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Tag: taxation

  • Explore opportunities in taxation,Fed Govt told

    There are hidden economic opportunities in taxation which government should explore by brining more people into the tax net, Alpha African Advisory Executive Vice Chairman,  Mustafa Chike-Obi, has said.

    Speaking to financial journalists in Lagos on the theme: “Repositioning Nigerian Economy for Sustainable Growth”, he said Nigeria’s tax rate at 30 per cent is one of the highest in the world, adding that multiple taxation should be discouraged.

    Chike-Obi, who was former Managing Director/CEO Asset Management Corporation of Nigeria (AMCON), also  spoke on intervention funds, and why adequate infrastructure is needed to stimulate the economy instead of relying solely on intervention funds.

    He also spoke on the need to lend at lower interest rate at around 12 to 15 per cent per annum and considerations by foreign creditors in lending to emerging markets.

    “All these intervention funds, don’t work. And let me tell you why they don’t work. If you  lend to a farmer at five per cent, you think you are helping him, but everything around him is at 26 per cent. So, he gets a little bit of relief on his financing, but he doesn’t get reliefs on his supplies, diesel, food, employees, so at the end of the day, those things he gets at 26 per cent invades his five per cent,” he said.

    Chike-Obi said intervention funds also don’t work because “the default rates are as high as default rates of non-intervention funds. So, they don’t work. They are not very efficient”.

    According to him, what the economic managers need to do instead, is to provide capital at a reasonable interest rates that work for everyone.

    He said: “There must be access to capital at a reasonable price. With 26 per cent interest rate, you cannot do a business successfully. So, we must find a way to provide interest rate to everybody at a reasonable rate. We must have an interest rate that will support our economy. And it cannot be much higher to the borrower at 12 to 15 per cent. Every Nigerian should be able to borrow money at between 12 to 15 per cent, so, we must have capital available.

    He also spoke on the foreign lenders look out for in lending to developed markets, arguing that borrowing in dollar may not be cheaper in the long-run.

    He said even when one borrows dollar at eight per cent for instance, the creditors will be looking at the exchange at the time of repayment, which is unlikely to remain at N360/$. He said the foreign creditors also consider borrowers, who have the capacity to generate needed funds for repayment of loans.

    “The reason they are lending money at eight per cent, instead of 16 per cent, is because they know that by the time that money matures, your Naira will not be exchanging at N360/$. This is because the Naira always depreciates by approximately 50 per cent in every five years,” Chike-Obi said.

  • Lagos: Of taxation and development

    Sir: The fourth president of the United States of America, James Madison said that the power of taxing people and their property is essential to the very existence of government. Franklin D. Roosevelt, the only US President to serve three terms also underscored the importance of tax when he asserted that: “Taxes, after all, are dues that we pay for the privileges of membership in an organized society.”

    Scholars of development economics have shed a sea of ink on the issue of taxation and its import to economic development. Amidst the penumbrae of arguments, the central tendency is that taxation is the price people pay for government services. Most often, because of the inherent tendency of people to resist payment of tax for essential services, taxes are compulsory payments individuals make to government.

    Irrespective of the school of thought one belongs, one is doubtless bound to contribute a certain portion of his income to government for the provision of essential social services. Similarly, it is the duty of government to apply such monies in the most efficient way to improve the living standards of the people.

    Since the return of democratic dispensation in 1999, successive administrations in Lagos State have had to contend with the knotty issue of attempting to boost the State Internally Generated Revenue (IGR) through the implementation of a viable and sustainable tax system.

    With about N600 million in 1999, when Asiwaju Bola Tinubu took over, the IGR rose to between N10 billion and N11 billion by 2007 when he left office. With continuing reforms in the internal revenue system, aggressive tax drive, capacity building and professionalism of the Lagos Internal Revenue Service (LIRS), the IGR of the state had by 2015 when BabatundeFashola (SAN)  left office, risen to about N23 billion monthly.

    What has been the secret of Lagos’ economic growth under the current administration is a revenue enhancement reform which has achieved higher IGR and providing a sustainable financial base for bridging the huge infrastructure deficit estimated at over US$50bn. Implementation of financial policy such as widening of the tax net, expansion of tax base, updating/upgrading of databases, improvement of administrative processes and operational efficiencies, among others has so far achieved an average monthly Internally Generated Revenue (IGR) of N34billion in 2018 compared to monthly averages of the last three years.  In could be recalled that in just two and half years, the Lagos State government constructed Abule-Egba and Ajah Bridges among several other capital projects.

    There is vast empirical evidence that taxation correlates highly with economic growth in addition to some spill-over effect on effective service delivery. Lagos is a good example for research work in this direction. At the global level, no economy in history has ever achieved high per capital growth without a sustainable tax system. In fact the advanced capitalist economies depend heavily on taxation in running their economies. In Europe, U.S.A and Latin America, tax evasion is a punishable offence without the option of fine. The global economic power of Japan is Personal Income Tax.

    It is, thus, surprising that many states and local governments still depend their entire operations depend on the statutory federal allocation. It is an aberration that even the federal government still depends heavily on oil. Governments across the country need to borrow a leaf from Lagos State and be committed to expanding their tax net, updating/upgrading of databases, improvement of administrative processes and operational efficiencies of their tax agencies.  What should be of concern to patriotic Nigerians is not so much of paying tax but to enjoin their ministries of finance, the state’s revenue boards and other agencies empowered to administer tax to ensure that monies accruing from it are judiciously used to effect rapid development.

    If properly implemented, dividends of paying tax far outweigh the sacrifices.

     

    • RasakMusbau, Ministry of Information and Strategy, Alausa, Ikeja.

  • Taxation as elixir for budget funding

    Budget funding is a herculean task for governments at all levels. The Federal Government’s 2018 and 2019 combined budget figure of N17.93 trillion (N9.1 trillion in 2018 and N8.83 trillion in 2019) needs revenue drive from oil and non-oil sectors to be realised. But a drop in crude oil prices below the 2019 budget benchmark of $60 per barrel is an early warning that governments should explore new funding option in taxation. COLLINS NWEZE writes that poor financing options have derailed budget execution for years, pointing out the gains of exploring what he calls the untapped goldmine in taxation.

    Joe Austin, a Lagos automobile dealer, transacted over N200 million in 2017. He also has luxury cars and houses in choice locations in Lagos and Abuja. But he is not among the 35 million Nigerians captured in the tax net.

    Likewise, PX-Rated Business Solution, an Abuja-based software  company, declared a  turnover of N235 million to Federal Inland Revenue Service (FIRS)  for fiscal year 2017.  But independent findings showed that the company imported equipment and software development tools worth N3 billion through customs and got foreign exchange allocations of over $1.2 million through Central Bank of Nigeria (CBN).  Even the shareholders and directors of the company got dividends not declared to their respective State Inland Revenue Service.

    The company, like many millions of others operating in Nigeria, is not ready to remit the right amount of taxes to government. This is bound to happen in a country where an industry and agency wide intelligence on financial and economic activities of tax payers and potential tax payers is lacking. It has adversely affected government’s efforts to drive an effective tax compliance regime and generate needed revenue to fund budget.

    Such tax-defaulting firms have explored the loophole in the nation’s tax system to evade or underpay taxes. But implementing the N9.1 trillion  2018 budget and N8.83 trillion budget estimate for 2019 would require getting tax evaders to pay the right taxes, especially with the ongoing volatility in the crude oil prices. The implementation of the 2018 budget continues in 2019.

    Already, the price of crude oil has dropped from $54 to $53 in the international market, showing $7 below Nigeria’s $60 per barrel 2019 budget reference price. The softening of oil prices is an indication that budget implementation and funding will be an uphill task for government unless it rakes in more funds through non-oil revenue via taxes.

    This means that the government projections, especially total revenue estimates and expenditure in the budget may not be realised, should the volatility continue in the oil market.

    • Voluntary Assets and Income Declaration Scheme (VAIDS) Tax Consultant, Chris Anidugbe, said Nigeria’s tax statistics is not looking good with its six per cent tax to Gross Domestic Product (GDP) ratio, about the lowest in the world.
    • He disclosed that of 70 million economically-active Nigerians, less that 10 per cent are on the Pay As You Earn (PAYE) scheme and 96 per cent of this 10 per cent demographic have their taxes deducted at source.
    • “Only 214 Nigerians pay N20 million or more in taxes annually, and all of them are based in Lagos. At 21 per cent PAYE rate, only 214 Nigerians earn above N95.238 million annually. Fewer than 1,000 pay N10 million or more in taxes, all but two are based in Lagos,” he stated during a tax meeting in Lagos.
    • This level of tax compliance is disturbing giving the enormous level of infrastructure to be funded and implementation of new minimum wage of N30,000 monthly expected to be begin next year.

    From year to year, the implementation of the budget has not only been impacted by delays in the signing of the budget but by limited revenues.  The 2017 budget implementation report released by the Budget Office of the Federation showed an acute revenue shortage.  Gross oil revenue stood at N4.084 trillion representing 23.43 per cent below budget.  The shortfall in gross non-oil revenue for 2017 was 34.46 per cent as the country only generated N2.791 trillion.

    According to the Budget Office, the net distributable revenue shared by the three tiers of government in 2017 after cost deductions was N4.944 trillion, representing a shortfall of 41.92 per cent.  With limited revenue, the country is said to be spending over 60 per cent of its revenue on debt servicing.

    Speaking at the 2019 budget proposal presentation in Abuja, Minister of Budget and National Planning, Udoma Udo Udoma, gave a breakdown of the 2018 budget implementation and 2019 budget estimate as against revenue target.

    Udoma said at the end of the third quarter of this year, Federal Government’s actual aggregate revenue was N2.84 trillion, which is 40 percent higher than 2017 revenue.

    This includes oil revenue of N1.51 trillion (101 per cent higher than 2017); Company Income Tax (CIT) of N500.37 billion (23 per cent higher than 2017); Value-Added Tax (VAT) of N100.37 billion ( five per cent higher than 2017); and Customs collections of N229.62 billion (11 per cent higher than 2017).

    The overall revenue performance is only 53 percent of the target in the 2018 budget largely because some one-off items such as the N710 billion from Oil Joint Venture Asset restructuring are yet to be actualised and have been rolled over to 2019.

    Of the total appropriation of N9.12 trillion in 2018, N4.59 trillion had been spent by September 30, against the prorated expenditure target of N6.84 trillion. This represents 67 per cent performance.  Debt service and the implementation of non-debt recurrent expenditure, notably payment of workers’ salaries and pensions are on track but capital releases only commenced after the signing of the budget on June 20.

    “As at 14th December 2018, a total of N820.57 billion had been released for capital projects. Spending on capital has been prioritised in favour of critical ongoing infrastructural projects in the power, roads, rail and agriculture sectors. Implementation of the 2018 Capital Budget will continue into 2019 until the 2019 budget is passed into law,” Udoma said.

     

    The 2019 budget in brief

     

    The 2019 budget proposal seeks to continue the reflationary and consolidation policies of the 2017 and 2018 budgets respectively, which helped put the economy back on the path of growth after recession.

    In the budget, N30.04 billion is to be spent on Federal Government National Housing Programme, about N280.44 billion for the construction and rehabilitation of roads in every geo-political zone of the country, N51.22 billion provisioned for the implementation of the National Health Act, over N53 billion for water supply, rehabilitation of dams, and irrigation projects nationwide, N3.64 billion Support For Infrastructure, Projects and Coordination Services, over N15.66 billion for Promotion and Development of Value Chain across in more than 30 different commodities to mention but a few.

    Also, N42 billion for ongoing and planned Special Economic Zone Projects across the geopolitical zones to drive manufacturing/exports, N10 billion provided as a grant to Bank of Industry to subsidize interest rate charged on loans to SMEs. This is intended to make it possible for the Bank to give them single digit interest loans. There are also, N65 billion for reintegration of transformed ex-militants under the Presidential Amnesty Programme, N45 billion for Federal Initiative for North-East (Pilot Counterpart funding contribution) and N10 billion as take-off grant for the North East Commission, among others.

    As with 2016, 2017 and 2018 budgets, the 2019 budget has been prepared on the Zero Based Budget (ZBB) principles. The 2019 to 2021 Medium Term Fiscal Framework (MTFF),  Medium Term Sector Strategies and proposed 2019 budget reflect many of the reforms and initiatives in the Economic Recovery and Growth Plan (ERGP), which is the roadmap to economic recovery and a more sustainable growth.

    The distribution of expected government revenue show that oil revenue  will contribute 52.9 per cent to budget funding, Company Income Tax    will contribute 11.5 per cent; Value Added Tax,   3.3 per cent; Customs ,4.3 per cent; independent revenue, nine per cent; Signature Bonus, 1.2 per cent; Joint Venture Equity Restructuring, 10.2 per cent; grants and donor funding, three per cent; domestic recoveries and fines, 2.9 per cent and others, 1.7 per cent.

    The 2019 budget is less than approved budget by 3.22 per cent. Recurrent (non-debt) spending expected to rise by 34.17 per cent, from N3.52 trillion in 2018 to N4.72 trillion (reflecting increases in salaries and pensions including provisions for implementation of a new  minimum wage).

    Capital expenditure (inclusive of transfers, government-owned enterprises capital and project-tied loans) as per centage of government expenditure is 30 per cent. At N2.14 trillion, debt service is 24.24 per cent of planned spending. Provision to retire maturing bond to local contractors decreased by 36.84 per cent from N190 billion in 2018 to N120 billion.

    Udoma said the               the 2019 budget of continuity is intended to further reposition the economy on the path of higher, inclusive, diversified and sustainable growth, and to continue to lift significant numbers of our citizens out of poverty.

    The budget also reflects the key execution priorities of the ERGP, namely restoring macroeconomic stability; agriculture and food security; energy sufficiency (in power and petroleum products); transportation infrastructure; and industrialisation (focusing on Small and Medium Enterprises).

    He said that government will continue to create the enabling environment for private sector to increase their investment and contribute significantly to job creation and economic growth.

    But achieving these milestones requires adequate funding which resources from government alone cannot achieve.

     

    Funding the budget

     

    Stakeholders insist that harmonisation of tax data of corporate entities and individuals is first step to securing needed revenue for funding the budget.

    According to VAIDS Consultant, Anidugbe, there are multiple silos of data sited in multiple data centers across the country under the stewardship of several Ministries Departments and Agencies (MDAs).

    For instance, National Identity Management Commission (NIMC) has 24 million registered persons on its database. It has  received 9.3 million Bank Verification Numbers (BVNs) from Nigeria Interbank Settlement System (NIBSS) of which there is a 40 per cent match to its existing records. It has also begun direct integration with several key data points like Independent National Electoral Commission (INEC), immigration, Nigerian Communication Commission (NCC) among others.

    “Therefore, there is need to identify potential tax payer through assets and income, process tax payer information and issue a tax bill and grant amnesty to VAIDS declarers. When these are done, the            tax payers will be normalized and becomes part of the tax paying society,” Anidugbe said.

     

    VAIDS project offers hope

     

    The Nigeria continues to struggle with its tax system and administration. The country’s tax authorities are still burdened with obsolete tax laws, dearth of technology in tax administration and consequently inefficiencies in tax collections and poor compliance levels. The VAIDS project, launched last year by Vice President, Yemi Osinbajo,  was meant to reverse these trends. It was also one of the major steps taken by government to lift tax revenues.

    The scheme, which was initially approved for a period of nine months, was extended for a further three months following repeated plea by taxpayers and tax advisors; happily the Government listened and granted three months extension.

    Some tax payers took advantage of the scheme to regularise their tax defaults and benefited from waiver of interests.

    The Federal Government said it had  raked in N30 billion from tax the amnesty scheme. The scheme provides an opportunity for taxpayers, or amnesty for chronic tax defaulters, to voluntarily declare their assets and income and pay taxes due on them and in return obtain some benefits.

    Chairman Federal inland Revenue Service (FIRS)  Tunde Fowler said the VAIDS windfall was championed by FIRS which was “responsible for the collection of 90 per cent of the amount, while the states were responsible for the 10 per cent collection balance.” The N30 billion so far mopped up from tax amnesty programme he said is N3 billion higher than previous N27 billion recovered few months ago.

    He reminded members of Joint Tax Board (JTB) that the beauty of VAIDS went beyond “financial gains but, rather its potential of expanding the tax net.” To this end he reiterated that the programme has also boosted the nation’s tax data base from 14 million to 19 million.

    Also, over 800,000 companies, including some government contractors, that have never paid taxes have already been identified and audited during the VAIDS implementation period .

    It was unprecedented initiative that entails cooperation between Federal and State Governments. The Federal Ministry of Finance also commenced a database project that combines data from the various arms of government including bank records, property and company ownership, and Customs records to create accurate profiles of those liable to pay taxes.

    Economist, Pricewater houseCoopers (PwC) Nigeria, Adedayo Akinbiyi, in the firm’s routine economic alert  said Nigeria’s low tax to GDP ratio at around six per cent is a consequence of a poor and inefficient tax collection system.

    “While the government has implemented specific measures to address this by expanding the tax base and increasing tax compliance using various incentives, the impact is yet to materialise. As a result, we estimate that the fiscal deficit could overshoot projections by as much as 67.7 per cent to N3.4 trillion in 2018,” he said in the report.

    He suggested that the  Federal Government would rely more on the domestic debt market to finance the budget deficit, given the availability of a stable domestic investor base, which includes the Pension Funds. Moreover, external financing could be tight in 2018 due to the uptrend in interest rates in advanced economies, particularly in the US and UK.

    However, an Abuja-based tax expert and industrialist, Azu Okorie, said taxation is not the solution to budget funding. He said  Nigeria has Since 1970, realised over $200 billion from oil, which has not been properly accounted for. “We know the our economy came out of recession not too long ago, and so, you cannot use tax as expected. If you tax people more, they are already recessed. This is not the time to be talking about increasing tax or frightening them about that. They might be scared. What we need is economic welfare. We need to introduce welfare projects that would detach the people from poverty. We also need to have a very good plan that can really take us out of poverty,” he said.

    According to him, any government that decides to do raise tax during a period of recession would lose her legitimacy.

    For him, there are various
    ways to grow an economy
    adding that now is the time to give incentives to companies in Nigeria and not to tax them. Let me give you an example, when the US economy was in recession that shook everybody, President Barack Obama told companies operating in the country that if they employ four persons, they get tax rebate for two. What happened? Unemployment responded and reduced. “If you follow same plan in Nigeria, unemployment would be addressed and budget funding will not be an issue,” he told The Nation.

    Continuing, he said: “Basically, you cannot tax those that are jobless or companies that are dying. However, if you give companies incentives to grow and remain sustainable, you can continue to tax them forever. If you kill them in two years, your ability to collect tax from them will end in two years. Still, don’t forget that today, you cannot compel people to set up their companies in Nigeria. So, the level of capital flight can be high as people can decide to take their companies to other countries. We need to encourage them to invest in Nigeria”.

    Okorie said the Nigerian economy should be inviting and government should be able to develop a programme that would see that companies get tax rebates in certain areas.

     

    New tax scheme

     

    Nigeria has also rolled out another tax amnesty scheme.  Backed by Presidential Executive Order No 8 signed on October 8, by President Mohammadu Buhari, Voluntary Offshore Assets Regularisation Scheme (VOARS) became the latest effort at combating money laundering and tax evasion.

    The next 12 months all persons and entities that hold offshore assets and generate offshore income but for which appropriate Nigeria taxes have not been paid could take the opportunity to declare those assets and income with a one-time payment of 35 per cent of the asset value.

    The scheme, which will be operated through a Swiss-based intermediary sovereign advisory services, provides immunity from prosecution for tax offences and penalties in exchange for voluntary disclosure and a one-off payment.

    Analysts said that with the number of initiatives aimed at deepening tax penetration, combating illicit financial flows and raising revenues, the country seems to be forging ahead in dealing with the serious revenue challenge that is plaguing the country’s fledgeling economy.

     

    Global trends

     

    At the global arena, countries are exploring tax options to bring development to their people.

    For instance, Singapore, a city-state much smaller than Lagos State in landmass, is often touted and rightly so, as a marvel of rapid, yet sustainable economic development and advancement.

    It’s success in transforming from a third to a first world country in a period less than 40 years has continued to impress, if not astound people.

    Singapore, before its transformation, faced the problem of overcrowding in the city, poor living conditions, a severe lack of infrastructure, and low technology, among others. Its current status as a thriving international business hub, characterised by a high standard of living, did not happen by chance. It was orchestrated through proactive and deliberate far sighted planning.

    The problems that Singapore surmounted on the path to economic development and prosperity are some of the issues that Nigeria is today tackling as it aspires to transform into an efficiently run and more productive country with vastly improved living conditions. A review of Singapore’s model reveals that, among other things, there was a systematic approach to the development of infrastructure.

    While Singapore’s experience shows clearly that infrastructure is central to socio-economic advancement, several studies by experts on other economies across the world have also identified a strong positive and even symbiotic link between infrastructure or infrastructure spending and growth. Any economy that wants to pursue sustainable growth must therefore invest in its infrastructure. However, infrastructure development requires funding

    In advanced economies, like Singapore’s, taxation constitutes a major source of government revenue and is an acceptable practice among their citizens. Taxation is also employed in other ways such as tariffs that protect local industries from foreign competition, checking undesirable practices and fostering inclusive development through asymmetric application.

    These economies also prove beyond doubt that taxation is a veritable source of funding for sustainable development, perhaps with its added advantage of empowering the citizens to demand more accountability from governments and as well constraining governments towards more transparency and efficient utilisation of funds. Apparently, making development everybody’s business fosters better growth.

    Tax to Gross Domestic Product (GDP) ratio (total tax collected as a percentage of the market value of all officially recognised final goods and services produced within a country in a given period), and the tax contribution to a country’s revenues are good indicators of efficient tax systems. In 2016, tax revenue in the European Union was 40 per cent of GDP (France 47 per cent, United Kingdom 35 per cent) and accounted for around 90 per cent of government revenues. Tax is usually about 26 per cent of GDP in the U.S. and accounts for about 85 per cent of government revenue. In Singapore, it is about 14 per cent and 68 per cent, respectively.

    Nigeria’s tax to GDP ratio of six per cent clearly depicts the poor state of taxation in the country while at the same offering the opportunity to significantly increase government revenues.

    To raise the country’s tax revenues from the current six per cent of GDP to the dream of 20 per cent will require a complete rethinking of the taxation ideology.  There’s definitely no magic wand that could deliver the ambitious 20 per cent target overnight, it requires a holistic review of the entire tax system.

    When that is achieved, budget funding will become much more easier for government and development of key infrastructure will improve.

  • NCC seeks NAE’s partnership to tackle multiple taxation, others

    The Executive Vice Chairman (EVC), Nigerian Communications Commission (NCC), Prof Umar Garba Danbatta, has sought the partnership of the Nigeria Academy of Engineers (NAE) to tackle the non-technical issues affecting quality of service (QoS) in the telecoms sector.

    He said the NCC would continue with the culture of support and cooperation with the academy.

    He spoke when the  academy’s Vice President, Prof Fola Lasisi,  led other professors on a courtesy call on him to convey the readiness of the group to induct him as Fellow of the elite engineering body, at NCC Headquarters, Abuja.

    Dambatta urged the Academy to also lend its voice on the issues of Right of Way (RoW), multiple taxations, and regulations to ensure that all the non-technical factors that affect the QoS are tackled.

    He said: “We will leverage the experience of the Fellows of the Academy and bring this to bear in improving QoS. QoS is normally measured, using four key performance indicators, and we believe that more additional indicators can be brought in to improve the QoS further,” he explained.

    Earlier, Lasis, said the addition of the NCC chief to the body is a testimony to the quality of his leadership at the NCC.

    Danbatta will be inducted as a fellow of the Academy on June 21, just some 48 hours before he receives an honorary doctorate from the University of Jos.

    Lasisi said: “We want to show that NCC has always had very brilliant people at the top. Ernest Ndukwe was also one of us and became a fellow when he was here. Prof Danbatta continues in the same way, so we want to congratulate him and tell him that we appreciate his becoming a Fellow.”

    Danbatta lauded what he described as the tradition of excellence in the NCC, adding that his induction as a fellow of the academy will be a big honour to the regulatory agency.

    “We acknowledge this recognition as a great honour to the NCC. I, therefore, pledge to continue to impact in a way and manner that will lead to the transformation of the industry, its stability, resilience and general contribution to the economy,” he said.

  • Group seeks end to multiple taxation

    The Association of Table Water Producers (ATWAP), is seeking an end to multiple taxation on its members by the Lagos State Government.

    ATWAP Lagos chairman, Alhaji Yisau Adeoye, stated this in Alimosho, during a one-day workshop with the theme, “Harnessing good manufacturing practice in table water production”.

    Adeoye urged the government to harmonise the levies.

    He said: “There must not be multiple taxation; levies on us must be also harmonised instead of coming in phases.”

    Adeoye encouraged his colleagues to unite and take ATWAP higher.

    Chairman of the association’s Alimosho Zone II, Onilede Bamidele, explained that the training was to ensure that all producers within the Zone obtain the knowledge they need to prosper.

    Bamidele said: “The idea of having this workshop is borne out of the desire to see that we are all equipped with the knowledge that would result in the progress of the association as well as our individual business.

    “The target is to improve our business performance positively, enlighten and strengthen members against all tides. ”

    ATWAP National Clementina Ativie urged the National Agency for Food and Drug Administration and Control (NAFDAC) to include the association in their regulation.

    According to her ATWAP could be NAFDAC’s watchdog, making sure that any member who is sanctioned remains that way until NAFDAC reconsiders.

    Ativie said: “ATWAP knows its members across the country; we can be used to fish out the fake water producers and ensure that whatever regulation NAFDAC wants is being maintained by water producers.”

    Deputy Director, Packaged Water Division in NAFDAC, Kenneth Azikiwe, urged water producers to maintain a clean environment and best practices.

  • Baru advises PIB Consultant to address multiple taxation

    The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, has challenged the consultant to the National Assembly on Petroleum Industry Reform Bill (PIGB) to address multiple taxes.

    He urged the consultant to take a comprehensive look at the issues in the oil and gas sector and make bold recommendations that could engender enduring reforms.

    According to its press statement, the NNPC chief gave the advice yesterday at a consultative meeting with the consultants to the National Assembly led by the lead consultant and former Director of the Department of Petroleum Resources (DPR), Mr. Osteen Olorunsola.

    He said with the passage of the Petroleum Industry Governance Bill which deals with the governance structure of the industry by the National Assembly, the remaining two segments of fiscal terms and host communities would require extensive consultation to aggregate views and opinions of industry stakeholders in order to strike a balance that could attract investments while ensuring a decent government-take in terms of oil and gas revenue.

    Speaking on fiscal terms, Baru said the major complaint by operators in the industry was that of multiple taxation which include statutory contributions to the Niger Delta Development Commission (NDDC) and Nigerian Content Development and Monitoring Board (NCDMB) as well as sundry expenses on security.

    “We have to be able to design a system that works. If the three per cent, 13 per cent or any other statutory allocation for development is not working, then you should not be afraid to recommend a percentage that could work to replace the present system where operators pay multiple taxes and yet have to pay much more extra to secure their investments,” he said.

  • Youths decry excessive taxation, brutality in Ebonyi

    Several youth groups and youth led organizations gathered in Abakiliki to decry excessive taxation being imposed on youth entrepreneurs.

    The youth groups met with representatives of the government from the integrated revenue department of the board of internal revenue, Mr. Esema A. Chima, and the SSA to the government on internally generated revenue, Mr. Okwuegbu Sunday, on Thursday.

    The youths have continued to endure a plethora of horrible experiences. Mr. Ukpabi of the Salt Youth Network narrated the experience of one of their skill acquisition beneficiaries, who just relocated to Abakiliki from his village to start his barbing business at a low cost location, only to be slammed with a tax of #36,000 which exceeds his rent and his business capital put together.

    The attitude of the waste management agents was not left out of this agitation as they were reported to have seized goods from traders at their business premises, insisting on annual purchase of waste bins. According to Mr. Nwogodo Vincent of Young Visioneers Association of Nigeria (YVAN), these agents also beat up citizens in the process of recovering such levies.

    As a result of this heavy tax and recovery agents’ molestation, several entrepreneurs have closed up their businesses, while some only open their shops at odd hours when the tax forces have closed for the day.

    In response, the government representatives explained the basis for the taxes and called on the youth to support the effort of the government as the dividend of their taxes can be seen in the development of the state. They however admitted that the agents responsible for the recovery are incompetent in some cases and as a result overcharged citizens. The youths suggested solutions to the problem which were documented in a communique.

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     At the end of the engagement, the youths agreed that they are willing to work with the government in the interest of the development of the state and they are also willing to pay tax, but demanded from the government a more transparent process subject to assessment in the determination of taxes.

    The aggrieved stakeholders made it clear that the right to freedom of expression has been denied them since anyone who reports or makes any statement against the government becomes a victim of attack. Journalists such as Mr. Charles Otu and Mr. Chika Nwoba were reported to have been arrested and brutalized, as a result.

    One of the victims is a journalist; Mr. Chika, whose head was broken in the course of a recent attack and placed under critical condition, is currently in a struggle for his life at the Federal Medical Centre, Abakiliki. Mr. Charles Otu was also rescued through external intervention.

    They reported that opposition parties are not free to host party meetings as it is unacceptable to the government of the day.

    South Saharan Social Development Organization, a non-governmental organization has come out to condemn the attack, upholding the fundamental human rights of Ebonyi state citizens.

    Speaking to our correspondent, Nwachukwu Onyinyechi, the program manager of South Saharan Social Development Organization said:

    “The Government of Ebonyi State should address the menace of brutalization by its tax collection agents. As much as it is important to increase the State IGR, it is imperative to secure the lives and rights of the citizens who are the tax payers.

    “The right of expression and association are constitutionally enshrined in the fundamental human rights and should not be denied any individual, group or community.”

  • Taxation: what reduced Land Use Charge means for Lagos residents

    The Lagos Land Use Charge, which was reduced yesterday, was created to get more properties into the tax net and increase revenue available for development. It was also meant to standardise property valuation on which charges are calculated and improve property enumeration across the state. After several debates, the Lagos State Government cut the rate payable for commercial properties by 50 per cent. COLLINS NWEZE writes that the gesture is significant and commendable.

    Taxation is at the heart of development in most great economies. Lagos State Government has been in the eye of storm ever since it commenced distribution of demand notices for the payment of Land Use Charge for 2018.

    Many property owners expressed surprise at the figures they saw in their bills. According to reports, many property owners were shocked to find increases of up to 400 per cent on the bills they paid only a year ago.

    Speaking on the development, an economist and tax expert, Osebumere Odia, said the Organised Private Sector (OPS), the segment most hit by the increases immediately went on air to vehemently protest these increases. “Anyone who was present at the Town Hall Meeting organised by the Lagos Chamber of Commerce and Industry could not have missed the passion with which the representative of the OPS criticized the new land use charge regime. “Any increase above a hundred per cent,” he stated very forcefully, “is unacceptable,” he said.

    But nowhere was the “war” as violent as cyberspace. Across various chat-groups, different people gave their own interpretations to the developments. Odia said it was the gross misinformation on cyberspace more than anything else that befuddled the arguments of the government making the communication process increasingly arduous.

    Government through its operatives including the Governor of Lagos State, Akinwunmi Ambode, had argued that the increases in land use charge had actually been sequel to the repeal of the 2001 Law and passage of a new Land Use Charge law by the state house of assembly. The review, it said, had been predicated on a need to bring obsolete charges up-to-date, standardize the practice of property valuation upon which charges are calculated, as well as ramp up property enumeration across the state and in the process bring more properties into the tax net.

    Government had also explained that the taxation approach being employed was progressive one, wherein the poor are less affected than the rich. In fact it added that the majority of properties, comprising some 75 per cent, were actually valued below N10 million implying that all they would need to pay would be N5,000 annually equivalent to some N417 per month.

    It had further stated that among the other 30 per cent, majority of properties were valued under N20 million, in which case tax liability was actually relatively low. It further demonstrated that for a property valued at N20 million for instance, an owner-occupier would not need to pay more than some N9,120 on an annual basis.

    Opposition to the new charges, however, remained very vehement, waning slightly with better education. According to Odia, agitation against the increased land use charge was not without basis. Many young people argued that the increases would merely provide a convenient cover for landlords to arbitrarily hike their rents.

    Members of the OPS also lamented that the taxes could cripple the operations of their members already reeling from the difficulties in the operating environment. It is instructive that despite its good intentions which it laboured to explain to Lagosians, the Ambode led administration still listened to the agitations and has lately made concessions. Ambode, while addressing a high caliber meeting of the OPS last week had hinted that government “was ready for dialogue” in response to the wave of criticism that had greeted the dissemination of demand notices for land use charge.

    Before then, he had explained the rationale for the increases especially against the backdrop of the infrastructure challenges that Lagos is beset with in the face of its rapidly growing population. The infrastructure gap in Lagos, Ambode explained, is in the region of $50 billion. To put this in context, he explained that even if the entire 2018 budget for Lagos were to be deployed to infrastructure alone, it would take another 15 years of such regular investment for the infrastructure in Lagos to get up to speed (assuming of course, that the population growth is stagnated).

    He also explained that the tax regime was actually very pro-poor, highlighting the fact that it was imperative to deploy tax revenues gotten from such progressive taxation, to creating job opportunities for the poor to enhance social security.

    The popular view, however, appeared to be that the taxes were on the high side and it is commendable that rather than refuse to bend, Ambode has chosen to engage the critics and give in to an extent, to their demands. Accordingly, Land Use Charge payable for properties which are devoted to commercial activities has been reduced by half. This is very significant and should considerably reduce the antagonism from real estate professionals. What this translates to for instance is that for a property valued at N20 million, which is used for commercial activity, instead of about N92,000 or so originally payable, such property would now only need to pay about N46,000 annually.

    Another sore point was that the demand notices left a very short window for property owners to make payment. Those who were able to make payment during this short window would enjoy an additional discount of 15 per cent. But not much longer thereafter, penalties of up to 200 per cent would apply. Some Lagosians felt this was unfair especially as the majority only earn salaries monthly. There should at least be an opportunity for staggered payments, many canvassed. The new concessions granted by Ambode indicate that indeed, property owners will now be able to pay their Land Use Charge in installments if they so desire. Of course, this concession also means that the penalties for late payments have now been waived.

    Another category of property is those that are dedicated to manufacturing or industrial activity. Such properties now have their land use charge further reduced by 25 per cent. While those in which the owner-occupier also has part of his property deployed to commercial activity will also enjoy a similar discount of 25 per cent.

    The owner-occupier category is not left out and enjoys a further 15 per cent discount on his land use charge payment, according to the revised land use charge law proposals. It is hoped however, that these revisions will take effect after they have been properly analysed and agreed to by the law makers who passed the law in the first place.

    It is a mark of civilized governance and kudos to our growing democracy that Ambode has chosen to listen to the people over whom he presides and accede to their request. As some discerning commentators have observed, he showed considerable moral courage to implement a tax increase barely a year to the next gubernatorial elections.

    That act demonstrates that his motivation may indeed have been more about helping to actualise his vision for Lagos, a vision which he passionately advocated while addressing the business community last week. It takes a statesman to subordinate his personal ambitions in preference for the common good, in the manner he did.

    It is hoped that the various opposition groups including the Nigerian Employers Consultative Assembly, the real estate practitioners and others will positively appraise this move by the Lagos Government, sheathe their swords and help create the right environment for the state to move forward with implementation of these taxes.

  • Taxation and inequality

    Sir: Taxation is a platform for sustainable revenue generation for the government. The proceeds from taxation are used by the government to provide essential goods and services for its citizenry.

    The reality of the tax system in Nigeria is that poorer individuals and companies pay a higher rate of taxes than richer individuals and companies. This tax system is retrogressive. Rich individuals who are usually well connected to the government are given questionable tax holidays and tax waivers. These rich individuals and companies exploit loopholes in existing tax laws and shift large amounts of revenue to places of low tax jurisdictions. Meanwhile, the 36 state governments in a bid to meet their revenue generation targets usually embark on aggressive taxation of the informal sector. Local Government Councils and some agencies of the state government relentlessly impose heavy and unbearable taxes on Small and Medium Scale Enterprises. Some of these taxes include offloading and loading charges, building permit, health approval permit, community development levy, pick-up and bus stickers, commercial vehicle stickers and tenement rates. These multiple taxations faced by the poorer people who dominate the informal sector are usually accompanied by human rights abuses.

    In Nigeria, there is no established positive relationship between the volume of revenue collected as taxes and public services delivered to the average Nigerian. The percentage of Nigerian government budget appropriated to sectors that address inequality – education, health, social welfare – are among the lowest in Sub Saharan Africa. Despite the trillions of naira that has been budgeted for the development of Nigeria over the years, the state of schools, hospitals, water supply, electricity has been hugely inadequate to meet the demand of the Nigerian masses. Millions of Nigerians lack access to potable water and sanitation. The number of Nigerians that lack access to basic maternal, newborn and child health facilities is scary. Nigeria is also a global leader of the number of out-of-school children. Nigeria’s commitments to improve its human development indices and address inequality can only be successful if there is an improved public finance management. Poverty eradication and equitable growth must be made a priority. Legislative measures must be taken to improve progressive taxation, while executive measures taken to build the capacity of tax authorities on transfer pricing.

     

    • Martins Eke,

    Centre for Social Justice, Abuja.

  • Taxation: Lagos simplifies tax collection with technology

    Nigeria’s tax authorities are still burdened with obsolete tax laws, dearth of technology in tax administration, inefficiencies in tax collection and poor compliance levels. But Lagos State is setting a good example that should be copied by others. Aside the deployment of technology to boost tax collection, the state is working with its House of Assembly to upgrade its tax laws for simplicity and efficiency.

    Many great economies build key infrastructure using tax revenues. For instance in 2010, South Africa was invited to join Brazil, Russia, India and China (BRIC) and many wondered why Nigeria was not picked ahead of South Africa, considering its population, size, abundant oil and gas resources and strong growth prospect.

    Today, the BRIC has become BRICS (Brazil, Russia, India, China and South Africa), a group of five newly industrialised or developing economies, which sought to have closer economic, financial and political ties among themselves and use their combined influence to shape the world’s socio-economic and financial narratives. The BRICS countries  are drawn from four continents (South America, Europe, Asia, and Africa) and they are the largest or among the largest economies in each of their regions.

    A Lagos tax expert/public analyst, Seun Olamilekan, said Nigeria could have learnt and benefitted a great deal from membership of the association, particularly in the area of taxation. He explained that only recently, the BRICS’s tax authorities signed a taxation cooperation memorandum. Among other things, the agreement is expected to foster greater cooperation among members on taxation efficiency, capacities, policies, collection, improving consultation procedures on taxation, and encouraging information exchange on taxation. These are areas Nigeria could have gained critical insight and knowledge.

    “Nigeria continues to struggle with its tax system and administration. The country’s tax authorities are still burdened with obsolete tax laws, dearth of technology in tax administration and consequently inefficiencies in tax collections and poor compliance levels. The Nigerian tax system, according to experts, is still largely “characterised by complex distortions and inequitable taxation laws” fostered by “multiplicity of rates and unnecessary exemptions.

    “Many of the country’s tax laws are obsolete and out of tune with current reality. It is not surprising therefore, that the country’s tax-to-Gross Domestic Product (GDP) ratio is a mere six per cent. The BRICS’ economies, on the other hand, earn an average tax-to-GDP ratio of 24 per cent (Russia’s tax collection is 19.5 per cent of its GDP, China 20 per cent, India 17.7 per cent, South Africa 26.9 per cent, and Brazil 34.4 per cent) PricewaterhouseCoopers (PwC) tagged Nigeria’s six per cent “abysmal,” he stated.

    However, Lagos State seems to have taken a few pages out of the BRICS’ tax book and the state is reaping the benefits. Aside the deployment of technology, the state is working with its House of Assembly to upgrade its tax laws for simplicity, equity, certainty, relevance, and efficiency. Recently, a public hearing was held by the state House of Assembly on a bill to repeal the 17-year-old Land Use Charge Law and enact a new one that will consolidate all property taxes in the state (tenement rate, neighbourhood improvement tax, land rates) into one tax, the Land Use Charge Law.

    Olamilekan said the legislators promised at the hearing to undertake an impact assessment of Lagos State tax laws with a view to amend and, or enact new ones, where necessary, to meet the present and urgent tax needs of the state.

    “The new Land Use Charge Law was comprehensive enough to satisfy the basic requirements of a good tax. By collapsing the multiple property tax law in the state into one law, the government has simplified the law. The new law will be equitable and standardised; assessment of tax due is to be calculated based on the property type and the market value, unlike the old law where valuation is arbitrary and the taxpayer is not certain of his tax obligations. All this, coupled with deployment of e-filing, is expected to help the efficiency of the law,” he said.

    Lagos already boasts of about 30 per cent tax compliance rate. This is far better than the country’s six per cent and even  higher than the BRICS’ average of 24 per cent. It is expected that the new tax administration, with up-to-date tax laws, will further boost this compliance figure and provide the state with additional resources to tackle its developmental agenda.

    But most importantly, there appear to be a clear trust by residents in the state to deploy tax revenue judiciously. For long, Lagos residents, and indeed, Nigerians, had complained that the impact of government was hardly felt. That is no longer the case in Lagos. The state has demonstrated good faith and has shown that it can be trusted with taxpayers’ money to deliver people-oriented and impactful projects.

    The government is investing in a modern and efficient transportation system: rail (Okokomaiko-Marina and Iddo terminal-Alagbado); Automated Guideway Transit (Ikoyi-VI-Ajah line); Bus Rapid Transit (BRT) plying routes across the state; channelisation of the waterways (construction of jetties and provision of ferry services); roads rehabilitation; upgrades and maintenance. It is equally investing heavily in social infrastructure, upgrading schools, health facilities and working hard to protect the environment.

    Compliance remains a major challenge to surmount. At the 2017 Stanbic IBTC/Standard Bank West to East Africa Investors’ Conference, the Minister of Finance, Mrs. Kemi Adeosun, told the audience that the country’s “tax burden is not being shared fairly… being carried by those, who are least able to afford it.”

    According to her, the country “only has 14 million taxpayers out of about 70 million people that are economically active”. And even at that, “majority of that 14 million are those, who have their taxes deducted at the source, largely lower income workers”. Very few voluntarily file tax returns.

    Analysts said the hallmark of a strong tax system/administration includes its simplicity for citizens to understand their tax obligations; equitability: relevance to reflect current realities; efficiency; enforceability with mechanisms for compliance and transparency, free from ambiguities and uncertainties.

    The country’s tax system, unfortunately, fails many of these basic criteria. The BRICS economies have very dynamic tax systems that are constantly reviewed to ensure relevance. As well, they deploy functional electronic filing systems to ensure standardisation and efficiency.

    At 59 taxable items, Nigeria has one of the highest tax charges in the world. This is a major contributor to its regular poor performance in the yearly Ease of Doing Business index. Urgent reform is needed to consolidate the multiple taxes and streamline them for convenience and simplicity.

    Besides, when a “tax burden is not shared fairly” and “only 14 million out of 70 million” pay taxes, then such a tax system lacks equity and clearly negates the basic ‘ability to pay’ principle of taxation. Such a tax system needs strengthening. Brazil, India and China operate a progressive tax system, where a taxpayer’s tax burden rises with income. So, those who earn more pay more.

    Tax regulation should also be cost effective to both the government and the taxpayers. The BRICS economies regularly streamline their tax systems, administration, and procedures to make them more efficient and ensure everyone is captured in the tax net.

    Besides, there is room for improvement if Nigeria’s attempt to boost tax revenue via better compliance will be realised. In 2015, the tax authorities introduced a centralised electronic payments system, which allows taxpayers to file tax returns at the nearest tax office to them. The ongoing voluntary asset and income declaration (VAID) campaign is expected to induce compliance. No doubt these initiatives will increase tax revenue in the short term. However, long term gains will only be possible if the tax system is reformed alongside technology adoption.