New Tax regime: Another nightmare for corporate Nigeria?

The Federal Government’s commitment to reform Nigeria’s tax systems has triggered a new wave of apprehension on corporate organizations and wealthy citizens.

The tax fever, which will climax in 2018, is also expected to characterize political and economic direction, as the build up to 2019 General Elections continues, appears to have started manifesting with the Federal Government giving Nigerians

and corporate organizations March 2018 deadline to declare their taxable and offshore assets in their reporting, failure of which would be faced with sanctions.

The FG recently said that she is now in procession of names of 500 Nigerians implicated in tax fraud, could these people be political opponents who have been market for silencing, party faithful that have not played to the rules of corporate players not in support of the government?

Senior Special Assistant on Media and Publicity to the Vice President, Laolu Akande, in a statement, revealed that a list of about 500 Nigerians with property and trusts abroad had been obtained to determine their tax compliance status at home.

He said,“Ad-Hoc Committee of the National Economic Council reported back to the Council that a number of revenue-generating agencies may have significantly under remitted returns to the Federation Account.

“The Council had previously ordered the forensic audit to review remittances of the agencies covering 2010 to May 2015. While Council received an updated interim report today, a final report is awaited next month.

Adeosun however explained that such Nigerians can take advantage of the Voluntary Assets & Income Declaration Scheme, VAIDS, to settle past taxation defaults.

“Letters would soon be going out to these Nigerians, including a number of prominent ones, asking them to take advantage of the tax amnesty in order to avoid prosecution and fines by simply paying up their tax defaults.”

However, while government has been insistent on raising tax revenue through increase in tax in some segments and blockage of leakages through tax avoidance, some stakeholders maintained that tax reduction would aid economic recovery in period of austerity or economic downturn.

It would be recalled that Nigeria’s president on November 7th, 2017, submitted the fg’S 2018 N8.6 trillion budget proposal to the Senate of which he said, that income generated from tax would account for a greater portion of the internally generated revenuer expected to be to fund the budget.

It is expected that the reforms in tax policies expected to boost revenue, will lead to increase in taxes in many sectors, which however runs against expectations in many quarters that reducing tax charges would invariably lead to increase in revenue.

The expected new tax regime is coming shortly after Nigeria’s president had in early August, signed new treaties tax administration, anti-corruption and ratification of tax related agreements.

Part of the agreement signed by Buhari, included “African Tax Administration Forum Agreement on Mutual Assistance in Tax Matters and World Intellectual Property Organization Performances and Phonograms Treaty.”

However, following the delivery of N8.6 trillion 2018 budget proposal to the National Assembly, Minister of Budget and National Planning, Udoma Udoma, giving details of how the budget would be funded, said that tax will play critical role, hence the government realized that inadequate revenue was the greatest challenge towards service delivery to the people.

The minister said discussions were equally ongoing to ensure that all taxable Nigerians and companies complied with the legal requirements to declare income from all sources and remit taxes due to the appropriate authorities.

The minister said the government was determined to increase its revenue target, including raising tax revenue from the current six per cent of gross domestic product to about 15 per cent, to fund the budget in the New Year.

Apart from the tax amnesty programme by the Federal Inland Revenue Service, FIRS, to encourage voluntary payment of tax by Nigerians, the minister said government has adopted other key reform policies to realize its revenue target.

The Lagos Business School (LBS) Faculty and Professor of legal, social and political environment of business, Prof. Olawale Ajai, recently spoke of the need for public reorientation in tax payment.

Ajai said, “it is on policy makers to facilitate regulatory frameworks that would enable economic growth in Nigeria. A reorientation of policy makers.”

He added that business growth should generate economic growth for the nation, which is why citizens should encourage the growth of small scale businesses, adding: “tax administrators is critical to the nation’s economic success and we must collaborate and partner to bring about an enabling environment for local businesses.”

Against the backdrop of increasing tax, tax reform and off shore/onshore taxable assets declaration with deadline fixed for March 2017, experts had earlier argued that instead of raising tax on citizens, taxes should be reduced to generate more revenue.

Doing so, the experts argued would entail, towing he path of taken by former President George Bush of the United States of America (USA), who had to cut tax to boost U.S economy.

Bush, in his first address to Congress, said, “To create economic growth and opportunity, we must put money back into the hands of the people who buy goods and create jobs.”

Even as cross section of Nigerians have argued that Nigeria is not yet in recession to demand a tax cut and increased government spending, findings reveal that tax cut helps put more money in the hands of more people and further lubricates economic activities.

Mr. Femi Awoyemi, a financial analyst And CEO Proshare Financial Services Company, at the inaugural lecture and commissioning of the Centre for Financial Journalism in Lagos, lent his voice to the calls for the Nigerian government to consider tax cut, to put more money in the hands of more citizens.

As a discussant following Professor Akpan Ekpo’s lecture on the theme:’ the Nigerian economy in distress, policy choices for Buhari’s administration’, Awoyemi also joined the call for economic nationalism policy geared towards infrastructure development. Professor Ekpo is the Director, West African Institute for financial and Economy.

Meanwhile, Awoyemi said that he made the call because the country is in a severe economic situation, and tax cut could proffer remedy for the situation.

He said that the people requires tax cuts because where the citizens are not buoyant or not earning money, they would not be positioned to buy more goods and the produce of companies would be heaped in the warehouse.

He argued that when companies are not making sales from the goods produced , they would not have enough funds to pay salaries or even affect its operations and this may lead to job cuts, or outright closure due to lack of income generation.

‘ the necessary thing to do is that if you reduce the tax, you make it possible for more people to increase their earnings and be prepared to pay tax, in this case, more people will be paying tax.”

He said that it would be better for one million people in the country to be paying N100 tax, with the possibility of growth in the number of tax payers while, than 100,000 people paying N500 tax, with the possibility of decrease in the number of tax payers.

But the FG seemed to be getting climbing its ‘proactive’ ladder.

The government, in its revenue drive to meet its recurrent and capital expenditure, is putting up for sale, critical assets like, the grandiose National Arts Theater, Tafwa Balaewa Square, both in Lagos, among other strategies it has embarked upon lately.

Awoyemi said that what is required is to create a tax paying environment for the un-captured eligible tax payers to be in the data base of tax payers irrespective of how low they pay in tax.

He said that through tax cut, the government would bring more people into the tax payment system, while the existing tax payers will also continue to sustain tax payment, increasing revenue even on lower tax rate.

Wth the government’s commitment to enforcing the new tax policy, it is therefore evident that tax evasion strategies through transfer pricing, non- disclosure of offshore assets , has raised new era of endless nightmare for corporate organisations and wealthy Nigeria’s bent on poor asset disclosure in order to evade payment of commensurable tax.

Bonny Amadi