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Redefining tax: Govt, CITN, experts want review of laws, processes

By Chijioke Nelson
18 May 2016   |   1:40 am
From the Presidency, tax institute, financial and manufacturers representatives, have come unanimous conclusion that the nation’s tax laws need review, while the entire processes are also due for a revolutionised reform.


From the Presidency, tax institute, financial and manufacturers representatives, have come unanimous conclusion that the nation’s tax laws need review, while the entire processes are also due for a revolutionised reform.

The conclusions, which were based on the fact that tax potentials in the country are under-utilised, with several challenges besetting collection, assessment and the enlisting of eligible payers, have also become expedient given Nigeria’s falling revenue profile, the uncertainty of its major earner- crude oil, the need to diversify the economy, as well as exploit tax opportunities which became manifest in the wake of Gross Domestic Product (GDP) rebasing.

President Muhammadu Buhari, at the 18th yearly tax conference of the Chartered Institute of Taxation of Nigeria (CITN), said the theme “Fiscal Challenges and Opportunities of the Nigerian Economy,” is indeed relevant and timely as it is coming barely a week after the assent to the 2016 budget, which is the fulcrum of an ambitious strategy to reset the Nigerian economy.

The President, who was represented by the Minister of Finance, Mrs. Kemi Adeosun, lamented the low level of tax to GDP, currently estimated at seven per cent, saying it is a key factor in the country’s financial woes and symptom of the fundamental over-reliance on oil now manifesting.

He agreed that previous conferences have set tone for clear fiscal priorities needed to underpin the current economic agenda in a concise manner, recollecting that the institute in 2015, canvassed the redrafting of the tax laws and in particular to amend the areas of the Companies Income Tax that impose double taxation.

Others are: to remove the minimum tax requirement that potentially forces loss making companies to pay tax from capital; renegotiate tax treaties that constituted to unwarranted advantages and give aways; establish a tax court and improve legal backing for the Joint Tax Board; create fiscal incentives for investment in oil and gas and to enhance local refining capacity by revitalizing our refineries; enhance financial control in the public sector; and widen the tax base.

He hinted that era of non-tax compliance by government contractors may be over as the Federal Government is now determined to enforce “no tax, no payment” on any company, which compliance status is in doubt in the books of the Federal Inland Revenue Service.

Besides, government will collect every dime related to tax, as it embarks on tax reform that is driven by technology, in efforts to widen the base and enthrone a regime of efficiency in collection, as his administration has strengthened control and budget monitoring processes to ensure that the people gets value for every kobo.

The President assured that the country would certainly recover with the implementation of the budget that was scripted to reset the economy.

Taking the responsibility for increased awareness on the need for a robust tax economy that is capable of generating the needed revenue for development, the Chartered Institute of Taxation of Nigeria (CITN) said it has elected to sustain its single largest gathering of tax professionals locally and internationally yearly.

The President of the institute, Dr. Olateju Somorin, said the yearly conference affords stakeholders the opportunity to share ideas, forge partnership, brainstorm on emerging and topical issues as they relate to tax profession and the environment, as well as mobilise leaders in the fiscal space to find enduring solutions to the issues.
Somorin pointed out that the huge gap between tax collection and the quantum left uncollected year after year must be addressed if the nation must make meaningful and sustainable progress in the face of parlous infrastructure across the country.

“A review of some of the tax laws has become overdue. Moreover, sustainable economic growth cannot be attained with only tax reform, without the review of the obsolete laws and tax rates in consonance with macro economic objectives and efficient tax administration machinery.

“Despite growth in terms of GDP, our tax ratio has only managed to record seven per cent, compared to 15.3 per cent for Cote D’Ivoire; 15.4 per cent Benin Republic; 15.8 per cent, Egypt; 18.2 per cent, Cameroun; 20.8 per cent, Ghana; 23.2 per cent, Cape Verde; and 26.9 per cent, South Africa.

“Our tax system must be well structured such that the framework of tax exemptions, tax incentives and waivers are streamlined,” she said.

Meanwhile, a new vista for increased revenue for the Federal and state governments may have been assured as well as diversified sources, with efficient administration of property tax and broadening of the Value Added Tax base emerging as top choices.

However, for enhanced compliance to tax laws, experts at the tax conference said that government must now be responsible in the management of public fund, while the leaders must also take the lead in tax payment.

But the Director-General of the Lagos Chamber of Commerce and Industry, Muda Yusuf, noted that transparency in the use of public fund encourages the tax payers to voluntarily comply.

He lamented the dire straight in which the state governments have found themselves because of the plummeted revenue profile, saying that property tax remains a veritable source of revenue for them, which proceeds must be used in the development of the areas they are collected.

With N682 billion cumulative Internally Generated Revenue in 2015 by states, against N2.69 trillion total budgets of the states, representing a paltry 18 per cent, he said their fiscal stability will remain threatened unless they develop more sources of earnings.

Also, a tax professional, Dr. Mark Abani, called on the leadership to reflect the change that is currently being preached, while and tax administrators must set the pace in paying VAT and mandating their clients to do so too.

For government, he canvassed continuous engagement and capacity building for taxpayers and stakeholders, as opposed to crisis management approach, which typifies what tax officers are currently doing.

Stakeholders include individuals, community leaders, groups and entities that contribute to and derive benefits from the Nigerian Tax system, as every stakeholder has a crucial role to play in the country’s tax system.

“In many developing countries, there is little public information or debate about taxation – even at election time. Wealthy and influential people evade tax, and public attitudes to taxation are often overwhelmingly negative.

“A growing body of research shows that taxation matters for governance. If governments do not depend on taxpayers for revenue, they have little need to be accountable and responsive to citizens. Likewise, if taxpayers see governments wasting their money or believe that others are unfairly avoiding tax, they will be reluctant to pay,” he said.

To build the needed engagement that is sustainable, there must be a set vision and level of ambition, which is exemplified in the National Tax Policy; and review of previous engagement that is very poor presently.

According to him, stakeholder engagement implies a willingness to listen; to discuss issues of interest to stakeholders and the organisation has to be prepared to consider changing what its aims to achieve and how it operates as a result of the stakeholder engagement

“Public engagement is about bringing on board the widest possible diversity of actors and it is different from simple ‘communication’ or ‘consultation’. It requires taking on board taxpayers reactions and wishes and accommodating them while attaining the required goal of increased tax revenues at the lowest cost.

“Widespread tax evasion leads to a narrow taxpayer base and reduced willingness to pay. There is evidence that better-off people and companies negotiate private bargains with the tax authorities, leaving them with less incentive to press for accountability or reform.

“Corruption and a lack of transparency in public spending further strengthens people’s reluctance to pay tax, while coercive and arbitrary tax collection – often a problem in rural areas – makes people resentful of paying taxes,” he said.

Government must be in continuous communications of what it intends to do and the ones it has done, rather than silence, while mandating the leaders to lead by example in tax compliance. “We want to see the President, lawmakers, ministers and other political appointees pay tax and make their declarations public.This was supposed to happen in 2012, bu has it?,” he added.