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For their five-year operation, about 55 life and non-life insurance companies in Nigeria have paid N36.5 billion taxes to the federal government through the Federal Inland Revenue Service (FIRS). Taxes were paid by the companies between 2013 and 2017 financial year end. The underwriters generated N100.4 billion as Profit Before Tax (PBT) and were left with Profit After Tax (PAT) of N63.9 billion, having paid N36.5 billion as taxes to the government.
The tax paid translates to about 35 per cent of the profit made within the period by the firms. The data sourced from the Nigerian Insurers Association (NIA) by LEADERSHIP showed that insurance firms made N9.8 billion as PBT which was reduced to N4.9 billion PAT, having paid N4.8 billion as tax in 2013 financial year, while the insurance industry recorded N6.3 billion as PBT in 2014, which went into a negative of -N691 million, after operators paid about N7 billion as tax. In 2015, insurers made N11.3 billion profit, while the profit reduced to N6.1 billion, having paid N5.2 billion as tax in that financial year. in the 2016 financial year, insurance companies paid N11 billion as taxes from a PBT of N29.4 billion declared and were left with PAT of N18.3 billion, even as insurers made a profit before tax of N43.8 billion in 2017 financial year and paid N8.3 billion tax to the federal government, This left them with profit after tax of N35.5 billion. Although, the tax paid to government by insurance companies in 2018 are still sketchy, as underwriting firms are just releasing their accounts, there are indications that it could rise above N10 billion as the government intensifies efforts to generate more revenue locally to finance the 2019 budget. Apart from paying taxes on management expenses, short-term lending, among others, insurers were also mandated to pay tax on claims, which is the core business of underwriting, meaning that, the higher the claims paid by an underwriter, the higher the tax accruing to the government. The federal, state and local governments have embarked on aggressive revenue generation, picking on corporate bodies where insurance firms are among the major source of revenue. The enforcement of these taxes heightened last year with some insurance companies shut down by the FIRS until they cleared their tax arrears. While the situation has negative implications on the books of some struggling insurers, others have their meager profit cut by these taxes, while the big underwriters were not exempted from the impact of these taxes. During the tenure of its former chairman, Mr. Eddie Efekoha, the NIA had complained that the industry was being subjected to multiple taxes that were gradually eroding the profits of insurance companies, thereby, affecting their ability to give good returns on investment to their shareholders as well as stakeholders. Efekoha, however, believes the permanent solution lies in amending the tax code which however takes times to do, noting that it has to be done through the National Assembly. “’Giving returns on investment to shareholders and stakeholders has a lot to do with how much you make as profit but in a scenario like ours, where we are subjected to multiple taxation, it becomes difficult to pay dividends to shareholders. The more tax we pay, the more the returns to our stakeholders diminish. If you are to pay tax on claims and on management expenses, what this means is that you have little or nothing left to pay dividends to shareholders,” he lamented. However, there is an ongoing discussion between NIA and FIRS to address this challenge. Also last year, the general manager, Retail Life, AIICO Insurance Plc, Mr. Sola Ajayi, said that the tax code in Nigeria was too hard on both life and non-life insurance companies as they were not allowed to take advantage of deferred tax, especially, for life business. “We cannot take advantage of those taxed assets because of Section 33 and Section 16 of the tax code. Section 33 stipulate that, we must pay minimum tax, while Section 16 provides that even when you have a tax exempt income, you must still come back and pay something. So, you cannot exempt paying tax on the life business where some are even incurring losses and you cannot fully take advantage of all your reliefs,” he said.
About four months ago, President, Muhammadu Buhari presented a total of N8.83 trillion as the proposed budget for the fiscal year 2019 to a joint session of the National Assembly. Close to N7trillion of that figure, representing 79 per cent of the total, is expected to be financed by government from different revenue resources major of which is oil. Judging by the opinion of experts, Bamidele Famoofo reports that achieving the budgetary target remains a herculean task for the government The proposed federal government budget is predicated upon revenue projections of N6.97 trillion for the 2019 fiscal year. From the oil sector, the federal government is expecting revenue of about N3.73 trillion, while N710 billion will come from the proceeds of government equity in joint ventures. As part of the government’s non-oil revenue push, it anticipates to receive about N799.52 billion from businesses as part of its own share of company income tax receipt. Also, the federal government’s share of revenue from customs duties and value added tax(VAT) are estimated to come to a region of N302.5 billion and N229.34 billion respectively.Oil Revenue Government’s projection is that about N3.73 trillion or 42 percent of funding will come from the sales of oil. This figure was derived from assumptions of oil price benchmark of $60 per barrel and an oil production of 2.3 million barrels per day. Daily crude oil production estimate of 2.3 million barrels per day is the same amount as budgeted for the 2018 fiscal year.
However, Nigeria currently produces about 1.8million barrels per day, which according to some experts in the oil sector, is believed to be a more realistic production estimate.
Nigeria’s non-oil revenue is mainly divided into value added tax, Corporate Income Tax, customs duties and levies. FG receives 14 percent of the VAT, while other taxes are paid into the Federation Account, which FG is entitled to 48.5 per cent. Nigeria’s non-oil r e v e n u e ( e x c l u d e s independent revenues from agencies by classification) has usually followed the GDP growth and the economic health of the country.
CEO of BudgIT, Oluseun Onigbinde, noted that as oil price and production swings had been critical to Nigeria’s economic growth, foreign reserves and currency stability, non-oil revenue growth has also been strongly influenced by oil. “It is evident that when oil revenue declined in 2016 due to the oil price slump, the growth of non-oil revenue marginally reversed. We see this in the change in Company Income Tax revenue—N1.2 trillion in 2014, N1.0 trillion in 2015, N0.9 trillion in 2016, and back to N1.2 trillion in 2017.” A total VAT uptake of around N229.34 billion was proposed by government for 2019. This amount is higher than about N207.51 billion in 2018. In 2014 and 2015, the federal government’s share of VAT was N106.74 billion and N104.66billion respectively. For the 2017 fiscal year, the federal government’s share of VAT came to about N130.05 billion. A Globalist article states that, “Nigeria doesn’t fare much better with value-added tax and corporate tax. A paltry 9 percent of Nigerian companies pay corporate tax, while only12 percent of registered businesses comply with VAT obligations. With some estimates finding as many as 99 percent of small businesses are unregistered, those percentages are even lower in reality.”
Company Income Tax
For the 2019 fiscal year, the federal government projects a CIT uptake of N799.51 billion, which is an increase from the approved N658.55 billion for the 2018 fiscal year. FG’s share of CIT rose from the 2015 level of N473.32 billion to an estimated N543.34 billion in 2017. As at the third quarter of 2018, actual CIT uptake was at N500.37 billion, a N92.78 billion increase from the actual of N407.59 billion in 2017, for a corresponding period. Considering the trends of the past five years, it will be overly optimistic to believe that the federal government will meet its 2019 CIT revenue projections. “At 30 percent, Nigeria’s CIT rate is higher than the average CIT rate in Africa which is at 28.53 per cent. In the European Union and Asia, CIT rates lie between 18.88 percent and 20.14 percent respectively. With serial reforms to boost corporate taxes which include Voluntary Assets and Income Declaration Scheme (VAIDS), that failed to significantly boost taxes revenues, it is evident that Nigeria lacks the formal private sector depth to deliver huge corporate taxes.”, BudgIT disclosed in its recent report on the budget. BudgIT believes the recent approach of using bank as agent of tax collection has been heavily resisted, but has a potential of increasing the number. “Another N799billion target by FIRS is commendable, but we do not expect magic in FIRS CIT collection which might reach N1.3trillion in 2019, raising FG’s share (48.5 per cent after cost of collection) to around N650billion,” it said.
The Edo State Internal Revenue Service has commenced aggressive tax enforcement exercise to collect revenue owed the state government.
In a statement signed by its Executive Chairman and Chief Executive Officer (CEO), Mr Igbinidu Inneh, the tax agency advised members of the public to take note of the commencement of the exercise and make sure to settle all their tax liabilities to avoid sanctions. According to him, “This is to notify the general public that the Edo State Internal Revenue Service has embarked on an aggressive Tax Enforcement exercise of all Revenue owed Edo State Government, particularly Income Taxes, Consumption Tax as well as Road Taxes.” “By this notice, the general public is advised to take note and settle all their tax liabilities to avoid sanctions,” he added.
The Bishop of Ife Diocese, Anglican Communion, Ile-Ife, Osun State, Rt. Rev. Olubunmi Akinlade, has urged the Federal Government to drop the idea of increasing the rate of Value Added Tax by 50 per cent. The bishop said increasing the VAT from its current five per cent to 7.5 per cent would have multiplier economic effects on goods, services and livelihood.
Akinlade, in a statement on Friday, observed that implementing the increase would not be ideal in the light of the current economic situation in the country and the hardship most Nigerians were grappling with. The cleric stated that government at all levels needed to carry out economic and social projects that would impact the life of the citizens. He advised the government to focus on policies that would reduce unemployment and increase economic fortunes of Nigerians. Akinlade said, “I will appeal to government to suspend any increase in VAT as the economic hardship is biting hard. Policies that promote job creation and reduce unemployment should be rigorously pursued. People are hungry, so polices that favour massive food production and distribution at affordable rate must be pursued.” The reverend said when government made job creation a priority, “it will automatically reduce the vices we see in the society,” noting that emphasis should be shifted from white collar jobs to skilled labour. He added, “No matter what happens, skilled manpower is needed. Such a person is an entrepreneur and he or she can also be an employer of labour thereby helping to further reduce unemployment.”
The executive chairman of the Federal Inland Revenue Service (FIRS), Mr. Tunde Fowler has set for the agency a target of N750 billion to be recovered from 55,000 defaulting taxpayers. The money is what millionaire tax debtors are owing and the effort to recover it is coming at a time the government is unveiling plans to woo owners of undeclared foreign assets with amnesty and permanent waiver of criminal prosecution through the Voluntary Offshore Assets Regularization Scheme (VOARS).
Fowler said this while addressing the House of Representatives joint committee on Finance, Appropriations, Aids, Loans and Debt Management, Legislative Budget and Research and National Planning and Economic Development on the 2019/2021 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP). The FIRS chairman told members of the committees that the recent substitution exercise carried out by the service led to the recovery of N23.25 billion. He further told the lawmakers that from the bank accounts substitution exercise, the FIRS used banking information to bring non-compliant taxpayers with N1 billion and above turnover to comply. He explained that the exercise has also been extended to cover those with a turnover of N100 million and above and that currently, about 500 of the millionaire debtors have come forward to pay their taxes in the region of about N24billion. This newspaper is gratified that VOARS will complement the Voluntary Asset Income Declaration Scheme (VAIDS). VOARS is a scheme that gives taxpayers, who have defaulted in the payment of their taxes, a platform to voluntarily declare all offshore assets and foreign- sourced income relating to the preceding 30 years of assessment in exchange for a one-time levy of 35 per cent on all offshore assets in lieu of payment of default taxes amongst other benefits. The scheme is scheduled to run for a 12-month period commencing on October 8, 2018. Similar to the recently concluded VAIDS, this Scheme provides some form of clemency to taxpayers who would take the opportunity to regularize their tax affairs. It is sad that in Nigeria today, the low income earners tend to pay more tax than the high income earners. Many millionaires in the country pay little or no tax at all. The government must continue to make efforts to bring them into the nation’s tax net so as to boost its internally generated revenue. Taxation is an issue that concerns everyone. Widening the tax net would help in improving the process. Nigeria, with an estimated population of about 189 million people, almost half of whom are aged 15 to 64, according to World Bank data, still has one of the world’s lowest tax ratios to Gross Domestic Product (GDP) of six per cent, the lowest among the sub-Saharan countries the International Monetary Fund (IMF), an arm of World Bank, has measured. South Africa has 24.7 per cent. This narrative must change. In contrast, the wealthy are being heavily subjected to taxation in Europe, the United States and Australia. Revenue, Ireland’s tax body, offers a sterling illustration. Periodically, these countries publish a list of defaulters. It is our considered opinion that every Nigerian must pay tax. The FIRS and state revenue agencies must continue to act creatively and firmly in bringing in more people into the tax net. It is unacceptable that millionaires who earn much pay unusually meager tax. Government should intensify policies on progressive taxation, in which case, the richer you get, the more you pay, as is the practice in Europe. We also believe that the move to expand the tax base should be accompanied by liberalizing initiatives to stimulate the economy through private sector-led investment, attracting foreign investment and privatizing state-endowed commercial assets. The current effort to widen the tax net for increased revenue generation must go together with improving the ease of doing business. While paying tax is a necessity, the government must intensify effort to address the genuine concerns of Nigerians who complain that they do not see the impact of the tax they pay on the provision of social infrastructure such as good roads, efficient healthcare system, stable electricity supply and others. Government, at all levels, should let the people see what they are doing with the tax revenue. That will make the expansion of the tax base worthwhile. Looting public funds by government officials, including tax proceeds, make compliance a difficult habit to cultivate by most Nigerians. As part of the move to bring more people into the tax net, the authorities must ensure that cases of tax diversion by public officers are eliminated entirely.
Nigeria is seen generating $13 billion in additional tax revenue if she could digitalise her identification programmes. This is according to a new McKinsey Global Institute report, which claims that high adoption of digital ID with the right principles can help unlock 3 percent economic value equivalent of GDP in advanced economies and as much as 6 percent in emerging economies on average. The report, which offers a framework to understand the potential economic impact of “good” use of digital ID, analyzed nearly 100 ways in which digital ID can be used, with deep dives into seven diverse economies: Nigeria, Ethiopia, Brazil, China, India, the United Kingdom, and the United States.
“We estimate that Nigeria could use digital ID to expand the tax base to include informal income and reduce fraud and errors in tax filing to generate more than $13 billion in additional tax revenue. Nigerians could save 1.8 billion hours annually from efficient services that reduce the need for travel to and from government offices and filing of physical paperwork,” said Fiyinfolu Oladiran, a McKinsey partner. Eyitope Kola-Oyeneyin, Nigerian-based Partner at McKinsey equally said the Digital ID potential for Nigeria is significant and that based on MGI estimates, Nigeria could capture economic value equivalent to 5 to 7 percent of GDP by 2030 from greater formalization, fraud reduction, increased tax revenue, and financial inclusion. “Scaling Digital ID in Nigeria has to be a top priority for enabling inclusive growth,” he said. Around the world, governments and businesses are implementing digital identification programmes with mixed results and adoption levels. Yet when carefully designed, “good” use of digital ID programs can help people participate more fully in their economy and society, which can create enormous economic value and inclusive growth, the report said. “We find that three-quarters of the potential economic value of digital ID could accrue to individuals in Nigeria, making it a powerful key to inclusive growth, while the rest flows to private-sector and government institutions,” said Rogerio Mascarenhas, managing partner of McKinsey’s Nigeria office. He added that the largely informal and self-employed workforce skews the overall benefits of digital ID toward individuals, who could receive 74 percent of the total overall value. He started that Nigeria’s unmet financial needs are significant. 60 percent of the adult population, or about 64.5 million individuals, do not have a bank account and therefore may be cut off from access to credit or the ability to deposit income. “The World Bank found that 18 percent of the unbanked population in Nigeria cited a lack of identification documentation as the primary reason for not opening an account. We estimate that increased lending to individuals and businesses resulting from an expanded deposit base could generate up to $21 billion in additional investment by 2030,” says Amuche Okeke-Agba, a McKinsey partner.
Presidential candidate of the opposition National Democratic Congress (NDC), John Mahama has said his administration will scrap the luxury vehicle tax if it comes to power; if the Akufo-Addo government fails to do so. Describing the levy as an ill-conceived one, he said its introduction has overburdened the ordinary commercial driver whose vehicle possesses the white number plate. He argued that the amount of revenue raised so far is not even enough for the tax to be sustained. Speaking to some drivers during his road safety tour in Accra, Mr. Mahama urged them to exercise restraint as the NDC will not hesitate to abolish the policy.
“Not too long ago, the government introduced the luxury vehicle tax. This tax was not well thought through before it was rolled out. They should have exempted all commercial vehicles. There are commercial vehicles without the yellow plates, but rather white plates yet they carry commercial goods. Once they exceed three litres, they are charged this luxury tax. This has brought untold hardship on some of the drivers especially those who work for the companies and others. ” “Just recently, I heard that government has only been able to raise GHC 25million from the luxury tax if that is the case, then they should abolish it. If they don’t, we the NDC government will abolish it when we come into power,” he added. The government has collected some GH¢21.3 million in taxes from the use of vehicles with engine capacities of 2.9 litres and above between August and December last year, provisional fiscal data on public finances for last year has shown. The amount is GH¢82.7 million or 79.52 per cent below the GH¢104million that was projected to be collected within the period. The projections were contained in the 2018 mid-year budget review. The government expects to rake in at least 300 million cedis from the tax on luxury vehicles by the end of 2019. The tax, which forms part of the new policy measures introduced in the midyear budget review, is to help bridge the gap in revenue for the first half of the year . The figure was disclosed when Parliament passed the four bills approving the taxes introduced by the government.
The Economic and Financial Crimes Commission (EFCC) has begun the recovery of funds from some staff of the Federal Inland Revenue Service (FIRS), who have agreed to return illicit Duty Tour Allowances (DTA) paid into their accounts by the management of the FIRS. Daily Trust learnt yesterday from sources familiar with the investigation that EFCC agents are recovering large sums of money from both the junior and middle-level staff involved in the scam.
It was learnt the EFCC initially discovered that over N2.1 billion was paid as DTA in the salary accounts of forty staff. A source said, “However, proper scrutiny was carried out, after normal salaries and normal DTA was deducted and what was paid to them was N1,060 billion.” It was said a substantial amount is already being recovered from the forty staff in this batch after their arrest and interrogation. About twenty of them were detained but all are now on administrative bail. A source said the EFCC seized all their passports, after committing them to pay back what they illegally received within a timeframe. It was learnt yesterday that the Director of Finance, Mohammed Auta was detained and grilled over the payments. Daily Trust gathered yesterday that the anti-graft agency may arrest the Director FIRS support services group Peter Hena who approved and authorized the payments and the main beneficiary of the scam. Sources said Hena, who was supposed to have returned to Abuja on 6 April, sent in his resignation letter, has also claimed to be sick and in need of medical attention abroad. As Coordinating Director, he has supervisory oversight over the Human Capital Management and Development, Finance and Accounts, Revenue Accounting, Facility, Security and Safety Management and Procurement Departments. It was learnt he authorized the payments despite being on N2 million approval limit. It was alleged that Hena authorizes several N1.9 million payments to a particular account in one day, which makes up the huge figures received by some staff. It was learnt some of the staff received varying amounts as DTA within the period being investigated from 2017 to date and did not travel. A source said amounts ranging from N50 million, N40 million, N101 million and N55 million were found to have been paid into the accounts of the staff. It was also learnt the that EFCC may look into the award of contracts and adherence to procurement processes in the FIRS.
Source: Daily trust
The Tax Appeal Tribunal sitting in Abuja, on Wednesday, fixed May 14 for definite hearing in a suit filed by a company, “M FIFTEEN” Consultants against the Federal Inland Revenue Service (FIRS). The company also dragged the FIRS, before the Tax Appeal Tribunal sitting in Abuja over alleged double taxation. Also joined in the suit are the Independent Electoral Commission (INEC) and the Nigeria Police.
The company, said it was dissatisfied with the FIRS assessments of it’s Tax Liability. The tribunal presided over by Mrs Alice Iriogbe, adjourned after the appellant counsel, Mr Chike Adaka informed the tribunal that his witness took ill and could not be in court. The counsel to FIRS Mr Ade Ogunmola told the tribunal that while the respondent sympathizes with the appellant ‘s witness but objected to what he called ‘sheer display of un seriousness of the appellant
Ogunmola, the counsel ought to have notified both the court and the respondent and there was no medical report against that before the tribunal. He further told the tribunal that in view of that he would ask for a cost of N50, 000 which the tribunal rejected saying that it does not award costs for now. NAN reports that the company specifically said that it was dissatisfied with an intent letter by the FIRS imposing a tax liability of N14. 662 million on it without due consideration of all the material and available facts. The company further stated that the N7. 9 million captured as part of the tax liability have already been deducted at source by the FIRS and the police from the contract sum of the appellant. The company argued that it would amount to double taxation if FIRS expected the appellant to pay same again. It therefore sought the order of the tribunal to declare as null and void, the intent letter by FIRS dated April 7, 2014 . The company also sought an order of the tribunal directing INEC and the Police to show evidence of remittances to FIRS of the sums deducted from the payments made by the appellant in respect of contract executed. The appellant also asked the tribunal to direct that, credit should be given to the appellant in respect of the tax deductions made on payments due to it from the INEC and the Police totaling N7. 9million. The Company further sought an order directing FIRS to issue it a tax clearance certificate which was withheld for the 2006 to 2011 year of assessment. The company further stated that the N7. 9 million captured as part of the tax liability have already been deducted at source by the FIRS and the police from the contract sum of the appellant. The company argued that it would amount to double taxation if FIRS expected the appellant to pay same again. It therefore sought the order of the tribunal to declare as null and void, the intent letter by FIRS dated April 7, 2014. The company also sought an order of the tribunal directing INEC and the Police to show evidence of remittances to FIRS of the sums deducted from the payments made by the appellant in respect of contract executed. The appellant also asked the tribunal to direct that, credit should be given to the appellant in respect of the tax deductions made on payments due to it from the INEC and the Police totaling N7. 9 million. The company further sought an order directing FIRS to issue it a tax clearance certificate which was withheld for the 2006 to 2011 year of assessment.
Source: Nigeria Observer
The controversies dogging the nation’s tax reforms, now with Value Added Tax (VAT) regime, may not achieve anything positive unless a holistic approach is taken and urgently, tax professionals have said. The top tax administrators, at the sensitization seminar on proposed VAT increase and the non-assented housing fund bill, organized by the Chartered Institute of Taxation of Nigeria (CITN), at its headquarters building in Lagos, said tax is a serious issue and must be seen as such.
The President of CITN, Chief Cyril Ede, who was represented by the Vice President, Olajumoke Surplice, admitted that time has come for comprehensive reforms of VAT regime, particularly as it relates to small business and imported items. Noting that such reforms will bring about balance with respect to disposable income of customers and stability of businesses, he also commended the government for refusing assent to National Housing Fund bill. Former Director of Tax Policy at FIRS, Chief Mark Dike, said the current discordant tunes trailing VAT rate are not new but have only shown lack of due process. According to him, the enactment of VAT in 1993 was a struggle and the process of the only recorded hike to 10 per cent and subsequent reversal in a short period was a display of shoddy arrangement. He said that discussions about tax must be inclusive, with professionals and other stakeholders consulted to smoothen the rough edges that must be followed strictly when agreed. “We must get back to the drawing and the same is true of the housing fund bill. The way we are currently going about these issues, we may not make any headway,” he said. Prof. Abiola Sanni, during a panel discussion, described the recent report on planned VAT increase as a moot, as there was no bill to that effect at the National Assembly, which must precede any discussion. For him, there has been inconsistency overtime in both actions and speech by some government officials but warned that any increase in VAT now would be in bad faith. “The best option is to widen the tax net, not increasing the burden now. Granted, there are opportunities in VAT segment, but it is not right at this point,” he said. The panel moderator, Prof Teju Somorin, said her study of over 15 countries, including Ghana, at the point of VAT increment, shows that there is always public outcry, with some of these countries raising their VAT to 30 per cent. But she appealed to government to follow due process and focus mainly on luxury items, while holding a standard rate of five per cent for non-luxury items, as well as broaden the tax base. Another tax administrator, Azeez Olatoye, said he wants a general review of tax processes to identify the challenges against VAT and other taxes, with a view to balancing the interest of all stakeholders. For him, the government must build trust, as it is not presently adding up, citing budget inconsistencies. He said that the country’s debt profile and the huge service bill is discouraging to taxpayers, who already know that the tax proceeds would not end up in development pursuits. He said that downward adjustment of tax rate would encourage more to voluntarily