must be in terms of the application to which it relates.

    •Specify permissible by-products to be produced.

    •Specify period within which company must be incorporated and conditions to be endorsed

    •Pioneer status will only be issued from a date when company was incorporated and shall be effective from a date not earlier than the date on which the application was submitted to the minister or date of incorporation, whichever is the later.

    •Any other condition will be specified by the minister

    •The minimum Tax relief period not exceeding five years to be stated 3(6)(a-b)

     

    Amending of pioneer certificate to add new product

    Section 4 (1) – (3) allowed a company during its pioneer period to make application in writing to the Minister to add a new product.

     

    Retrospective pioneer operation

    •Where a pioneer certificate is to be operative from a retrospective date, all Acts shall be treated as not having been closed or not having happened and all taxes paid (if any shall be repaid as soon as may after the expiration of three months from the production day.

     

    Production date

    •No later than one month when the company is going into commercial production (marketable quantity), the company shall apply in writing for the certification of its production date.

    •Not later than one month after the production date or any extended period granted by the Board, the company shall make application in writing to the Board for the certification of the amount incurred as qualifying capital expenditure prior to the production date.

     

    Cancellation of pioneer certificate

    i) Company may apply for cancellation.

    ii) If company contravened any provision of the Act or failed to meet conditions set.

     

    Tax relief period

    i) Commencing from the production date, it shall continue for three years (but can be extended):

    ii) for another one period of two years (if the standard and rate of expansion are satisfactory), local raw material utilisation expansion, training and development of Nigerians, government policy priority).

    iii) Five years (once and for all).

     

    Transition from pioneer status

    Conditions of old trade or business of a pioneer company

    •The old trade shall be deemed to ceased permanently at the end of the tax relief period.

    •The pioneer company deemed to have set up a new trade on the day next following the end of its relief period

    •All capital expenditures incurred and used by a pioneer company shall be deemed have been incurred on that day next following the end of its tax relief period.

    •Where it incurs a Net loss, that loss shall be deemed to have been incurred on the date on which its new trade commences i.e. it will be allowed to deduct all the losses brought forward from the pioneer period.

    •The company must submit to the Board a list of its assets for certification.

    •At the end; the Board will issue a certificate of qualifying expenditure.

    •The Board is expected to issue the company for each year, the amount of income as ascertained and loss as arrived at (if applicable).

     

    Treatment of capital allowances and losses

    • A capital expenditure incurred shall be deemed to have been incurred on that day next following the end of the pioneer period. i.e. regardless of the number of years granted a pioneer company, all capital expenditures incurred in line with the provision of the second schedule within the periods shall be deemed to have been incurred after the Tax relief period.

    • For losses incurred within the pioneer period, the cumulative amount will be deemed for computing total profits to have been incurred on the day, next following the pioneer period i.e. it will be allowed as a deduction in the new business.

     

    Documentation required by FIRS

    •Memorandum and Article of Association

    •Certificate of Incorporation

    •Answer to standard questionnaire

    •Pioneer Certificate issued

    •The period approved

    •Production date

    •Products and by-products

    •For a going concern, the Audited account ended before the production date to be furnished (regardless of the number of months).

     

    Rendition of returns

    •The conditions governing the submission of tax returns in CITA are applicable to a pioneer company.

    •One year from commencement of production date

    •Period of one year successively

    •Last year of the relief period.

    •Example: Kano Money Lender Ltd was granted a pioneer status commencing from July 1, 1999. The firm has 31/12 as it’s accounting date. The period granted was for five years.

    •At expiration of the pioneer period, it submitted Accounts for the years ended December 31, 2004 and 2005 you are given these additional data

     

    The data:

    2004 (N) 2005 (N)

    i) Net Profits 16,980,155 9,758,273

    ii) Depreciation 32,157,000 46,102,328

    iii) Capital Allowance b/f 172,314,886 —

    iv) Investment Allowance 10,378,700 8,033,243

    v) Initial Allowance 75,414,556 58,020,388

    vi) Annual allowance 37,975,662 60,659,786

    You are required to compute basis period and the relevant taxes payable by this company.

     

    Solution:

    • The account is for twelve months and therefore are prorate for six months for the first year

    2004 N

    1st Year 1/7/2004 – 31/12/2004

    Net Profit 16,980,655

    Add Depreciation 32,157,000

    Assessable Profits 49,137,155

    49,137,155 x 6/12 = 24,568,577.50

    Less Investment allowance 10,378,700

    14,189,877.50

    Less Capital allowance 285,705,104

    Unrelieved Capital Allowance 271,515,226.50 c/f

    Income Tax Nil

    EDT N24,568,577.5 @ 2% = 491,371.55

     

    2005

    • 1/7/2004 – 30/6/2005

    • First twelve months: 6/12 x 49,137,155 + 6/12 x 55,860,601

    (24,568,577.50) + (27,930,300.50) = 52,498,878

    Assessable profit 52,498,878

    Less Investment allowance 8,033,243

    44,465,635

    Less Capital allowance b/f 271,515,226.50

    for the year 118,680,174.00

    390,195,400.50

    Unrelieved Capital Allowance c/f 345,729,765.50

    Income Tax NIL

    EDT N52,498,878 @ 2% = 1,049,978.56

     

    2006

     

    • 1/1/2005 – 31/12/2005 N

    Net Profits 9,758,273

    Add. Depreciation 46,102,328

    Assessable profit 55,860,601.00

    Less: C. A. b/f 345,729,765.50

    For the year 60,659,786 406,389,551.50

    Unrelieved Capital Allowance c/f 350,528,950.50

    Income Tax NIL

    EDT N55,860,601 @ 2% 1,117,212.02

     

  • Tax system in Nigeria: Issues and challenges

    Tax system in Nigeria: Issues and challenges

    The tax system has undergone several reforms geared at enhancing tax collection and administration with minimal enforcement cost. The reforms include the introduction of TIN (unique Taxpayer’s Identification Number which became effective since February 2008), automated tax system that facilities tracking of tax positions and issues by individual taxpayers, e-payment system which enhances smooth payment procedure and reduces the incidence of tax touts, enforcement scheme (Special Purpose Tax officers), these are special tax officers in collaboration with other security agencies to ensure strict compliance in payment of taxes. The tax authority has autonomy to assess, collect and record tax. This enabling environment which came into being on the basis of (Section 8(q) of FIRS Establishment Act 2007) has led to an improvement in tax administration in the country.

    The tax system has undergone significant changes in recent times. The tax laws are consistently being reviewed with the aim of repealing obsolete provisions and simplifying the main ones. Under the law, taxation is enforced by the three tiers of government, i.e. federal, state, and local governments, with each having its sphere clearly spelt out in the Taxes and Levies (approved list for Collection) Decree, 1998.

    Despite this improvement, there are still a number of contentious issues that require urgent attention and among them is the issue of the appropriate tax authority to administer several taxes. The crisis between Lagos State and the Federal Government on the tax jurisdiction of Value Added Tax (VAT) in the state is still a contentious issue that has been taken to the courts.

    Other states, such as Ogun, Oyo and Benue have joined Lagos, while states like Abia, have gone against this. Also, there is the issue of multiple taxes administered by all the three tiers of government which sometimes imposes welfare cost. Furthermore, the issue of the paucity of a data base, which contributes to tax avoidance in the country. The issue of corruption is still a perennial issue in the country; this reduces the confidence and trust of the taxpayers in discharging their civic duty. The issue of infrastructural development is also a crucial issue, in Nigeria, the level of infrastructural facilities is in a deplorable state, most of the facilities are often privately sourced, thus a number of people wonder what the taxes collected are used for, hence the tendency to evade tax payment. Furthermore, the problem of the tax language that is legally codified makes it difficult for an average Nigerian to understand.

     

    Policy recommendations

    Disclosure and sharing of information

    There is a need for mutual cooperation among different government agencies and parastatals, this collaboration should enhance exchange of information, and reduce the incidence of tax evasion as well as fraudulent tax practices.

    Beneficial /welfare schemes.

    To elicit voluntary compliance, the government should be more responsive to the welfare needs of the citizens. The Nigerian tax system can effectively generate more revenue when the citizens have trust and confidence in the authority. Lagos state in recent times is generating huge revenue due to the fact that many corporate bodies and individuals feel that they can visibly feel the development impact of their contributions

    Patriotism and positive tax culture

    There is a need to enhance a positive tax culture; this can be done through the re-branding efforts of the ministry of information. In most developed countries, tax payment is considered a moral and civic responsibility, thus tax avoidance is frowned upon. This implies that our leaders should demonstrate patriotism through leadership that is worthy of emulation by timely payment of their taxes and discharging other civic duties.

     

    Religious education /responsibility:

    In Nigeria, most of the citizens are religious and faithful people. Thus, with religious provisions that explicitly support fulfilling religious obligations, tax payment could be enhanced. Therefore, tax education can be encouraged to be part of religious education among the adherents.

    Evoking religious injunctions could elicit more voluntary compliance and reduce tax evasion and avoidance. For instance, the Biblical saying of “Give unto Caesar, what is for Caesar and to God what is for God” is apt and relevant to the Christians while the Qur’an calls on the Muslims thus: “O you who believe, fulfil all obligations” (Q5:1).

     

    Civic education

    Civic education was part of the educational curriculum in the early 1960s and 1970s; however, this was stopped in the mid-1980s and 90s. A re-introduction of this into the school curriculum would not only improve civic responsibility but also infuse a sense of patriotism and commitment to national ideals and interests. There should be vigorous enlightenment and public awareness about tax payment and its importance in the economy.

    Hot lines

    There can be dedicated lines or emails, where issues, observations and queries can conveniently reach the authority; this will contribute to the reduction of tax fraud and avoidance.

     

    Harmonisation of taxes to reduce double/ multiple taxation on a single taxpayer

    There is a need to harmonise the different taxes that are being levied by the different tiers of government so as to reduce the negative impact on the taxpayer. A situation where an individual pays rates and licenses to local government, pays sales tax and personal income to the state government and at the same time pays VAT is not one that will encourage voluntary compliance.

     

    Improving our record or database, to be able to track all potential taxpayers

    In Nigeria, an improvement in our tax revenue can be enhanced through a regularly updated, comprehensive database. This would enable the country to be able to track all potential taxpayers as well as to reduce incidences of tax avoidance.

    Elongated tax operation (Twilight shift)

    To maximise the revenue accruing from tax collection and especially to fulfil the principles of convenience and economy on the part of taxpayers, collectors of tax should be made to operate on shift throughout the day.

    Tax laws should be codified in simple, non-technical language, if possible in the three major languages: Hausa, Ibo and Yoruba.

    Need for an effective judicial process to adjudicate on tax issue

    List of approved taxes and levies for the three tiers of govt

    A list of approved taxes and levies for collection by the three tiers of government:

    (A) Taxes collectible by the Federal Government

    (1) Companies income tax;

    (2) Withholding tax on companies;

    (3) Petroleum Profit Tax;

    (4) Value-added tax (VAT);

    (5) Education tax;

    (6) Capital gains tax – Abuja residents and corporate bodies;

    (7) Stamp duties involving a corporate entity;

    (8) Personal income tax for:

    – Armed forces personnel;

    – Police personnel;

    – Residents of Abuja FCT;

    – External Affairs officers; and

    – Non-residents.

    (B) Taxes/levies collectible by state governments

    (1) Personal income tax:

    – Pay As You-Earn (PAYE);

    – Direct (self and government) assessment;

    – Withholding tax (individuals only);

    (2) Capital gains tax;

    (3) Stamp duties (instruments executed by individuals);

    (4) Pools betting, lotteries, gaming and casino taxes;

    (5) Road taxes;

    (6) Business premises registration and renewal levy;

    -urban areas (as defined by each state):

    §maximum of N 10, 000 for registration and N5, 000 for the renewal per year.

    -rural areas

    -registration N2,000 per annum

    -renewal N 1,000 per annum

    (7) Development levy (individuals only) not more than N100 per year on all taxable individuals;

    (8) Naming of street registration fee in state capitals

    (9) Right of occupancy fees in state capitals;

    (10) Rates in markets where state finances are involved.

     

    (C) Taxes/levies collectible by local governments

    (1) Shops and kiosks rates;

    (2) Tenement rates;

    (3) On and off liquor licence;

    (4) Slaughter slab fees;

    (5) Marriage, birth and death registration fees;

    (6) Naming of street registration fee (excluding state capitals):

    (7) Right of occupancy fees (excluding state capitals);

    (8) Market/motor park fees (excluding market where state finance  are involved);

    (9) Domestic animal licence;

    (10) Bicycle, truck, canoe, wheelbarrow and cart fees;

    (11) Cattle tax;

    (12) Merriment and road closure fees;

    (13) Radio/television (other than radio/tv transmitter) licences and vehicle radio licence (to be imposed by the local government in which the car is registered);

    (14) Wrong parking charges;

    (15) Public convenience, sewage and refuse disposal fees;

    (16) Customary, burial ground and religious places permits; and

    (17) Signboard/advertisement permit.