The National Assembly is considering a bill that will provide a uniform procedure for the efficient and effective administration of the nation’s tax laws, giving 90 percent of such tax revenue to the States and local government.
When passed and assented by the President, the law will grant the Federal Government only 10 percent of all tax revenues, provided that 60 percent of the amount standing to the credit of States and Local Governments shall be distributed among them on the basis of derivation.
The executive bill, which is one of the four tax reform bills submitted to the National Assembly by President Bola Ahmed Tinubu recently provides, among others, a six year jail term or a fine of N10 million for anyone who fails to disclose information of foreign exchange transaction at his disposal to the Nigerian Financial Intelligence Unit within seven days of the transaction or becoming aware of the transaction.
The bill is titled: “An act to provide for the assessment, collection of and accounting for revenue accruing to the federation, federal, states and local government, proscribe the powers and functions of tax authorities and for related matters.”
The bill provides a sharing formula for all tax revenue among the three tiers of government with the federal government taking only 10 percent of such revenue, while the state and local government are expected to take 55 and 35 percent of the tax collections respectively.
The objective of the law is to provide uniform procedures for a consistent and efficient administration of tax laws in order to facilitate tax compliance by taxpayers. It is to optimise tax revenue and will apply to any person required to comply with any provision of the tax laws, whether personally or on behalf of another person.
The law will empower the Nigeria Revenue Service which is expected to replace the Federal Inland Revenue Service Act to administer taxes on companies, on persons employed in the Nigerian Army, the Nigerian Navy, the Nigerian Air Force, the Nigeria Police Force, other than in a civilian capacity, on officers of the Nigerian Foreign Service, on non-resident persons who derive profit or income from Nigeria or any income derived from employment in Nigeria by a person, not being a resident of any State in Nigeria.
It also collects petrol profit tax royalties from crude oil and solid minerals exploration banks, insurance and other financial institutions among others.
It also confers similar powers on the state internal revenue services and is expected to administer all forms of taxes contained in the Nigeria Tax Act, while exercising such other powers and functions conferred on it under any tax law enacted by the National Assembly.
The proposed law states that a tax authority, with the approval of the relevant government, may authorise another tax authority to administer taxes within its jurisdiction on its behalf, on such terms as they may agree.
When passed, the new tax law would require all taxable persons, institutions and organisations, including non-resident persons that supplies taxable goods or services to any person in Nigeria, or derives income from Nigeria to register for tax purposes and obtain a Tax ID, provided that a non-resident person who derives only passive income from investment in Nigeria may not be required to register for tax but shall provide relevant information as may be prescribed by the Service.
The bill also states: “A person engaged in banking, insurance, stock-broking, or other financial services in Nigeria shall make the provision of a Tax ID, a precondition for opening a new account or operating an existing account”, while also requiring that any taxable person shall, within 30 days of the occurrence of a change in its particulars, notify the relevant tax authority of the change.”
It also requires every company registered and operating in Nigeria to file an annual self assessment return with the service, including a company granted exemption from incorporation, irrespective of whether or not it is liable to pay tax under the Nigeria Tax Act or any other tax law.
Companies and other organisations are also expected to submit annually the audited financial statements, tax and capital allowances computation for the year of assessment in respect of the profit from each and every source computed, provided that the return of a small company may contain a statement of accounts attested to by the taxpayer in place of audited financial statements; evidence of payment of the tax due; computation of the effective tax rate and additional tax payable, where applicable; and an attestation of the information contained in the tax returns signed by a Principal Officer of the company.
In addition, an employer shall file a return with the relevant tax authority for all emoluments paid to its employees, not later than 31 January of each year in respect of all employees in its employment in the preceding year, disclosing each employee’s gross emoluments, including allowances and benefits in kind, total deductions, net emoluments and tax deducted, while the employee will also be required to file an annual return of income from all sources, including employment income.
Clause 21 of the bill states that “a non-resident person engaged in the operation of transport by sea or air, into Nigeria, shall file monthly returns with evidence of payment of monthly return of minerals royalty the tax as specified under section 18 of the Nigeria Tax Act to the Service in respect of the carriage of passengers, mail, livestock or goods shipped or loaded into an aircraft in Nigeria”.
The proposed law also requires every bank, insurance company, stock-broking firm, or any other financial institution to prepare, with or without demand by the relevant tax authority, quarterly returns to the relevant tax authority specifying the names and addresses of new customers; and existing customers with a transaction volume of about N25 million or more for an individual and N100 million or more for a corporate entitle.
In terms of tax assessment and payment, the proposed law provides that notwithstanding the provisions of any other law, tax may be assessed in the currency of transaction, adding that “tax, including royalty, assessed in a currency other than the Nigerian Naira may be paid in that currency, or the Nigerian Naira at the prevailing exchange rate in the official foreign exchange market”.
Clause 52 of the bill prevents the distribution of assets of a company that is being liquidated, unless provision has been made for the payment in full of any tax which may be found payable by the company, including any tax deductions made by the company under any law in force in any part of Nigeria, while adding that “where tax is not paid in accordance with the provision of this section or any other law, the liquidator shall be personally liable”.
The bill also states that, “Where a company which is or was engaged in petroleum operations transfers a substantial part of its assets to any person without having paid any tax, assessed or chargeable upon the company, for any accounting period ending prior to such transfer and in the opinion of the service one reason for such transfer by the company was to avoid payment of such tax then that tax as charged upon the company may be sued for and recovered from that person in a manner similar to a suit for any other tax under section 66 of this Act”.
It also provides for the revocation of the operating licence or lease agreement of any company engaged in petroleum or mining operations that failed to pay its petroleum or mineral royalty or tax due and payable by any company after a demand notice has been issued to the company.
It also states in clause 63.-(1) that “notwithstanding the provision of any other law, the tax authority shall have the power to investigate or cause investigation to be conducted to ascertain any violation of any tax law, whether or not such violation has been reported to the relevant tax authority”.
It empowers the President to exempt from income tax, any company or class of companies; or any profits of any company or class of companies from any source, on any ground which appears to be sufficient, provided that the order is published in the Official Gazette stating the grounds upon which the exemption is granted to the company or the class of companies, adding that the President may, by order amend, add to or repeal any exemption.
It also empowers the Accountant General deduct all un-remitted revenue due from any Ministry, Department, Agency or Government from its budgetary allocation or such other money accruing to it, and immediately, remit such deductions to the relevant tax authority after receiving a warrant signed by the Chief Executive Officer of the relevant tax authority and a Judicial Officer within 30 days of such default.
The bill provides several penalties for individuals and corporate bodies saying that a taxable person who fails or refuses to register for tax shall be liable to pay an administrative penalty of N50,000.00 in the first month in which the failure occurs; and N25,000.00 for each subsequent month in which the failure continues, while a statutory body or company who awards a contract to an unregistered person, shall be liable to pay an administrative penalty of N5,000,000.00.
Other penalties in the bill include N100,000 in the first month and N50,000 in subsequent months for anybody who fails or refuses to file returns or knowingly files incomplete or inaccurate returns to the relevant tax authority.
It imposes a N10,000 and N50,000 fine on persons or companies that fail to keep accounts, books and records of business transactions and income, to allow for the correct ascertainment of tax and filing of returns to the relevant tax authority; or upon request by the relevant tax authority, fails to provide any record or book prescribed in this Act shall be liable to pay an administrative penalty of failure to register.
In addition, it states that a person who refuses to grant access to the relevant tax authority to deploy technology after 30 days of receipt of the notice under this Act is liable to an administrative penalty of N1,000,000.00 for the first day of default and N10,000.00 for each subsequent day of default.
According to the Law, a taxable person that fails to process a taxable supply through the fiscalisation system is liable to an administrative penalty of N200,000.00 plus 100 percent of the tax due and an interest of 2 percent above the Central Bank of Nigeria Monetary Policy rate per annum.
It also provides punishment for those saddled with the responsibility of collecting, deducting or withholding tax under the relevant tax laws who fail to collect, deduct or withhold the tax due who will not be liable to an administrative penalty of 40% of the amount not deducted.
In terms of tax remittance, the law provides stiff penalties aimed at preventing agencies collecting tax on behalf of the government failing to remit such taxes as such officers will be liable to pay the amount involved, a 10 percent penalty as well as interest at the prevailing Central Bank of Nigeria monetary policy rate plus 2 percent per annum.
It also states that “a person who fails or refuses to supply information, documents, or records as demanded or requested for by an authorised officer relating to any tax issue under this Act or any other tax law within the time provided under this Act or any other tax law, is liable to an administrative penalty of N200,000.00 in the first day of default and N10,000.00 for each subsequent day where the refusal continues”.
In addition, “a person who fails or refuses to comply with obligations to submit information relating to a legal arrangement or other obligations as may be prescribed by notice, rules, regulations, guidelines, or circulars issued by the Service or any other relevant tax authority, is liable to an administrative penalty of N1,000,000.00 for the first day of default, in addition to N10,000.00 for each subsequent day in which the failure continues, or any other administrative penalty as may be specified in such notice, rules, regulations, guidelines, or circulars”.
The bill also states that a person that fails to stamp dutiable instruments in accordance with the relevant provisions of the Nigeria Tax Act is liable to pay, in the case of the fixed duty, 10 percent of the unpaid duty and interest at 2 percent above the Central Bank of Nigeria Monetary Policy Rate; and in the case of ad valorem duty, 10 percent of the duty and interest at 2 above the Central Bank of Nigeria Monetary Policy Rate.
Also, a taxable person who fails to notify the relevant tax authority of any change of address within 30 days of such change; gives a wrong address or fails to comply with the requirement for notification of permanent cessation of trade or business under the relevant tax laws shall be liable to administrative penalty of N100,000.00 for the first month in which the failure occurs; and N5,000.00 for each subsequent month the failure continues.
It provides further that “a company which fails to file any of the estimated or actual returns under this Act on the due date is liable to pay for late filing for each of the return not filed, a penalty of N10 million on the first day the failure occurs and N2,000,000.00 for each subsequent day in which the failure continues or any other sum as may be prescribed by the Minister by order published in the Official Gazette among others.
“In addition to the provisions of subsection (1) of this section, the licensee or lessee shall be liable to (a) N10 million or US Dollar equivalent on the first day of the failure to pay the tax, royalty or remittance; and (b) N2,000,000.00 or US Dollar equivalent for each day in which the failure continues.
“Notwithstanding the provisions of subsections (1) and (2) of this section, the Service may, with the assistance of the Commission or Authority- (a) distrain the licensee or lessee of its oil well, crude oil, condensates, natural gas or natural gas liquid, petroleum products, engines, machinery, tools, implements or other effects; or (b) cancel, revoke, seize, distrain or dispose the licences or rights of the holder.
“There are other penalties which include a N10 million fine for failure to (a) comply with the requirements of a notice served pursuant to chapter two of this Act; (b) appear in response to a notice or summons served pursuant to chapter two of this Act, without sufficient cause or having appeared, fails to answer any lawful question; or (c) submit any return required to be submitted under the relevant provisions of this Act;”
There is also a N20 million fine for a person who is found guilty of an offence under the law or as prescribed by the Minister, as well as a N15 million administrative fine for false or misleading information leading to the loss of revenue in the oil sector.
Neglect to pay tax or royalty in the petroleum sector is regarded as an offence under the law which attracts a fine of N15 million and 1 percent of the amount of tax for which the person assessable is liable under this Act, whichever is higher, for the accounting period in respect of or during which the offence was committed, or to imprisonment for six months or to both the fine and imprisonment and is also liable for the appropriate tax which would have been assessed and charged.
It also provides specific penalties for failure to comply with provisions made for the administration of excise duty under this Act or the Nigeria Tax Act which attracts an administrative penalty of N5,000,000.00 or such other amount as may be specified by any regulations made for the administration of excise duties on services.
In addition, it provides a N10 million fine or six months jail term for any person who fails to disclose information of foreign exchange transaction at his disposal to the Nigerian Financial Intelligence Unit within seven days of the transaction or becoming aware of the transaction.
