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FIRS introduces presumptive tax to enlarge net

By Mathias Okwe (Assistant Business Editor), Abuja
26 May 2015   |   4:35 am
AS the nation reels from its revenue drop in crude oil, the new management at the Federal Inland Revenue Service (FIRS) has flagged off a number of initiatives to bolster tax revenue to shore up the country’s finances
Samuel Sunday Ogungbesan

Samuel Sunday Ogungbesan,

• Seeks enforcement of TIN for accounts opening
• Stakeholders want review of pioneer status in oil sector 

AS the nation reels from its revenue drop in crude oil, the new management at the Federal Inland Revenue Service (FIRS) has flagged off a number of initiatives to bolster tax revenue to shore up the country’s finances.

The initiatives, according to FIRS Acting Chairman, Mr. Samuel Sunday Ogungbesan, includes the introduction of a presumptive tax regime, which relaxes some tax filing requirements such as firms’ audited account and sundry condition, but tax returns based on presumption, a strategy that is flexible and capable of promoting voluntary tax compliance.

Another initiative is the collaboration with the Central Bank of Nigeria (CBN) to compel banks to make the Tax Identification Number (TIN) a mandatory requirement for companies opening accounts, which will enable the agency get accurate information on tax payers and their revenue profile, as a measure against tax evasion. The two initiatives are nearing approval for implementation.

The presumptive tax regime proposal has already been approved by the Federal Ministry of Finance and is being gazetted and sensitisation ongoing across the six geopolitical zones.

Similarly, discussions on the enforcement of TIN for banking transactions with the CBN is at advanced stage, as banks were already cooperating with FIRS on tax payers’ information even before a formal policy directive.

Ogungbesan further allayed fears that crude oil price slump would be a death knell on Nigeria, as stakeholders in the petroleum industry have called for the review of the pioneer status tax regime to address the abuses inherent in it, which they felt was rubbing the nation of several billions of naira in taxes.

According to him, “presumptive tax is another tax regime that often times will not make reference to the audited accounts of companies because we believe that most of these people are in the informal sector, where they do not keep account books.

“We have gone to the minister to gazette a regulation and she has advised that we need to do sensitisation, which we have done sufficiently and have discussed with all professional bodies on what we intend to do. We have given the document to states’ revenue chairman to take back to their people and discuss.

“As soon as we have the regulation, we are ready to go, the rest is to clean up the mess in the system and afford us transparency to strengthen the resolve of our staff to do more work. What we are doing in the area of audit review is debt management and taxpayers’ services.

All these would enable us provide improved services to our taxpayers and also deliver higher compliance level. “

All I want is more people filing their returns, paying taxes towards economic development and ensuring that they understand their rights. We are there to provide them support where ignorance would have prevailed. Now they have the information and they cannot say they don’t know.”

Enforcement of TIN On TIN, the FIRS chief said: “Today, the banks are giving us information on people who are opening accounts. We realised that some information are not often complete, that is why we said we would beckon on the CBN, but on our own, we have also engaged the banks.

“For example, they shouldn’t take any money from those paying to them if TIN has not been provided; that is working and they are complying, but we are taking it further because the power to open an account or not is not that of FIRS but the CBN’s.

That is why we are beckoning on CBN because the rule has not been given to them yet, we are just talking informally with the bankers.

“By the way, why would they even deal with a company that has no TIN? We keep reminding them that they must demand for TIN before they open an account at all. These initiatives are interventions on our part, just to ensure that we get everybody to contribute towards economic development.

“It’s a strategy to bring us closer to them, a strategy that addresses the issue of non-compliance. I know these guys will not comply and if they are not going to comply, should I be jailing them?

This is an alternative to jailing them, an alternative to increasing the cost of doing business.

“If I force them and they go and prepare an account when I know they had never kept any records, what is disclosed here is non-disclosure interest.

The auditors will just close their eyes and prepare returns for them and they will bring it to the office and I will deploy my officers to go and examine the returns. “But why will I be examining the results that I know is not correct, it is waste of time and resources. Just transparently state what you have made and lets move on, it pays off at the end of the day.

However, the objective is to bring them into the tax net and we will promote them to a level where they will voluntarily be filing returns on their own much better.”

Pioneer status in oil sector Meanwhile, a stakeholders discussion on the Petroleum Industry Bill (PIB) has recommended some critical implementation keys to ensure that the nation’s oil-based communities benefit from oil mineral resources in the event that the bill is eventually passed.

In a communiqué by Dr. Persuo Dema at the end of the roundtable on “Nigeria Energy Policy Framework: Expected Impact of Petroleum Industry Bill,” organised by the Centre for Petroleum and Mineral Law Research, the forum concluded that there was need to unbundle the fiscal sections of the PIB to make it a stand-alone legislation.

More appropriately, the fiscal section of PIB may be an amendment and inserted in the existing Petroleum Profit Tax Act (PPTA).

It also noted the duplicity and complexity of the tax regimes in the petroleum industry, stressing that the PIB has not addressed taxation holistically and specifically for the growth of the industry and smooth operations of its players.

It recommended that the Nigerian National Petroleum Corporation (NNPC) must be unbundled and commercialised as a true private enterprise with no government’s day-to-day interference, noting that the downstream petroleum sector must be properly deregulated to ensure availability of Premium Motor Spirit (PMS) and other refined petroleum products.

It further warned that the PIB must not just promote openness and transparency in the nation’s oil and gas industry in the letters of the bill but also in its spirit of implementation and enforcement.

On the pioneer status, the roundtable noted that the issue has been controversial as it pertains to its utilisation by the upstream petroleum companies.

Therefore, it stressed the need to address clearly who qualifies for pioneer status and its extension to the upstream petroleum sector. It also noted that pioneer status ought to be for Nigerian companies that need a hand-up in growth in the highly competitive petroleum industry.

Another tool for the growth of the industry, it observed, is the partnership between Nigerian companies and states and other sovereign states or companies to develop the nation’s natural resources.

More so, it observed that the licensing and contractual synergies deployed in maximizing the natural resources between the sovereign states that share territorial waters or geographical boundaries, as in the case of Nigeria-Sao Tome Principe JDA.

On international trade, it noted the local content rationale for PIB but also addressed the encouragement of Foreign Direct Investment (FDI) by creating economic space for foreign players to invest in the industry.

Also, it noted that in a global economy such as the petroleum industry, Nigerians cannot afford to close its doors to capital and credits that foreigners may invest in the industry for its effective growth.

Discussants included the Chairman, House of Representatives Committee on Justice, Ali Ahmed, the Legal Adviser, Nigeria-Sao Tome and Principe JDA, Ahmed Yabo, President, Chartered Institute of Taxation of Nigeria (CITN), represented by the Chairman, Oil and Gas Faculty of CITN, Azeez Alatoye, among others.