Support the two-year experience of legislative tax reforms and policies

Finance Minister Zainab Ahmed last week in the National Assembly revealed that more responsibilities would be given as Federal Inland Revenue Service (FIRS) in the new 2021 finance bill currently under consideration by legislators.

The minister said there would be an amendment to the Police Trust Fund Law and Nigerian Trust Fund Laws, with the aim of empowering FIRS to collect Nigerian Trust Fund Levies from Nigerian citizens. companies on behalf of the fund itself.

“Currently, in the absence of such a provision, FIRS is unable to start raising on behalf of the fund. In addition, it is a question of rationalizing the collection of taxes and levies from Nigerian companies in accordance with the ease of doing business policy of the President’s administration, ”she began.

In addition, Article 68 (2) of the bill states that FIRS is the main body responsible for administrative assessment, collection, accounting and enforcement of taxes.

These additional responsibilities demonstrate that the current management team of the umbrella tax revenue agency has been proactive and forward thinking in the administration of the new Nigerian tax system.

The Nami-led FIRS leadership resumed exactly two years ago, and the agency managed during that time to reach a reasonable milestone in the country’s fiscal target, despite the economic slowdown caused by the pandemic of covid-19.

This, however, is not unrelated to the strong legislative reforms on the part of the government as well as the dedicated service of the FIRS leadership. After the first year of administration of Nami, the total revenue paid into various FIRS accounts with the CBN at the end of 2020 was N4.95 trillion. This amount shows a slight shortfall from the revenue target for the year, which was 5.07 trillion naira. This is understandable, however, given the general economic depression, volatile exchange rates, the prevailing global economic crises caused by the COVID-19 pandemic and the poor tax culture of the population.

As of November 30, 2021, the Service had collected more than 5.03 trillion naira, or 85% of the national tax target. It plans to reach and even exceed its objective by December 31, 2021. Thus, with the current revision of the finance law, there is no doubt that tax revenues will make it possible in the years to come to make up for the deficit. budget deficit under reasonable conditions.

In December 2019, when the new executive president took office, the 2019 finance bill was already in preparation but had only been adopted by the House of Representatives, while the Senate adopted the bill on 11 December 2019 and presidential assent was given on January 13, 2020.The 2019 finance law entered into force, setting the tone for several other FIRS reform initiatives led by Nami. The new law was a rough amendment to seven different tax laws, namely: the corporate income tax law, the value added tax law, the capital gains tax law , the Stamp Duty Law, the Customs and Excise Law, the Petroleum Profits Tax Law and the Personal Income Tax Law.

Small and medium-sized enterprises have been the biggest beneficiaries of the reforms introduced by the Corporate Income Tax Act (Amendment). More specifically, the amendment divides businesses into three tax categories. They are small, medium and large companies. Businesses with an annual turnover of less than N25 million are exempt from paying corporation tax. Companies with annual turnover between 25 million Naira and 100 million Naira are taxable at 20 percent of taxable profits. Businesses with an annual turnover of 100 million naira or more (large companies) remain taxable at the rate of 30 percent of taxable profits.

This reform intervention recognizes that small and medium-sized enterprises are the main engines of job creation and economic growth. The tax system therefore aims to reduce operating costs, encourage recapitalization and the expansion of activities of small and medium-sized enterprises.

In addition to clarifying some ambiguous provisions of the VAT law, the amendment increased the VAT rate from 5 percent to 7.5 percent. The concomitant reduction in corporate tax rates on the one hand and an increase in the rate of value added tax on the other hand is in line with the national tax policy which aims for a gradual shift from direct taxes to indirect taxes.

As a follow-up measure to strengthen the legal framework, a committee was formed to further examine all relevant tax laws. Following this, a draft law with amendments to the Federal Law on the Establishment of Tax Services, the Law on Value Added Tax and the 2019 Finance Law was prepared and submitted to the National Assembly. (NASS) for further consideration.

While the fear of multiple taxes is still looming and cannot be dismissed with a wave of the hand, tax managers should reassure taxpayers about an efficient and less burdensome strategy to avoid double burdens. The FIRS leadership, probably thinking in this direction, has introduced effective policies to minimize the incidence of double taxation and to further facilitate international trade and investment between Nigeria and the rest of the world. FIRS, in collaboration with the Federal Ministry of Finance, Budget and National Planning, has entered into bilateral / multilateral agreements.

In 2020, the FIRS concluded the negotiation of Double Taxation Avoidance Agreements (ADTA) with Turkey. Negotiations are also at different stages with the following countries: Hong Kong, Saudi Arabia, Cyprus, Iran, Germany, Switzerland, India, Botswana, Japan, Greece, New Jersey and Russia. These will be concluded as soon as the few outstanding issues have been resolved.

Likewise, Nigeria has an active ADTA agreement with 16 countries, which are South Korea, Spain, Sweden, Singapore, France, Mauritius, United Arab Emirates, Qatar, Kenya, Morocco, Ghana, Cameroon, Turkey, Sudan, Gambia and Denmark.

Transfer pricing is another major tax policy issue that FIRS continues to focus on. The management of FIRS has, as part of the follow-up to the introduction of the 2018 Income Tax (Transfer Pricing) regulations, issued demand notes totaling 1.074 billion naira to 222 companies for failing to deposit their transfer pricing statements in accordance with regulatory requirements. . 54 companies paid penalties imposed on them and these amounted to N 47.433 million. At present, the Service is involved in several audits which have the potential to generate substantial income resulting from additional adjustments and evaluations.

The Service also maintained its relations with ATAF, WATAF, CATA and OECD and organized a WATAF workshop on risk management in Bamako, Mali, in June 2020.

Meanwhile, in FY2020, FIRS continued to implement various administrative measures to improve revenue collection in order to meet its target. From the start, the new Executive Chairman identified four cardinal pillars to drive his reform interventions in the area of ​​tax administration. These objectives are: to rebuild the institutional framework of FIRS; Robust collaboration with stakeholders; Build a client-centered institution (taxpayer); Build a data-centric institution and participate in international tax commitments.

Tax managers are committed to developing and strengthening the capacity of FIRS departments and units to execute their mandates over the long term and on a sustainable basis. With this in mind, the Board approved a new structure for the Service on January 17, 2020. The new Organizational Chart is made up of six Groups and 32 Departments, including the Internal Affairs Department which reports directly to the Executive President.

In addition, the segmentation of taxpayers has been reintroduced. The efficiency of the Audit and Investigation services was also reviewed.

The annual corporate plan retreat has been reintroduced and is being held from February 7-8, 2020 on the theme “Repositioning FIRS for efficient service delivery”. The 2020 business plan has been approved by the Executive Chairman of FIRS and presented to headquarters staff.

The Intelligence, Strategic Data Mining & Analysis (ISDMA) department was created to deploy technological tools for analyzing and distilling tax data for a better assessment of taxpayers.

The Tax Incentives Management Department (TIMD) was also established to manage, implement and report on tax incentives provided for by applicable laws and regulations. This service is in particular in charge of the tax affairs of companies / companies benefiting from tax exemptions and holidays. Companies benefiting from pioneer incentives, NGOs, cooperative societies, companies in export processing zones, free zones, oil and gas export processing zones, those engaged in the use of gas in downstream and all others benefiting from tax exemptions are managed by this department to prevent revenue leakage, so that businesses, businesses do not use their status as a cover to earn taxable income and refuse to pay the tax. tax on such income. The leadership led by Muhammad Nami at the dawn of history at FIRS.

Thus, the additional responsibility that could be imposed on FIRS by the 2021 finance bill will be well integrated into the existing administrative framework and will help to rationalize the country’s revenue base.

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