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Tag: OECD

  • OECD, ATAF sign Mou on tax cooperation in Africa

    The Organisation for Economic Cooperation and Development (OECD) and the African Tax Administration Forum (ATAF) on Tuesday renewed commitment to tax cooperation in Africa.

    The two multilateral bodies signed the renewal of the Memorandum of Understanding (MoU) till June 2023, agreeing to continue to work together to improve tax systems in Africa, during a meeting in Pretoria, South Africa.

    The MoU sets their co-operation towards the achievement of the common objective of promoting fair and efficient tax systems and administrations in Africa.

    Justifying the need for the Mou, Logan Wort, Executive Secretary of ATAF, stated that, “ATAF has made tremendous strides in its ability to offer concrete and tangible benefits to member administrations. Our targeted technical assistance work in stemming Illicit Financial Flows (IFFs) that erode Africa’s tax base in key sectors, has begun to bear fruit and is a key driver in advancing Africa’s development Agenda 2063. Our two organisations enjoy a special relationship that has contributed to the sharing of knowledge and the development of better tax policy for Africa and technical skills of African revenue administrators.”

    Echoing similar sentiments, Pascal Saint-Amans, Director of the OECD’s Centre for Tax Policy and Administration, said: “It has been a privilege to partner with ATAF in the past nine years,” adding, “Our work with African countries is an essential component which helps us to develop new international tax standards.”

    The group holds the view that domestic resource mobilisation (DRM) is essential to reaching the Sustainable Development Goals (SDGs). The Addis Ababa Action Agenda (AAAA) also recognised the universal nature of the tax challenges of the 21st century.

  • S/Africa must improve business regulation, power output: OECD

    South Africa needs to improve business regulation to support job creation and privatise state-owned companies in markets with sufficient competition, the Organisation for Economic Co-operation and Development (OECD) said on Friday.

    South Africa also needs to boost electricity generation by speeding up the independent power producer programme and facilitating private co-generation, the international think tank said in a report.

    Growth in Africa’s most developed economy was also being hampered by inadequate tax revenue needed to support infrastructure projects.

    “The public sector will face considerable resource needs in the years ahead to expand social and economic infrastructure,” the OECD said.

    “Meeting these needs will require increased revenues, but this must be equitable and not penalise growth.”

  • OECD: Euro zone growth gaining pace, others stable

    The euro zone is increasingly contributing to an improvement in global economic growth prospects, according to a forward-looking indicator the Organisation for Economic Co-operation and Development (OECD) has published.

    The OECD said its leading indicator, designed to detect changes in economic prospects, showed “positive change in growth momentum in the euro area and stable growth momentum in most other major economies and the OECD area as a whole.”

    The indicator, expressed as an index where 100 denotes the long-term average, rose to 100.7 for the euro zone as a whole from 100.6 in the preceding month’s report, and rose also for the OECD group of mostly wealthy economies, to 100.4 from 100.3.

    The U.S. reading was stable at 100.2 and for Japan it stayed at 99.8. In large non-OECD economies, the index rose to 99.1 in China from 99.0. It edged higher too in Brazil and India but fell in Russia to 99.3 from 99.5.

    Within the euro zone, the reading for Germany rose to 99.7 from 99.6 while in France it rose to 100.6 from 100.5. It nudged higher too in Italy, to 101.2 from 101.0.

  • Greece spends more on pensions than UK

    State pensions are one of the biggest expenses for the British government. However, new figures from the Organisation for Economic Cooperation & Development (OECD) showed that the United Kingdom (UK) spends less on pensions than most other developed countries.

    In 2011 Britain spent less than 12pc of its total government budget on state pensions, putting it below the 18pc average across OECD countries.

    The countries spending the highest proportion of their public money on pensions are Italy at 31.9pc, Greece at 28pc and Portugal at 26.4pc.

    This is down to these nations’ ageing populations and the economic meltdown they have suffered since the financial crisis, which has caused other state spending to shrink.

    Iceland spent the lowest proportion of its government funds on pensions in 2011, at 4.5pc.

    Tim Reay of accountancy firm PwC said countries in northern Europe tended to have smaller, “welfare-style” state pensions that benefited the poorest most. Across Southern Europe, however, state pensions were more generous and provided a percentage of people’s salary, much like a final salary private pension.

    According to the OECD, pension systems “differ substantially” across its member countries, but face the same main difficulty: remaining financially sustainable while delivering adequate pension income.

    In a report it said: “The economic crisis in 2008 developed into a fiscal crisis in many countries. These difficulties have led to substantial changes and reform of pensions.

    “The current need to reduce government debt to more sustainable levels and the high level of public pension expenditure in many OECD countries imply that additional pension reforms are likely to figure prominently on the policy agenda.”

    As a result of these challenges, most of the OECD countries have been very active in reforming their pension system over the past two-and-a-half years, it said.

     

    •Culled from Telegraph

  • OECD sees global economy held back by slow eurozone

    OECD sees global economy held back by slow eurozone

    Conflict in the Ukraine is among the factors holding back global growth,

    A slow recovery among nations using the euro is holding back the global economy, the Organisation for Economic Co-operation and Development (OECD) has said.

    The market economy group downgraded its growth forecast for most big economies.

    Conflicts in Ukraine and the Middle East and the referendum on an independent Scotland are areas of risk and uncertainty, it said.

    Its 2014 estimate is a 0.8per cent increase in the eurozone economy for 2014, compared with a forecast of 1.2 per cent made in May.

    The UK’s forecast was cut by 0.1 percentage points to 3.1 per cent.

    US economic expansion for the year was cut to 2.1per cent from 2.6per cent. Japan’s forecast was cut to 0.9per cent from 1.2per cent.

    The OECD did not provide an update to its forecast for global growth for 2014, which it forecast at 3.4per cent in May.

    “Continued slow growth in the euro area is the most worrying feature of the projections,” the OECD said.

    Among countries which are not OECD members, China’s forecast was unchanged at 7.4per cent. The OECD said China “has so far managed to achieve an orderly growth slowdown to more sustainable rates”.

    India was the only economy to be judged by the organisation as likely to grow quicker, with its forecast upgraded to 5.7per cent from 4.9per cent after voting in a new government that said it would pursue growth-oriented reforms and progress in containing inflation.

  • Weak status of women in the informal sector

    Weak status of women in the informal sector

    WOMEN are a cornerstone of African economic development. According to recent estimates, they provide approximately 70 per cent of agricultural labour and produce about 90 per cent of all food. Women’s economic activity rate, which measures the percentage of people who furnish the supply of labour for the production of economic goods, ranks highest compared to other regions of the world (including the OECD countries) with a value of 61.9. However, women are predominantly employed in the informal sector or they occupy low-skill jobs. This can be illustrated by considering the percentage of women in wage employment in the non-agricultural sector, which scores lowest among all regions of the world with a value of only 8.5 per cent.

    The weak status of women in the formal economy of Africa* has many reasons. Insufficient access to key resources such as education and health are two important contributing factors. As is illustrated by the Gender, Institutions and Development Data Base (GID-DB) of the OECD Development Centre, primary education of females is still at a strikingly low rate of 67 per cent despite international endeavours such as the second Millennium Development Goals to achieve universal primary education by the year 2015 (men 72.6%). Unsurprisingly, illiteracy remains a major challenge with only 51 per cent of all women above the age of 15 being able to read and write (compared to 67.1 percent of all men). Improvements in maternal mortality also fall far short of international objectives. The African value of 866 deaths per 100.000 live births partly due to dismal medical services which only guarantee 50.9 per cent of all births being attended by skilled health personnel is alarming and far worse than in any other region of the world.

    Apart from these relatively obvious factors, the GID-DB also helps to identify and understand more hidden reasons that obstruct the socio-economic development of women (Fig. 1). The comprehensive data base compiles for the first time in a coherent and systematic fashion information on inequalities that are based on social norms and traditions. The prevailing family code in many African countries, for example, discriminates against women in preventing daughters from having an equal share of inheritance or parental authority over their children after a marriage is broken. Similar to South Asian countries, girls often find themselves in arranged or even forced marriages, into which they enter at very young ages. Compared to an OECD average of 27.4 years, girls in Africa get married at only 21.3 years. What is more, 28 per cent of all girls before the age of 20 have been married at least once in their life.

    Polygamy is pervasive in many African countries and property rights over land are not granted equally to men and women. Although women may have the right to obtain a bank loan on paper, customs still prevent females to have equal access to credit in many rural areas in Africa. Other traditions such as female genital mutilation – which in some countries are reported to affect more than 95 per cent of all women (e.g. In Guinea, Mali, Egypt, Somalia and Eritrea) are not only a violation against women’s basic human rights but also a heavy burden for their health status and consequent chances in the labour market. Highlighting the important impact of social norms and traditions may help to design better policies that can improve the socio-economic status of women in the long-run.

    But there are positive examples as well. Especially North African countries have made some progress in reducing the impact of discriminatory social institutions and improving the status of women. Tunisia in the 1960s opened to the West and abolished many traditional practices under the presidency of the charismatic Habib Bourguiba. A similar movement has recently begun in Morocco with King Mohammed VI who changed the prevailing family code to allow more rights to women.

  • Positioning the tax system in line with 21st century trend (2)

    Positioning the tax system in line with 21st century trend (2)

    The Nigerian Vision 20: 2020 falls within the 21st century and it is envisioned that by 2020, Nigeria will be one of the 20 largest economies in the world, able to consolidate its leadership role in Africa and establish itself as a significant player in the global economic and political arena. Nigeria’s tax system has to be well positioned to meet the aspirations of Vision 20: 2020 and with sustained reforms in critical areas it will get there. Other considerations have been identified as being aligned to the attainment of Nigeria’s Vision 20: 2020:

     

    Transfer pricing:

    Transfer pricing (sometimes referred to as transfer mis-pricing because of its misapplication by multinational corporations) is a veritable tool for tax planning for entities operating across multiple tax jurisdictions and entities belonging to the same group or parent. The Organisation for Economic Co-operation and Development (OECD) has its own guidelines for transfer pricing and in order to align Nigeria with the 21st century trends, Nigeria, through the Federal Inland Revenue Service (FIRS) has released its own transfer pricing guidelines. The regulations, which have an effective date of August 2, 2012, aim to prevent tax base erosion, ensure certainty in the treatment of related party transactions and reduce the risk of economic double taxation. The regulations can be seen as the efforts of the government to shift the over-dependence on oil revenue to non-oil tax revenue.

     

    Multiple taxation

    The concept of multiple taxation applies to the subjection of the same income to more than one tax treatment or the imposition of several taxes on the same taxpayer. In effect, tax is paid on similar taxes on the same or substantially similar tax base. Given the fact that Nigeria is a federation, there is a tendency for tax competition amongst the three tiers of government. This creates a situation of multiple taxation. In order to position the Nigerian tax system appropriately in line with the 21st century trends, there must be a conscious and sustained effort to curtail, if not completely eliminate all the nuances associated with multiple taxation at all the three tiers of government. Hence, all new tax bills from all the tiers of government, whether federal, state or local government SHOULD be harmonised and benchmarked against the dictates of the National Tax Policy by the central tax agency – the Joint Tax Board – before such bills are presented to the legislatures for debate. This will eliminate conflicts to a great extent after such laws have been passed.

     

    Curtailing tax evasion

    This is another bane to economic growth that must be eradicated or at best reduced to a manageable level. There are some forms of tax evasion which Nigeria’s and the United Kingdom’s tax laws have identified and provided sanctions against in order to prevent them. These include:

    i. Making an incorrect return by omitting or understating income;

    ii. Outright refusal or neglect to pay tax;

    iii. Omission to state income received in or brought into Nigeria from sources outside

    Nigeria;

    iv. False claims of contributions to a pension scheme etc.

    Enforcement of legal proceedings against convicted tax evaders will bring some sanity into the tax environment and enhance tax compliance. This should be done with transparency and without regard to social status. However, this will require a reform in the Nigerian legal system.

     

    Improved revenue yield

    Tax collection must be greatly enhanced and the tempo of tax collection must be maintained. Since the onset of the current tax reforms arising from the Dotun Philips Study Group report, the Nigerian tax system has actually repositioned itself with an improved revenue yield.

    The 2012 financial year closed on a high note of N5.007 trillion as total revenue collection from taxes, including Petroleum Profits Tax ( PPT), the highest cumulative tax collected in the history of the FIRS. The agency realised about N4.628 trillion in 2011. Of this figure, oil taxes accounted for N3.201 trillion, or 63.93 per cent, up from N3.070 trillion in 2011, while N1.806 trillion, or about 36.07 per cent, came from non-oil taxes.

    The performances are significantly above a projection of N3.635 trillion in the budget for all its taxes, which grew by N379.4 billion or 8.20 per cent, when compared with the 2011 all-taxes figures.

    This positive trend must be sustained in future years in order for the country to actualise the positioning of the tax system in line with the 21st century trends.

     

    Creation of simplified tax systems:

    Another way in which changes to the tax system can help economic growth is by easing the administrative burden on businesses – reducing the time which businesses need to spend dealing with tax matters and the complexity of the payment system. This suggests that governments keen to create a more business-friendly tax climate which is more supportive of economic growth need to focus not only on the overall rates and burden of taxation, but also on minimizing the time and effort which businesses need to spend complying with their tax rules and regulations. The fall out of an overly complicated tax system is tax evasion. This is why it is imperative, for instance, that all tax forms both at the federal and state levels should be reviewed and redesigned.

     

    Concise and simple tax laws:

    Tax revenues depend on government’s administrative capacity to collect taxes and taxpayers’ willingness to comply. Compliance with tax laws is important to keep the system working for all and to support the programmes and services that improve lives. Keeping the rules concise, simple and as clear as possible will be helpful to taxpayers.

     

    Review of obnoxious tax laws:

    There are still some contradictions, gaps and overlaps in some existing tax laws that require urgent amendment. The timeliness of review of tax laws as events unfold should also be addressed expeditiously so that the tax environment can respond positively to the dynamism in the global economy.

     

    Coordinated approach to tax reforms:

    There is need for the country to develop a coordinated approach to tax reforms. While many countries have improved their tax systems significantly and still continue to do so, tax reform is very high on governments’ agenda around the world. According to PricewaterhouseCoopers’ publication on ‘Paying Taxes 2012’, during 2010/2011, 33 economies made it easier to pay taxes or reduced tax rates. Introducing electronic systems to make compliance easier was the most common feature of tax reform during the period.

    Tax reforms provide the platform for creating a more business-friendly tax system. Tax rates which directly bear on business activity can be brought down by shifting the burden of tax away from wealth-generating activities to consumption activities such as personal expenditures vide VAT and other indirect taxes.

    Another way in which tax reform can help create a better climate for business, is by broadening the tax base which enables the same amount of taxation to be raised with a lower overall tax rate. The UK’s current approach to corporate tax reform is an example of this. It should also be noted that this is the position proposed by the NTP. Hence there is need to implement all the reforms proposed in the policy as earlier stated.

    In this regard, therefore, Kabir M. Mashi, the Acting Executive Chairman of FIRS had posited that a tax system that will take Nigeria to 2020 and beyond should:

    Have an effective linkage of all the revenue collection agencies with an empowered and elevated common policy making organ (JTB).

    • Be fully automated for easy information capturing and sharing, such that no transaction with some tax implication will take place without passing through the tax system.

    • Have a taxpayer data base that can be updated from time to time, and that can reveal the profile of every taxpayer.

    • Stand on the tripod of quality service delivery, effective taxpayer education and an enforcement and compliance strategy that will make tax evasion in any form very unprofitable.

    • Rely on proper self-assessment, supported by an effective compliance/enforcement machinery, transparency and accountability entrenched as part of the culture of quality service delivery.

    • Raise the level of tax morality to such a level that will make tax payment a routine patriotic obligation.

     

    The role of professionalism in positioning the tax system in the 21st Century

    The role of tax professionals in fostering a good and effective tax system cannot be over-emphasized because of the changing times which require bringing the varied professional skills and experience to the fore front of improving the tax system. Since professionals are at the vanguard of development initiatives in other parts of the world, especially in developed economies. Nigerian professionals, (chartered tax practitioners) should not only be involved but also allowed to play leading roles in any tax reform process. This is the only sure way to achieve our collective desire for a fully professionalised tax system in our country.

    The government should encourage the use of tax professionals who are members of the Chartered Institute of Taxation of Nigeria(CITN) to handle their tax matters in order to eliminate quacks in the tax system. The regulation of the tax practice and administration in any country is necessary to discourage sharp practices. This apart, the low level of tax education among the populace has made voluntary compliance quite difficult, hence, the need to consult members of a regulatory body such as the CITN for professional tax advice and guidance.

    There is the need to have professionals within the tax system to drive this all important sector of the nation’s economy. It is our belief that government policies and programmes in the area of increased revenue generation can be best implemented with a State Internal Revenue Service (SIRS) that is autonomous and managed by professionally competent chartered tax administrators in accordance with the laws of the Federal Republic of Nigeria. Unless the revenue agency is totally independent with powers to carry out its assignments without hindrance but in compliance with the dictates of the law, government shall continue to lose revenue. The political will of government shall be a morale booster for the improvement of the state’s internally generated revenue.

    Poser: The era of desktop has faded away and the era of laptops is fading away gradually. Conducting business in a physical office is going viral. Is the tax system moving along? Unless and until it is recognised that the Nigerian tax system moves as fast as the world is moving or pick up speed to meet up, it will be difficult to achieve the aim of positioning the tax system for globalisation. Tax reforms and improvement of the tax system should be left in the hands of professionals who have been trained to carry out their professional duties so that the citizenry and investors will not continue to complain of such vices as multiple taxation, inefficient and ineffective administration, obsolete tax laws, extortion, evasion and low revenue.

    A good and efficient tax system will help to achieve the following:

    • Better taxpayer enlightenment programme

    • Encourage voluntary tax compliance

    • Simpler assessment and payment procedures

    • Comprehensive and reliable database

    • Automation of tax administration processes

    • Better remuneration for tax administrators

    • Training and motivation of revenue officers

    • Accountability on the part of the collecting agencies as taxpayers have a right to demand for this

    • Fool-proof tax clearance certification

    • Mutually beneficial relationship between government and private agencies

    • Promoting government support of tax administration for enforcement of tax laws.

    The tax system is gradually coming of age and all hands must be on deck to ensure that the reforms are fully implemented.

  • Govt inaugurates task force on review of policies

    Govt inaugurates task force on review of policies

    The Federal Government yesterday has inaugurated a task force to review the country’s investment policies.

    The review will be anchored by the Organisation for Economic Cooperation and Development (OECD) and the Growth and Employment in States (GEMS3), a United Kingdom’s Department for International Development (DFID)-funded programme.

    The Minister of Trade and Investment, Mr Olusegun Aganga, made this known during the inauguration in Abuja, stating that the review would include such critical areas, such as investment policy, promotion and facilitation, trade policy, competition policy and corporate governance.

    He said: “Africa, today, is known as the last investment frontier globally in terms of investment opportunities and Nigeria is a key player in that sector. And for the first time, we have Nigeria in a different area where you can describe as the high growth and high return environment compared to at least 75 per cent of other global economies. This means that we are in a very unique position to take advantage of this unique opportunity.”