₦airaland Forum

According to him, the carbon tax policy is in line with the recently approved Energy Transition Plan, as part of the Climate Change Act.

President Muhammadu Buhari had approved the Energy Transition Plan, to be driven by the NCCC, in accordance with the Climate Change Act 2021.

But according to the NCCC boss, the agency had obtained approval to initiate key deliverables in the Climate Change Act, including establishing a carbon budget for the country.

“That is to develop a framework for a carbon tax system in Nigeria. It will also look at where projects are being implemented in the country to reduce overall carbon or greenhouse gas emissions.”

The harvest of these emissions reduction are normally contained in what we call emissions reduction certificate, which can be translated into carbon credit and then sold to potential buyers within and outside the country” he said.

He disclosed that the Council also instructed the Secretariat to develop the framework for carbon trading and also to develop the framework for establishing the climate change fund for Nigeria.

This, he said, would serve as the main source of revenue and inflow of funds to be used for running of the council.

Dahiru said the funds would also be used to undertake projects to help Nigeria fulfill all its obligations under the nationally determined contributions, as well as the net zero target of 2016.

Said he “The President also endorsed the Council as the Designated National Authority for the United Nations Framework Convention on Climate Change (UNFCCC) and the DG, NCCC as the UNFCCC National Focal Point, in line with the Climate Change Act 2021,” he added.

On gas flaring, Dahiru said part of the Council’s mandate is the implementation of the energy transition plan, which is the first among many African countries, predicated on the use of natural gas as the transition fuel for Nigeria as the transition energy source.

We know that what has been flared is actually natural gas. So, we also know that one of the added advantages that the energy transition plan is going to have is to help close the energy, power or electricity gap that we are experiencing in the country.

“We are going to use the energy transition plan as the main launchpad for capturing the gas needed.

If you take the population of Nigeria, which is over 200 million, and we are already experiencing shortages in terms of electricity, and utilising this gas for even domestic use alone is something that is going to be a big positive. So, the government is pursuing the implementation of this ETP as a very important project that will have multiple benefits, including reducing the energy gap.”

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The Panel led by Obehi Odiase-Alegimenlen held that the Federal Inland Revenue Service has proved its case in line with the Summary Appeal Procedure.

From facts, the Appellant- Federal Inland Revenue Service had notified the NDDC of tax liability of N28,798,494,924.29k (Twenty Eight Billion, Seven Hundred and Ninety-Eight Million, Four Hundred and Ninety-Four Thousand, Nine Hundred and Twenty-Four Naira, Twenty Nine Kobo only) resulting from a tax investigation exercise which the Respondent did not object or challenge but rather contested and requested for the waiver of the Interest and the penalties and made a commitment to pay ?100,000,000.00 (One Hundred Million Naira) monthly instalment payment to offset the total liability.

Consequently, the NDDC recomputed its liability and netting off all the remittances it has made from the above said sum and arriving at a liability of ?20,338,795,939.00 (Twenty Billion, Three Hundred and Thirty-Eight Million, Seven Hundred and Ninety-Five Thousand, Nine Hundred and Thirty-Nine Naira only).

The Appellant- FIRS sought an Order of the Tribunal declaring that the failure/refusal and/or neglect of the Respondent to pay the balance of Withholding Tax (WHT) and VAT Tax liability in the sum of ?25,498,494,924.29k (Twenty-Five Billion, Four Hundred and Ninety-Eight Million, Four Hundred and Ninety-Four Thousand, Nine Hundred and Twenty-Five Naira, Twenty Nine Kobo only) is in violation of FIRS Establishment Act, Company Income Tax Act and Value Added Tax Act.

Likewise the sum of ?500,000,000.00 (Five Hundred Million Naira) only as general damages for non-payment of the assessed tax despite repeated demand.

In response, the Respondent- NDDC averred that the outstanding balance and the sum stated in the FIRS’s Notice of Summary Appeal Procedure is not a liquidated sum of money and it accepted to pay the FIRS ?7,000,000,000.00 (Seven Billion Naira only) and urged the Tribunal to transfer the balance of N18,798,494,924.00 (Eighteen Billion, Seven Hundred and Ninety-Eight Million, Four Hundred and Ninety-Four Thousand, Nine Hundred and Twenty-Four Naira, Twenty Nine Kobo only) to the general cause list.

In opposition, the FIRS submitted that the amount has become a debt or liquidated sum and can be resolved through the Summary Appeal Procedure, and urged the tribunal to grant the reliefs sought.

In a well-considered judgment, the tribunal led by Hon. Prof. Obehi Odiase-Alegimenlen as Chairman, Hon Dr. Ala-Peters David, Hon. Mrs. Hilda Ofure Ozoh, Hon. Barr. Ajoku Vitalis Friday and Hon. Prof. Olatunde Julius Otusanya as members held that the sum of ?23,038,795,939.00 (Twenty-Three Billion, Thirty-Eight Million, Seven Hundred and Ninety-Five Thousand, Nine Hundred and Thirty-Nine Naira only) consented to by the Respondent and the ?3,300,000,000.00 (Three Billion, Three Hundred Million Naira only) remittances agreed by both parties are no longer in contest, and the balance of N20,338,795,939.00 (Twenty Billion, Three Hundred & Thirty-Eight Million, Seven Hundred and Ninety-Five Thousand, Nine Hundred and Thirty-Nine Naira only) has become a debt or liquidated sum that is to be resolved summarily through the Summary Appeal Procedure.

“The question to be asked is on what basis did the Respondent arrived at that ?7,000,000,000.00 (Seven Billion Naira only) it is hastily agreeing after previously accepting to monthly liquidate the actual accessed liability of ?23,038,795,939.00 (Twenty-Three Billion, Thirty-Eight Million, Seven Hundred and Ninety-Five Thousand, Nine Hundred and Thirty-Nine Naira only) which it has also complied with remittances to the tune of ?3,300,000,000.00 (Three Billion, Three Hundred Million Naira only). It is the position of the law that you cannot both appropriate and reprobate.

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The Federal Government has budgeted N5.51tn for tax expenditures in 2023,

This was according to the 2023 fiscal framework document obtained by our correspondent.

According to Tax Foundation, tax expenditures are a departure from the “normal” tax code that lowers the tax burden of individuals or businesses, through an exemption, deduction, credit, or preferential rate.

The expenditures can result in significant revenue losses to the government.

Wikipedia also describes tax expenditures as government revenue losses from tax exclusions, exemptions, deductions, credits, deferrals, and preferential tax rates.

The tax expenditures in the 2023 budget covers Companies Income Tax, Value Added Tax, Customs Duties, Imports Value Added Tax, Petroleum Profits Tax and Road Infrastructure Tax Credit Scheme.

The N5.51tn budgeted for 2023 is 22.07 per cent lesser than the 7.07tn budgeted for 2022.

A breakdown showed that in 2022, the tax expenditure budget was N658.08bn for Companies Income Tax, N4.97tn for Value Added Tax, N792bn for Customs Duties, N237.6bn for Imports Value Added Tax, N371.47bn for Petroleum Profits Tax and N44.26bn for Road Infrastructure Tax Credit Scheme.

In 2023, the tax expenditure budget was N789.7bn for Companies Income Tax, N3.13tn for Value Added Tax, N871.2bn for Customs Duties, N261.36bn for Imports Value Added Tax, N408.62bn for Petroleum Profits Tax and N45.26bn for Road Infrastructure Tax Credit Scheme.

Based on the breakdown, the decrease in tax expenditure only applies to VAT as others recorded an increase.

This occurred as the Federal Government plans to introduce more sin taxes and cut down on tax incentives in 2023 through the proposed 2022 Finance Bill.

The Federal Government has also proposed the suspension of tax relief and rebates being granted to companies established in locations lacking public infrastructure, that are providing electricity, water and other amenities for themselves.

Recently reported that the Federal Government gave tax reliefs and concessions valued at N16.76tn to large companies between 2019 and 2021.

As of the end of 2021, 46 companies had benefitted from various tax incentives and duty waiver schemes while the requests of 186 companies were still pending.

The Managing Director/Chief Executive Officer of Cowry Asset Management Limited, Mr Johnson Chukwu, said that introducing new taxes and cutting down some tax incentives might negatively affect manufacturers and consumers in Nigeria.

He said, “We could see a situation where the manufacturers are unable to pass on those costs and absorb the costs, which will reduce their profitability and even the appetite for further investments. If they are able to pass those costs to consumers, this will be a difficult situation because of the existing weak purchasing power.”

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Nigerians have been urged to look at the positive contribution of taxes to the economic advancement of the country and meet their tax obligations as it provides the major source of revenue for the government to meet the infrastructural needs of the country.

Johannes Oluwatobi Wajuola, the Special Assistant on media & communications to the executive chairman, Federal Inland Revenue Service (FIRS) gave the charge at a one-day stakeholder engagement with media practitioners on FIRS tax processes held on Friday in Abuja.

He explained that the Service had automated it administrative and operational processes to boost tax revenue, adding that the stakeholders engagement was necessitated by the need to raise more awareness on how such revenue contribute positively to national development.

He explained that even when government takes a loan to fund budget deficits, such loans will be paid back with revenues generated from taxes.

Furthermore, he said there is no way government will be able to provide quality public services, such as healthcare and education, without enough revenue from taxes.

The Special Assistant said tax is a social contract between the government and the governed, saying that when citizens pay their taxes, they have legal rights to hold the government to account on how revenue from tax are spent

Earlier, the lead paper presenter, Mr. Michael Oche who is the Group News Editor, Nigerian Pilot newspapers noted that revenue generated by the FIRS has been helping federal, states and local governments to meet their day-to-day obligations.

He said although, “FAAC is however not the only source of revenue for states and the local governments as they also have internally generated revenue (IGR). Unfortunately, between 2017 and 2020, most states have not made IGR that match their FAAC revenues, which essentially means most states in Nigeria are dependent on the central pool for the running of their states.”

“Tax avoidance and evasion reduces the revenue that expected to accrue to government from a calculated number of persons already covered in the tax net. This in turn affects the economy. The country becomes cash strapped and restrained from carrying out what is expected of it for the benefits of its citizen. Then the need to borrow huge sums of money from other big nations to provide amenities amongst other things will arise. The continuous generation of low revenue hinders the country from being able to pay back her debts and the consequences fall back on the poor who depend on the Government for everything.”

Oche also delved into the various tax incentives and intervention such as the Road Infrastructure tax credit scheme, hailing it as one of the best interventions so far introduced by the current administration to accelerate the process of road construction across the country.

He also said the Higher education tax (TETFUND) which is being administered by FIRS has helped to fund numerous projects in the tertiary education system.

Speaking on the role of media in boosting tax compliance, he maintained, it is important that media highlights how taxes are spent and distributed, adding that showing taxpayers the social utility of taxes can help change their perceptions about tax, which too often emphasize the costs while dismissing the benefits.

He said, “Media report bad news at a pace that does not mirror reality, thereby discourages compliance.

“Providing taxpayers with factual information about the use of tax revenues may increase self-reporting and tax compliance. Reporting news stories basically focusing on successful public projects funded with tax revenues, reporting evidence of how tax revenues increase public welfare. Basically, when taxpayers are exposed to positive news on the use of tax revenues, they are more likely to pay their taxes correctly.”

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Ogun State Government, through its Internal Revenue Service (OGIRS), has extended the filing of 2022 annual returns by two weeks from February 1, to 14, to accede to the plea of some employers of labour that cannot meet up with the stipulated deadline.
A statement by the Executive Chairman, OGIRS, Mr. Olugbenga Olaleye, said employers of labour in the state and employers of labour outside

The state with Ogun State residents in both public and private organisations were obliged to file their Pay As You Earn (PAYE) Tax Returns for
2022 on or before January 31, 2023.

He said any employer of labour who contravened Section 81 (1-3) of Personal Income Tax Act 2011 (as amended) and Paragraph 10 of 2002 PAYE Regulation that supported the exercise would be liable on conviction to a penalty of N500,000 for corporate body and N50,000 for an individual organisation.

Olaleye enjoined employers of labour, who have not filed the 2022 annual returns, to utilise the opportunity provided by the extension and do the needful by visiting the OGIRS website, ogirs.ogunstate.gov.ng on or before February 14, to avoid penalty.

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Lagos State Governor, Babajide Sanwo-Olu, has said that collaboration between tax authorities will help not only to increase revenue but also help check evasion in the country.

He said this, yesterday, in Lagos, at the Memorandum of Understanding (MoU) signing between the Federal Inland Revenue Service (FIRS) and Lagos State Inland Revenue Service (LIRS) to deepen tax collection and check tax evasion.

The governor also said that collaborative efforts would help the government to be more responsive to the welfare needs of its citizens.

According to Sanwo-Olu, the collaboration is to support the tax system in achieving its mission and vision, and, by so doing, increase revenue generation and service to taxpayers’.

He said it would also help to eliminate bottlenecks and leakages in the tax system, which constitute significant drain on government revenue and a challenge to efficient collection as well as utilisation of revenue.

The collaboration, The Guardian gathered, became necessary following government’s inability to have readily available statistics on various aspects of taxation in Nigeria.

At the occasion, the Minister of State, Budget and National Planning, Clem Agba, said the most important aspect of the collaboration was the need to bring potential taxpayers out of their hiding places and make sure they were properly profiled to play their role in the social contract.
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Lagos State government has sealed a bilateral agreement with the federal government to harmonise tax administration, raise system efficiency and proffer solution to challenges of multiple taxation.

Governor Babajide Sanwo-Olu, yesterday, presided over a ceremony where the Federal Inland Revenue Service (FIRS) and Lagos State Inland Revenue Service (LIRS) signed a memorandum of understanding (MoU) to establish a joint tax audit system that would address duplication of efforts and facilitate exchange of data that are relevant to enforcement of extant tax laws.

According to a statement, the Minister of State for Finance, Mr. Clem Agba, witnessed the agreement signing event held the State House in Marina, which also had Commissioner for Finance, Dr. Rabiu Olowo; Lagos Attorney General, Mr. Moyosore Onigbanjo; Commissioner for Economic Planning and Budget, Sam Egube, and Commissioner for Information and Strategy, Mr. Gbenga Omotoso, in attendance.

Aside from offering joint jurisdiction in tax audit and bringing about an integrated system of tax compliance, the scope of the MoU also empowered both tax authorities to exchange information sourced under International Tax Treaties in line with global protocols, while creating a common tax collection platform to eliminate double taxation.

Sanwo-Olu described the collaboration as “epoch-making”, noting that the conversation for the harmonisation of the two agencies’ mandates started about a year ago, based on the need to forge a common front in widening the tax net to raise the country’s tax to GDP ratio.

The governor observed that Nigeria had maintained an unimpressive tax to GDP ratio of between 6 to 8 per cent, despite the yearly record-breaking turnovers by both FIRS and LIRS.

This, he said, has mounted pressure on the nation’s resources and created an imbalance in Government’s expenditure.

Sanwo-Olu said Nigeria must operate at the same level with other nations within sub-Saharan Africa doing between 14 and 15 per cent in tax to GDP ratio in order to support the Government’s development programmes and improve accountability.

He said: “We have just witnessed an epoch-making ceremony between the Federal Inland Revenue Service and Lagos Inland Revenue Service. This collaboration did not just happen by chance; it is a conversation we started about a year ago with the chairman of FIRS when both parties reviewed their successes and limitations.

“It was clear there was a need for a relationship to be consummated. Both FIRS and LIRS have been breaking records of their tax collection and administration yearly, but this is not enough. We have an unimpressive tax to GDP ratio, which ranges between six and eight per cent; this is totally unacceptable.

“Studies have shown that there would be better service delivery to the citizens and improvement in efficiency of tax collection when the two agencies work together. The cost of tax collection would be reduced, we would see better customer satisfaction and more resources would be generated for the government to deliver more dividends of democracy.

“For us as a state, we are humble by this collaborative effort and we believe our citizens will be the ultimate beneficiaries of this initiative. The MoU is in the best interest of the public, as it affirms the reason why we need to come together and strengthen the cordial working relationship between the two agencies.”

Sanwo-Olu said the bilateral agreement was initiated not to overburden tax-paying citizens, stressing that the objective was to widen the tax base and bring more people to equitability. With a sustainable tax administration system, the Governor said more resources would accrue to the Government to reduce social burden and take care of the vulnerable.

The governor observed that the sizes of Lagos’s budget were significantly lesser than what the State should be appropriating. He said the market study indicated a N5 trillion budget benchmark for the State, given the size of the State economy’s GDP. With the collaborative effort, Sanwo-Olu said Lagos may have been on the right track to raise its budget level to what it should be.

Agba said the dwindling oil revenue necessitated the need to expand the nation’s tax base to fund development projects. The minister said duplication of efforts by both agencies would lower the efficiency of both Lagos and Federal governments in resource generation, while limiting both parties to collect tax.

The collaboration, the minister said, would not short-change each party, but rather bolster the parties to raise finance to bridge infrastructure gap in their respective domains.

On his part, FIRS chairman, Mr. Mohammed Nami, said the MoU would help both agencies to build capacity in respective areas of specialisation while helping Lagos and Federal governments to raise revenues for projects and development programmes.

LIRS chairman, Mr. Ayo Subair, said the collaboration would bring about quick solutions to tax disputes and incidents, thereby creating seamless reconciliation of issues. He listed other expectations to include reduced administration costs for both tax authorities and the elimination of hiding places for recalcitrant taxable persons and entities.

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Chairman of the Federal Inland Revenue Service Muhammad Nami, has stated that his recognition by the LEADERSHIP Group as the Newspaper’s Public Service Person of the Year 2022 is a morale booster for the service to do more.

Mr. Nami stated this while speaking to journalists after receiving the award at the 14th edition of the LEADERSHIP Annual Conference and Awards, held at the International Conference Centre, Abuja on Tuesday.

“We feel honoured to receive this award, and in fact feel more indebted to Nigerians to do better in the years to come,” he noted.

“We are grateful to the media, and most especially the LEADERSHIP Newspaper for finding us worthy of this honour.

“Permit me to dedicate this Award to the FIRS family, and rename it as ‘the LEADERSHIP Public Institution of the Year Award 2022’—not Muhammad Nami’s. This Award is the result of a collective effort. It is because of team work that we have been able to achieve what we have done at the FIRS.”

The FIRS boss stated that the Award was a recognition for the reforms that the Service had carried out, and their consequent results.

“We have carried out so many reforms that have brought us to this proud moment: we have rebuilt the institutional structure of the Service; we have ensured we carry our taxpayers along; we have created an environment for ease of tax payment; we have deployed big data in our operations; we have taken our stakeholders—including the media, seriously; among many others.

“When we came on board, we met a Service that was collecting tax revenue within the region of 5 trillion for a period of nine years. In 2021 we broke that jinx, and crossed over the 6-trillion Naira mark. We did not rest on our oars, in 2022, by sheer determination and collective effort we raked in N10.1 trillion in tax revenue—the highest sum in our nation’s history.”

Speaking on the prospects for the year 2023, Mr. Muhammad Nami stated that the FIRS would do everything within its means to ensure that government does not lack the needed resources to cater for the needs of the Nigerian people.

“It is not easy to collect taxes. I believe that after the issue of tackling insecurity, the second most difficult task for our government is to collect taxes. But we will continue to appeal to Nigerians to pay their taxes, and help them understand that without taxes, salaries cannot be paid; without taxes, roads cannot be built; without taxes our lives and properties cannot be secured.

“I want to assure Nigerians that we would do everything within our means to ensure that the governments at the three tiers are funded to provide these services and needs to the Nigerian people.

“We have already commenced the journey to do better, well before the new year. We have appointed telecommunication companies and deposit money banks to act as agents of VAT collection for us. They would deduct VAT at source from their Contractors and, or Service providers, and remit same to us.

“Also, we are extending our collaboration further, beyond local local stakeholders and engaging with the international community to ensure that we have seamless flow of information required for tax administration.

“We would also work tirelessly to ensure that we improve our automation so that we are able to serve our taxpayers better than previous years.”

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FINANCE

For a nation with serious revenue challenges like Nigeria, the N10.1 trillion tax collection by the Federal Inland Revenue Service for 2022 is not a mean feat. However, from the experience of the FIRS, it is crystal clear that Nigeria has what it takes to raise the bar of revenue collection if it’s ready to put its house in order, writes Festus Akanbi

It is no longer news that the Federal Inland Revenue Service (FIRS) has remained the goose that lays the golden eggs in Nigeria amidst the colossal failure of the oil proceeds to meet the country’s growing expenditure over the years.


It is also a fact that the FIRS has been consistent with a legacy of good performance, a feat which its chairman and chief executive Mr. Muhammed Nami proudly attributed to a combination of sheer determination on the part of the staff to support the economy and the collective desire to meet the yearly revenue targets.

So, it was with a deep sense of fulfilment that Nami, recently announced the N10.1 trillion tax revenue generated by the agency in 2022.

Culture of Performance

In 2021, the revenue service had collected a total of N6.405 trillion in both oil (N2.008 trillion) and non-oil (N4.396 trillion) revenues as against a target of N6.401 trillion.

For its 2020’s operation, the FIRS collected N4,952,243,711,728.37. The service explained that the landmark achievement represents approximately 98% of the national tax target of N5. 076 trillion set for the FIRS by the federal government.19 Jan 2021.


As it is, the 2022 revenue represents the highest tax collection ever recorded in the history of the service and any other revenue agency in the country but it falls short of the N10.44 trillion target for the year under review.

Missing the Projection

Although the latest figure is unprecedented in the history of tax collection in Nigeria, the FIRS chairman lamented that his organisation’s effort was hampered by a chain of debilitating factors which includes a series of unresolved court cases, the regime of tax waivers and government influence, among others.

Nami said the service would have surpassed its projection for 2022, but for the various tax incentives granted under the respective laws, which amounted to N1.81 trillion. He added that this was not part of the total tax receipt for the year under review.


Nami also said political interest and distractions, including litigations against the service, hindered its tax collection drive last year.

He said, “We would have done better, but for several issues, some of which are political and very sensitive to discuss in the public domain.”

It is absurd that the same federal government which has been lamenting a general revenue shortfall could be fingered in the revenue crisis.

Listing obstacles to revenue mobilisation in the period under review, Nami disclosed that the most important one is distractions from certain interests within the federal government itself and the sub-nationals or people who want to do what FIRS is doing – in other words, those that want to perform the statutory functions of FIRS of assessing, collecting, and accounting for taxes in Nigeria.”


The FIRS chairman added, “These are not just mere issues but people instituting legal actions against FIRS to further distract us. People instituting, even federal agencies instituting legal actions against laws that have been passed by the National Assembly and signed into law by Mr. President.

“So, these challenges impacted negatively, because you see on so many occasions people writing in to find out that ‘tax A, we are confused, we don’t know who to pay to now that there’s a court ruling to restrict you from collecting such taxes’. So, this really impacted negatively on what we did last year.”

Legal Tussle over VAT Collection

Since 2021, the FIRS has been locked in a contest with the Rivers State government over which entity has the right to collect VAT.

The federal government, through the FIRS, has been in charge of VAT, which it then shares with the federal, state and local governments. That was until a federal high court in Port Harcourt in August 2021 ruled that it was the right of the Rivers government to receive VAT in the state. The state argued that it was against the constitution for it to generate VAT that is later shared with other states.

The highly populated Rivers, Lagos and four other states are responsible for about 80 per cent of VAT collected in Nigeria.

While the Court of Appeal has asked parties to maintain the status quo on the matter so as not to affect the subject matter of the suit, states like Lagos and Rivers have enacted laws backing up their collection of VAT within their states. This will affect the uncertainty of business as businesses would not know which agency has prevailing authority over the collection of VAT and non-remittance will amount to a breach of the law.


Tax experts said the legal tango will also create enough opportunities for potential tax evaders to thrive since the resort to court action is a recipe for confusion over who to collect the taxes.

Controversy over Waivers’ Policy

The unprecedented increase in tax waivers granted by the federal government in recent times has been hotly debated by concerned stakeholders who have argued that it is a drainpipe on the economy.

During the preparation for the 2023 budget, the Senate Committee on Finance reportedly rejected a N6 trillion tax and import duties waiver proposed by the federal government in 2023 budget, stating that wastages and leakages must be blocked.

Subsequently, the Minister of Finance, Zainab Ahmed, was directed to cut down the tax waivers by half to N3 trillion, to offset the N12.43 trillion deficit of the N19.76 trillion proposed as expenditure for the 2023 budget.

The lawmaker’s grouse is that many of the beneficiaries of the waivers are not ploughing accrued gains made into expected projects as far as infrastructural developments are concerned.

Economists said for a nation with a serious revenue challenge, there is a need to review the waiver policy in a way that will guarantee the flow of more revenue to the nation’s covers.

Harmonising Tax Laws

One of the issues raised by Nami included the need for the three tiers of government to discuss the possibility of harmonising the country’s tax system. He said the global best practice was to have a single tax authority with a single technology to drive tax administration.

Nami argued that a multiple tax system would only help people to dodge tax payments, stressing that harmonisation would help boost tax receipts in the interest of the economy.


Analysts noted that Nigeria, which should be the leading light in terms of tax administration in Africa, given its position as the most populous with the largest economy in the continent, has continued to lose billions of naira in tax revenue to illegal tax collectors.

According to the Organisation for Economic Co-operation and Development (OECD), in its Revenue Statistics in Africa 2021, the average ratio of Tax-to-GDP of 30 selected African countries in 2019 was 16.6 per cent while Nigeria recorded a mere 6.0 per cent.

There is no doubt that Nigeria is bleeding from the activities of illegal revenue collectors, especially non-state actors.

A good example of the operation of illegal revenue collectors is found in Lagos State where motor park touts, popularly called agberos fleece the state of billions of naira in transport taxes collected from drivers of commercial buses, tricycles and motorcycles.

For example, it is estimated that there are about 75,000 commercial buses (danfos) in Lagos, according to the Lagos Metropolitan Area Transport Authority (LAMATA).

There are at least 100 revenue-collecting agencies at both federal and state levels competing with the officially designated tax authorities like the Federal Inland Revenue Service and state internal revenue services, leading to multiple taxations and compounding the ease of doing business in Nigeria.

Perhaps, one major incentive to taxpayers is the evidence that the revenue collected is well spent. Therefore Nami urged the three tiers of government to apply the funds generated by the service to critical sectors of the economy to “give value back to taxpayers as far as their monies are concerned”.

He stated, “We appeal to them to continue to invest the little we are generating judiciously so that they can encourage taxpayers to continue to comply and pay more so that together we can fix Nigeria.”

Analysts said most Nigerians decline to pay tax because the ostentatious lifestyles of many political leaders do not march the reality in terms of dividends to the people.

A Lagos-based tax expert, Mr. Kingsley Ugbonna said the government is finding it difficult to convince Nigerians that the economy is down.

“How do you reconcile a situation whereby people are asked to pay tax while government officials travel outside the country for social engagements? Costs of living are moving up daily. Nigerians are finding it difficult to get essential items like fuel, electricity and good roads whereas some political leaders are spending money on frivolities with impunity,” he said.

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Prior to January 2020 when the first Finance Act was signed into law, the Nigerian tax laws had not been reviewed for several years and tax positions adopted by non-resident companies (NRC) on their Nigerian tax matters tended to subsist for a long time. This has since changed as the Federal Government has used annual Finance Acts as a fiscal tool to amend relevant laws that impact how businesses are carried on in Nigeria.

The introduction of the Finance Act to improve the ease of doing business and align the tax laws to global best practices has been largely positive. To date, about 167 amendments have been introduced and the full impact of these amendments will only be seen in the next couple of years as the business environments improves with the imminent change in Government by May 2023.

As the country awaits the President's assent on the latest Finance Act 2022, this article seeks to evaluate some of the amendments to the tax laws introduced by the Finance Act that impact NRCs operations in Nigeria.

Companies Income Tax - The Quest to Include More NRCs in the Tax Net

On 24 July 2014, the Federal Inland Revenue Service (FIRS) mandated NRCs to file full tax returns like their Nigerian counterparts. This was a departure from the norm as NRCs were previously subject to tax on deemed tax basis. In effect, the NRCs were required to include actual profits made from Nigerian operations, capital allowance computations and audited financial statements effective from 1 January 2015 based on a Public Notice issued by the FIRS. The intention of the FIRS was to have more visibility on the actual financial results of NRC's operations in Nigeria with the hope of collecting more tax revenue.

The above approach did not yield much results as many NRCs reported losses. Some NRCs were also not liable to tax based on the extant laws at the time. Consequently, the basis of taxing NRCs as provided in Section 13 of the Companies Income Tax (CIT) Act was reviewed and amended by the Finance Acts. Currently, NRCs are subjected to tax where;

the NRC has a fixed base (i.e., a place of business) in Nigeria to the extent that the profit is attributable to the fixed base;
the non-resident company habitually operates a trade or business through a person in Nigeria or maintains a stock of goods or merchandise in Nigeria from which deliveries are regularly made by a person on behalf of the company;
the trade or business or activities of the non-resident involves a single contract for surveys, deliveries, installations or construction;
the non-resident company does not have physical presence in Nigeria but derives income from Nigeria through digital activities to the extent that it has a Significant Economic Presence (SEP) in Nigeria;
the trade or business of the non-resident involves the remote provision of technical, management, consultancy or professional services to a Nigerian resident; and
the trade or business or activities is between the company and a related party, which is considered not to be at arm's length.
The amendments introduced in paragraph (iii) to (v) above brought more NRCs into the tax net even where they did not have a fixed base or permanent establishment in Nigeria. Many NRCS earn more than ₦25m (requirement to qualify for SEP) from remote operations in Nigeria which may not have been the case prior to the amendment. Thus, NRCs operating in Nigeria should review their operations and ascertain that they do not have new tax obligations in Nigeria based on the above.

Are Double Tax Treaties Sufficient to Shield NRCs from Tax?

Nigeria has Double Tax Treaties (DTT) with 16 countries which is aimed at ensuring a company resident in the DTT state suffers tax only once for income derived from any of the contracting jurisdictions. Typically, the DTTs provide that an NRC will only be liable to CIT in Nigeria where it has a Permanent Establishment (PE) in Nigeria. A PE is essentially a Fixed Place of business through which the business of an enterprise is wholly or partly carried on.

Consequently, where there is no PE, there is no CIT applicable to the NRC. Given most DTT between Nigeria and other countries have not been updated to cover remote digital, technical, professional, management or consulting services, an NRC located in a DTT country will not be liable to tax in Nigeria if it does not have a PE in Nigeria (or other conditions for taxation under the DTT) even where the income earned from Nigeria exceeds the SEP threshold. Section 45 of the CITA is very clear that arrangements between Nigeria and other countries under a DTT supersedes the provisions of the CIT Act.

The above notwithstanding, the FIRS issued a circular dated 3 June 2021 on the claim of DTT benefits in Nigeria. Based on the circular, the claim of DTT benefit is no longer automatic as intending companies are required to submit a formal application to the relevant tax authority, complete a certificate of residence and a claim for the applicable tax credit.

In addition, the reduced tax rate of 7.5% applicable on dividends, interests and royalties earned by taxable persons resident in a DTT state has been terminated by the FIRS with effect from 1 July 2022. Consequently, the applicable withholding tax (WHT) rate provided in the enabling laws will apply except where such rate exceeds the maximum rate provided in the applicable DTA. Hence, NRCs receiving passive income based on their investment in Nigerian companies will pay more taxes based on the amendments introduced by the Finance Acts.

Capital Gains Tax and Withdrawal of Incentive Associated with Investment in Nigerian Companies

Prior to the Finance Acts, where a Nigerian company has 25% imported equity, such a company is exempted from minimum tax. Based on the amendment introduced by Finance Act 2019, this incentive has been removed. The introduction was intended to create a level playing ground for Nigerian companies without imported capital. However, this may impact the attractiveness of investing in Nigerian companies given that minimum tax is 2.5% of turnover and investors may have to take loans to pay the minimum tax due to the government where the company is making losses.

In addition, Finance Act 2021 removed the Capital Gains Tax (CGT) exemption on the disposal of shares in a Nigerian company by amending relevant provisions of the Capital Gains Tax. Thus, where a company sells its equity investment in a Nigerian company worth at least ₦100m in any twelve consecutive calendar months, the gains associated with the sale are to be taxed at 10% subject to certain exemptions including where the proceeds from the disposal of the shares are reinvested within the same tax assessment in the acquisition of shares in either the same or another Nigerian company.

Section 32 of the CGT Act was also amended to introduce CGT on restructuring arrangements between related entities. To qualify for exemption from CGT, companies involved in a restructuring exercise must be related for 365 days before the restructuring, either by way of one entity having control over the other entity, both entities having same parent or both entities being members of the same group. In addition, the assets involved in the restructuring exercise must not be disposed within 365 days after the restructuring exercise.

Furthermore, Finance Act 2019 provides that the amount of interest deductible for tax purposes by a Nigerian Company from loan advanced by a related NRC is limited to 30% of Earnings before Interest Tax Depreciation and Amortization ("EBITDA" in each accounting period. Interest in excess of 30% of EBITDA will be deductible within a maximum period of five years.

Key Amendments Relating to Transaction Taxes

For several years prior to the Finance Acts, the Value Added Tax (VAT) implication of services provided by an NRC to persons in Nigeria was in dispute. Section 10 of the VAT Act required NRCs carrying on business in Nigeria to register for tax and include VAT in the invoice issued for the services provided. However, the definition of "carrying on business" was not provided in the VAT Act.

The latest court case on this issue was the 2019 Court of Appeal (COA) case between Vodacom and the FIRS where the COA ruled that the supply of satellite bandwidth to the satellite transponders located in Nigeria is liable to VAT.

The above notwithstanding, services provided by an NRC to persons in Nigeria were not liable to VAT where those services were provided exclusively outside Nigerian Tax Jurisdiction. However, the Finance Act has laid all controversies on the matter to rest by shifting the determinant of the VAT implication on such transaction from where the service was provided to where the beneficiary of the service is registered or located. Consequently, a service will be liable to VAT in Nigeria if the service is provided by a person physically present in Nigeria at the time the service is provided in Nigeria or if the service is provided to a person in Nigeria, regardless of whether the service are rendered within or outside Nigeria. Based on the amendments, the Nigerian beneficiary is required to self-account for the VAT even where the services are provided entirely outside Nigerian tax jurisdiction.

The above exposes cross-border transactions to double tax and additional cost as the Nigerian company may be required to pay the local transaction tax where the foreign company is resident. Conversely, where the services are provided by a Nigerian Company to a person outside Nigeria, such services are considered to be exported service and not liable to VAT. The amendment to the VAT Act which exempts companies with revenue less than ₦25m is a welcome development targeted at small and medium scale enterprises. However, this may not be beneficial to NRCs as most Nigerian operations exceed ₦25m (about $55,000) revenue.

Similarly, where an NRC provides technical, consultancy, management, or professional services outside Nigeria, the fees earned are liable to WHT deduction provided the fees exceed $25m. What typically happens in practice is that the service provider increases the cost of providing this service by the WHT amount, thus increasing the cost of doing business.

Furthermore, prior to the Finance Act amendments, foreign companies could enjoy full (100%) or partial (10%, 40% or 70%) WHT exemptions on interest relating to loans advanced to Nigerian companies provided the terms of the loan meet certain moratorium / grace period in the CIT Act. The Finance Act modified the exemption to 70%, 40% and 10% thus reducing the incentive available to NRCs on such loans.

Other proposed Amendments to consider in the 2022 Finance Bill

To avoid double taxation, importation of taxable goods purchased through an online electronic or digital platform operated by a Non-Resident Supplier (appointed as a VAT collecting agent of FIRS) into Nigeria are not subject to VAT at the point of clearance with the Nigerian Customs Service where the importer furnishes evidence of registration or appointment of such collecting agent with the FIRS and VAT charged on the sales invoices of the goods.
Imposition of a levy of 0.5% on all eligible goods imported into Nigeria from outside Africa to finance capital contributions, subscriptions and other financial obligations to the Africa Union, African Development Bank, Africa Export-Import Bank and other multilateral institution.
The scope of services liable to excise duty under the Customs, Excise Tariff, etc. (Consolidation) Act is to be expanded to include all services.
Introduction of 50% investment tax credit on qualifying expenditure incurred by medium and large companies involved in the commercial winning, capture, production and utilization of associated and non-associated gas.
Introduction of a new corporate tax rate of 50% to be levied on Companies engaged in gas flaring.
Removal of Investment Allowance of 10% applicable on capital expenditure incurred on plant and equipment. In addition, the Rural Investment Allowance ranging from 15% to 100% applicable on capital expenditure incurred for the provision of certain facilities for the purpose of trade or business which is located at least 20 kilometers away from such facilities provided by the government has also been removed.
Tax as a Fiscal Tool to Provide Stable Source of Government Revenue

Amidst crude oil price volatility and reduced crude oil production which fell by 23% (1.14 million barrels per day1) in 2022, the amendments to the tax laws introduced by the Financial Acts have helped the government increase its tax revenues. Few days ago, the FIRS reported that it collected ₦10.1trillion2 as tax revenue in 2022 which is about 63% higher than the tax collected in 2021. Although some analysts opine that there has not been much improvement in dollar terms, this is an indication that the Government can place more reliance on taxes as a stable source of revenue.

The FIRS has made tremendous efforts in digitalizing tax compliance process with the introduction of TaxPro Max; an online digital platform that allows taxpayers submit tax returns online. While there are views that the online tool impacts on the right of the taxpayer to self-assessment since approvals have to be obtained from the FIRS for the treatment of certain tax items, the TaxPro Max has reduced the cost of compliance for both taxpayers and the tax authority. With the introduction of online instant issuance of Tax Clearance Certificate which typically takes two weeks or more before approval is granted, it is expected that the FIRS will make more improvements that will positively impact the tax administration and compliance.

The above notwithstanding, it is not clear whether there is a direct relationship between the declining FDI and the amendments to the tax laws as there are other factors that may be contributory to the decline in foreign investment inflows like the challenging foreign exchange regime and insecurity in some parts of the country. Given the World Bank's growth projection of 2.9%3 for 2023, the Nigerian Government must be mindful to strike a balance between the quest for increased tax revenues and the need to stimulate economic growth. There will be more tax revenue where economic activities improve and the citizens can link the taxes collected with increased social infrastructure provided by the government that impact the quality of life of the citizens.

According to the International Monetary Fund (IMF), tax to GDP ratio should be at least 123/4%4 to accelerate economic growth and development. In 2020, Nigeria's Tax to GDP ratio dropped to 5.5%5 due to the impact of Covid-19 pandemic. For context, this was the lowest in Africa and the Organization for Economic Co-operation and Development (OECD) average is 33.5%. The Nigerian Government must find creative ways to improve the Tax to GDP ratio by expanding the tax net to include the informal sector and show more accountability on how taxes collected are utilized.

Conclusion

As the Nation prepares for elections in few days, the next Government will have to evaluate the existing tax regime in order to simplify it further, expand the tax base and explore new initiatives that will attract the much-needed investment to stimulate the economy. NRCs should continue to monitor developments in the tax space so they can take full advantage of the investment opportunities that exist in Africa's biggest economy.

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First off, our Federal Inland Revenue Service (FIRS) – soon to be known as Nigeria Revenue Service to capture the fact that revenue everywhere including online (not only inland) must be captured – must be commended on their unprecedented and superlative achievement of N10.1 Trillion collection for the year 2022. Honestly, in our country, replete with bad news, this is one news that gladdened my heart and for which I have heard or read little commentary since announced. The Muhammad Nami-led service bested itself in a performance that is also reflective of the ongoing economic recovery, after the second slump due to COVID-19 under President Buhari’s leadership since 2015. We had never neared that double digit in the trillions of Naira.

Let us do a quick rundown of our revenue performance over the years since the year 2000. In that year as the civilians settled into government, the FIRS collected a total of N455 billion across the board. By 2001, this increased to N587 billion. In 2002, collections dipped to N434 billion. But in 2003, 2004, 2005, and 2006, the numbers increased to N703 billion, N1.19 Trillion, N1.7 Trillion and N1.87 Trillion respectively, before we saw another slight dip in 2007 to N1.85 Trillion. Due to the performance of the crude oil sector, the FIRS witnessed a leap in collections in 2008 when it hauled in N2.97 Trillion. But a dip occurred in 2009, when collections slumped to N2.2 Trillion. The growth trajectory was resumed the year after and maintained for another two years when in 2010, 2011 and 2012, the FIRS collected the sums of N2.8 Trillion, N4.62 Trillion and N5.007 Trillion respectively, before another dip to N4.8 Trillion and N4.7 Trillion in 2013 and 2014 respectively. The year 2015 was a transition year, and it witnessed underperformance by the FIRS when collections slumped to N3.7 Trillion. An economic recession would follow in 2016 which further collapsed collections to N3.3 Trillion (by then the lowest collection in 7 years). Luckily, revenue collections improved the year after, when the FIRS collected N4.03 Trillion, increasing in 2018 to N5.3 Trillion, and dipping slightly to N5.26 Trillion and N4.9 Trillion in 2019 and 2020 (the COVID-19 year). Global economic recovery and resilience on the part of the service saw to an increase in collections to N6.45 Trillion in 2021 and now, a superlative performance of N10.1 Trillion in 2022. A graphical representation of the journey is presented below.

MATTERS ARISING

1. Growths in collection must be discounted for inflation and devaluation.


Whereas I will commend the FIRS Chairman and his team for being focused and having ploughed through a very difficult time (COVID-19), we all must note that the growing figures must be discounted for yearly inflation and devaluation. Just as the Naira gets weaker and weaker in the hands of the common man, so also is it getting weaker in terms of the public goods it can procure for the masses. Indeed, it may be prudent to represent these numbers in dollar terms, since our economy is quite externalized and linked to the dollar. If we do this, the excitement may wane. It must however be noticed that despite inflation and devaluation, the period of 2014 to 2017 were years of decreased revenue even in absolute terms. That meant inefficiency and low value for Nigerians. This collection of N10.1 Trillion happened in a year that we didn’t have shocking devaluation – at least not officially. Therefore, it passes the test for good performance. But we must keep challenging ourselves. Rather than the political capture and executive tardiness that has held Nigeria down so far, a more articulate and focused approach could lead to significant leaps in FIRS collections. I see that figure hitting N20 Trillion soon. Customs collections, which is part of what FIRS accounts for, is impacted by Naira devaluation, and must be benchmarked appropriately so that we know when we are making real progress.

2. Non-oil sector is here to stay

The Nigerian government has been very deliberate about the need for the economy to be diversified. It was however impossible to achieve this under the Obasanjo administration and it remained a struggle throughout the Yar’Adua and Jonathan administrations. We could however say this is now a reality given that we are seeing a reversal of fortunes so to speak. The oil sector used to contribute almost 65% of FIRS collections in the early 2000s. In the year 2011, non-oil contributed N1.56 Trillion as against oil sector contribution of N3.071 Trillion (almost double). 2022 performance shows that non-oil collections have now surpassed what accrues from oil. Oil sector in 2022 contributed N4.09 Trillion, while non-oil accounted for N5.96 Trillion (59%). This is good if it depicts the seriousness of our economic diversification efforts, and FIRS’s ingenuousness in going after those who should pay taxes. However, it also may belie the fact that Nigeria really lost grounds in the oil sector in 2022 and for some years now, with production dipping to somewhere below 1,000,000 barrels per day as against our OPEC quota of at least1.6 million barrels a day. Thankfully, with the contracting of Tompolo’s Tantita Security Services company, we now understand that crude oil production has ramped up considerably. With some luck, production from the Gombe/Bauchi axis may weigh in and 2023 should tell a different story, for good. We can walk and chew gum at the same time. We should be optimizing both sectors – oil and non-oil.

3. Silo mentality affecting Nigeria very adversely

It must be said that silo mentality and ego trips among government functionaries was a major problem. This is more so under the Buhari administration. I wrote about that recently when the suggestion (indeed the recommendation per the 2022 Finance Act), of an introduction of 5% tax on telecommunications was stepped down ostensibly on the orders of, or with the influence of the Minister for Communications and Digital Economy. I felt this was an overkill and power play by Sheikh Isa Pantami and an embarrassment to Dr Zainab Ahmed who had agonized for too long about low revenues and insisted that what Nigeria has is a revenue problem more than anything else. There she was, trying to do something about it with what could be considered a good tax – easy to pay, may not be felt, and easy to collect – and being shut down summarily on national TV. This time, the FIRS Chairman could not help but express his frustration at some of what he had experienced so far, including the tendency for agencies of government to sue each other and to compete for what is beyond their remit. Hear him as quoted in This day Newspaper of January 24, 2023:

“We would have actually done better, but for several issues, some of which are political and very sensitive to discuss in the public domain… But the most important one is distractions from certain interests within the federal government itself and the sub-nationals or people who want to do what FIRS is doing – in other words, those that want to perform the statutory functions of FIRS of assessing, collecting, and accounting for taxes in Nigeria… These are not just mere issues but people instituting legal actions against FIRS to further distract us. People instituting, even federal agencies instituting legal actions against laws that have been passed by the National Assembly and signed into law by Mr. President…. So, these challenges impacted negatively, because you see on so many occasions people writing in to find out that ‘tax A, we are confused, we don’t know who to pay to now, that there’s a court ruling to restrict you from collecting such taxes’. So, this really impacted negatively on what we did last year… We appeal to them to continue to invest the little we are generating judiciously so that they are able to encourage taxpayers to continue to comply and pay more so that together we are able to fix Nigeria.”

I totally agree with Nami. The dysfunction in the current administration is very sad to watch. Who knows how many billions Nigerian masses lost to some fat cat somewhere as a result of infighting? Nami also stated briefly that N1.8 Trillion of waivers under several arrangements, were granted in the year.

4. Waivers, concessions and forbearances need to be curbed


Flowing from 3 above, it will be good for government to have a relook at the system of waivers because this nation – with a huge debt overhang – can ill afford them. We cannot be servicing debts with over 90% of our revenue and be gifting some away at will for any reason. Personally, I think the idea of exempting companies with turnover of less than N25 million and below from all forms of taxes is preposterous and needs to be reviewed. Nigeria is an open sesame and companies are thriving here. Even if it was minimum taxation, I believe we should get. There is a strong correlation or even causation between tax responsibility and economic development. Indeed, I am proposing that we start to operate as they do in the UK and UAE (countries in which I have done business corporately). In these countries, they don’t joke with their taxes. The UAE is even introducing company income tax by June 2023. That is an Arabic country reforming. In these two countries anyway, no company can do any business or even operate a bank account in any given year except they file company returns. And the company house (like our own Corporate Affairs Commission) will not collect your returns unless you show evidence of tax payment – including remittance of your staff PAYE and National Insurance. Note that the idea of Annual Returns also has security implications as it is primarily meant to be an update of company address and director or circumstance change in a given year. This is precious data. And data is king today. Anyway, in both countries that I’ve mentioned, as it also happens in every serious country, your bank will close down your company account if you don’t supply your annual return after a deadline every year. This is what happened to Peter Obi’s Next International UK Limited. If Nigeria could effect this policy, company income tax collection will explode.

5. Are Nigerians paying too much taxes already?

There’s also this argument flowing from 5 above, about whether Nigerians are already overtaxed as a result of multiple agencies and even non-state actors shaking everybody down. There was recently a short clip of a transporter of farm products in my Ondo State, who had to pay dues to about 60 agencies to do his business. There is also the popular knowledge that ‘agberos’, or those who work for transport unions around Nigeria, rake in billions of Naira daily. I want to add that I disagree though, with Miss Taiwo Oyedele, Andrew Nevin, and others who believe that Nigerians are already overtaxed. Whereas we could define ‘taxes’ as every statutory payment that Nigerians are obliged to pay to government – including rents, rates, dues, duties, fees, levies, fines and others – I believe that it is dangerous to sell the idea to our public that they are overtaxed already. Not many people are subjected to the multiple taxes that we complain about. And Nigerians do not pay anything near what people pay abroad. Dr Nevin argues that because Nigerians have to build their own infrastructure, we are already overtaxed. However, the idea of obligations to the state is about promoting responsible citizenship. We cannot shorty-circuit that process. Most developed countries are where they are because their citizens feel obliged to support government – to a good degree – by contributing their quotas by way of those taxes, fees, fines, duties etc., and thereby promoting collective development. Our intellectuals should try to take a long view and not discourage that larger, noble objective. The truth is that most Nigerians pay nothing. Most companies underpay taxes. Most people underpay. Even those charged with enforcement are more sympathetic with payers than being strict with their jobs. It is a fact that our governments have disappointed the people for too long with their ostentation and wrong choices. Still, we should not give up on our nation, promote the disconnection of the citizens from the country, and the eventual disintegration of our country.

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Major revenueg e n e r a t i n g agencies of the Federal Government, such as the Federal Inland Revenue Service (FIRS), the Nigeria Customs Service (NCS) and the Department of Petroleum Resources (DPR), received a total of N422.39billion as revenue collection cost from the Federation Account Allocation Committee (FAAC) last year, findings by New Telegraph show.

According to data released by the National Bureau of Statistics (NBS), the agencies received N79.41 billion, N110.91billion, N126.29billion and N105.78billion in Q1, Q2, Q3 and Q4’22, respectively. This means that that they collected a total of N422.39 billion as revenue collection cost from the FAAC in 2022. It also means that the total amount received by the agencies as revenue collection cost last year was N93.02billion or 28.24 per cent higher than the N329.37 billion that they got in 2021. Similarly, the agencies’ collection cost last year is N193.62billion or 84.63 per cent higher than the N228.77 billion they received in 2020.

Further analysis of NBS data shows that the FIRS, NCS and the DPR received a cumulative sum of N220.39billion as cost of revenue collection in 2019. Availabledataindicatesthat of the three key revenue generating agencies of the government, the FIRS’ collection cost is the highest. For instance, the Service received N85.95billion as collection cost in H1’22 compared with N60.31billion and N44.06billion for the NCS and the DPR respectively. In 2021, the FIRS’ collection cost was also the highest at N142.8 billion, up by 27.5 per cent from N111.97 billion in 2020. It was followed by the NCS with collection cost of N99.91 billion and the DPR with N 83.51 billion.

The FIRS is empowered by law to retain seven per cent of the revenue it generates as cost of revenue collection, while the NCS and the DPR are both entitled to four per cent. According to the Section 15 (a) of the FIRS (establishment) Act, the major source of funding for the agency is “a percentage as determined by the National Assembly of all non oil and gas revenue collected by the service which may be appropriated by the National Assembly for the capital and recurrent expenditures of the Service.” Last Monday, the FIRS announced that it netted its highest revenue collection ever in history with collection of over N10 trillion in 2022. Special Assistant to FIRS Chairman on Media, Johannes Wojuola, who disclosed this in a statement, said of the N10.1 trillion collected, oil accounted for N4.09trillion and non-oil, N5.96 trillion revenues as against a target of N10.44 trillion. According to the breakdown, Companies Income Tax contributed N2.83 trillion; Value Added Tax (VAT)-N2.51 trillion; Electronic Money Transfer Levy- N125.67 billion and Earmarked Taxes, N353.69 billion. Specifically, the statement said: “Non-oil taxes contributed 59 per cent of the total collection in the year, while oil tax collection stood at 41% of total collection.”

In the “FIRS 2022 Performance Update,” report also released last Monday, the Service noted that its management led by Executive Chairman, Mr. Muhammad Nami, had over the last two years, introduced reforms which were producing results. “The reforms introduced at different times from 2020 are gradually yielding fruits. By the close of 2022, the Service had fully restructured the administration of the Service for maximum efficiency and achieved internal cohesion such that all functional units are working in unison towards the achievement of set goals. “The Service had also automated most of the administrative and operational processes. A major leap was the full deployment of the TaxPro Max for end-to-end administration of taxes in June 2021. The module for the automated TCC went live 1st January 2023 while taxpayers had already downloaded over 1,000 TCCs this year without having to visit FIRS office,” the report said. It also noted that the Service had operationalised its data mining and analysis system thereby allowing for data backed taxpayer profiling.

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On Monday, January 24, 2023, Nigeria’s tax man, the Federal Inland Revenue Service (FIRS), released its 2022 report detailing the agency’s performance in 2022.

Beating its 2021 figures, the agency disclosed that it had collected a total of ₦10.1 trillion in oil and non-oil revenues. In 2021, the agency collected ₦6.405 trillion, exceeding its target of ₦6.401 trillion. Since 2017, non-oil revenue has grown from 38% in 2017 to 59% in 2022. However, this also represents a drop from last year’s figures, where non-oil revenues made up 69% of taxes collected.

Under non-oil revenues, Companies' Income Tax contributed ₦2.83 trillion; Value Added Tax ₦2.51 trillion; Electronic Money Transfer Levy ₦125.67 billion and Earmarked Taxes ₦353.69 billion. The Federal Minister for Finance, Budget, and National Planning, Mrs Zainab Usman, signed the Electronic Money Transfer Levy Regulations into law in 2022, placing a ₦50 fee on all deposits above ₦10,000.

Muhammad Nami, the Executive Chairman of the FIRS, attributed the agency’s ability to exceed the trillion naira mark to collaboration with stakeholders and the willingness of taxpayers to remit taxes while expressing hope that the agency can exceed last year’s achievement.

“This collection was possible through collaboration with our stakeholders, from our colleagues at the Executive branch of government, to the members of the judiciary, to our brothers and sisters at the National Assembly, as well as the tax advisory committee, professional bodies, unions, and most crucially our taxpayers. We intend to maintain and even improve on the momentum in 2023.”

He also noted that the agency would continue identifying ways to improve service delivery and deploy data and artificial intelligence in its processes.
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The Lagos State Internal Revenue Service (LIRS) has insisted on January 31, 2023, as the deadline for filing the annual tax returns by employers of labour.

The LIRS executive chairman, Mr Ayodele Subair, made this known in a statement signed by the head, Corporate Communications of LIRS, Monsurat Amasa yesterday.

According to the LIRS executive chairman, all businesses and employers of labour residents within Lagos State must file their annual income tax returns on or before January 31, 2023, as failure to comply with the directive would attract penalties as well as other statutory sanctions as stipulated in section 81 (2) of the Personal Income Tax Act (PITA) Cap P8 LFN 2004 (as amended).

The Act stipulates January 31st as the deadline for filing of annual income tax returns, failing which a penalty accrues.

"For filing the annual income tax returns in Lagos State, the only available platform is the LIRS e-Tax portal: https://etax.lirs.net. The e-Tax portal is built for the convenience of taxpayers and is easy, convenient and safe. All businesses and employers of labour are advised to use the e-Tax portal to file their returns.

"With the eTax system, corporate bodies are expected to find it more convenient to carry out tax transactions in the comfort of their homes and offices. To be on the eTax platform, corporate bodies can follow these steps: Visit https://etax.lirs.net, input your company payer ID, password and click login; Step two: Generate your bill and Step three: Make your payment.

"Taxpayer ID of all employees is compulsory for the annual income tax returns to be successfully filed on the e-Tax portal. Therefore, all employees and taxable persons within the State are advised to generate a taxpayer ID (where applicable) and file their individual annual income tax returns on the e-Tax portal," she pointed out.

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The 2022 Employer Tax Return (Form H1) is due for filing by 31 January 2023. The Personal Income Tax Act, Cap P8 LFN 2004, as amended to date (PITA) requires every employer to submit its tax returns (Form H1), with the relevant state tax authorities where its employees are resident.

There are peculiarities with the filing process across different states. Many states have adopted the e-filing system for this purpose, while some other states have retained the requirement for the physical submission of relevant documents at their various tax offices.

Form H1 is a declaration of the total emoluments paid to employees in the preceding year. The penalty for non-filing is ₦500,000 in the case of a corporate organization and ₦50,000 in the case of an individual employer.

Employers are advised to carry out annual year-end payroll reconciliations and get familiar with the requirements for each state, ahead of the deadline stated above.

Inner Konsult LTD is available to provide further guidance or any other assistance that may be required by employers of labour in completing this obligation. If you require further clarification or seek to understand how this will impact your business.

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The 2022 Finance Act which became effective January 2023 contains a lot of new taxes The Finance bill became law when President
Muhammadu Buhari assented to it, making it lawful for Nigerians.Act The Act provides a slew of taxes which seek to bring in more revenue to the cash-strapped Nigerian government seeking to increase revenue to service more debts. The Nigerian government has been harping on the need to raise revenue to match its bloated expenditure and service external debts. The list of new taxes: Digital Assets Tax: The Act says that profits on digital assets, including cryptocurrency, are taxable at the rate of 10 per cent. It also proposes that income from betting and lottery business be taxable under the Companies Income Tax Act. Others are Capital Gains Tax Companies Income Tax Custom, Excise Tariff Personal Income Tax Petroleum Profits Tax Stamp Duty Value Added Tax The 2022 Finance Bill is currently undergoing legislative consideration. The Bill seeks to amend the following laws: According to reports, companies engaged in winning, capturing, production and utilisation of gas will be entitled to a single 50 per cent investment tax credit on its qualifying expenditure. The Act which has since gone into operation received a mixed reaction, especially with the increase in taxes payable by soft drinks and beverage manufacturers in Nigeria. Finance Act, the federal government introduced an excise duty called Sugar Tax. Minister of Finance, Budget and National Planning, Zainab Ahmed explained that the tax on soft drinks would discourage excessive sugar consumption which contributes to diabetes, obesity and other sugar-related ailments. Per the Daily Trust report, the sectoral arm of the Manufacturers Association of Nigeria (MAN) raised the alarm the new tax burden of an additional 20 per cent tax will compound the woes of manufacturers. According to the manufacturers, the N10 per litre tax is also destroying their businesses and rejecting the proposed new tax.

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The groundswell of criticisms of the 2022 Finance Bill, which was hurriedly passed by the National Assembly but suspended by President Muhammadu Buhari, have provided sufficient grounds for the outgoing administration to address the reservations of the members of the organised private sector who insist on wide consultations to avoid additional tax burden on businesses, reports Festus Akanbi

As the nation awaits what becomes of the Finance Bill 2022 recently passed by the National Assembly but which has been put in abeyance by President Muhammadu Buhari, some members of the Organised Private Sector (OPS) have outlined steps to make the document acceptable and workable.

Two weeks ago, President Buhari signed the N21.83 trillion 2023 appropriation bill into law, marking the last time he would be performing such a task as Nigeria’s president. The president however deferred the signing of the Finance Bill, which is still being reviewed, as it conflicts with the fiscal term of the Petroleum Industry Act (PIA).

The budget, which contained robust provisions for the funding of this year’s general election, was passed by the National Assembly on December 28 last year.

The controversial Finance Bill brought about a wide-range of amendments to the following legislations: Companies Income Tax Act; Customs, Excise Tariff Act; Personal Income Tax Act; Petroleum Profits Tax Act; Stamp Duties Act; Value Added Tax Act; Capital Gains Tax Act; Corrupt, Practices and Other Related Offences Act; and the Public Procurement Act.

Key Amendments in the Bill

A key amendment in the bill is the new provision that subjects gains on digital assets to tax under the Capital Gains Tax Act at the rate of 10 per cent.

The bill also subjects income derived by a company from gaming, gambling, betting, or lottery business to tax under the Companies Income Tax Act.

It also provides for a tax increase for gas-flaring companies. In line with Nigeria’s climate change commitments to ensure the reduction of greenhouse gas emissions, the Bill proposes that gas-flaring medium and large companies are to be liable to corporate taxation at a 50 per cent rate. It is anticipated that this rate will help to deter gas-flaring, as it is more than the typical 30 per cent nominal income tax rate.

The Bill also makes a case for the set-off of capital losses against capital gains on two identical capital assets (that is, two assets that are of the same kind) in a taxable year.

There is also remittance of Value Added Tax (VAT) by specific entities. Under the new provision, entities like MTN, and oil and gas companies, appointed to deduct VAT at source on invoices received from their vendors will be expected to remit such VAT to the Federal Inland Revenue Service (FIRS) on or before the 14th day of the following month (currently 21st day of the following month).

In addition to the existing customs duties and other charges, a levy of 0.5 per cent is to be imposed on goods imported into Nigeria from outside Africa. It is stated that this duty will be used to make payments for subscriptions, and other financial obligations to multilateral institutions like the African Union (AU), African Development Bank (AfDB), and others.

According to the bill, the existing investment allowance of 10 per cent applicable on qualifying expenditure incurred on plant and equipment will no longer apply as of December 31, 2022, when the Bill was expected to have been passed as an Act.

There is also a rollover relief on shares and stocks. Investors are required to pay a tax of 10 per cent on the gains they make from the sale of their shares in startups and other companies. The Bill, however, proposes that investors that purchase shares from startups will be eligible to roll over reliefs if they reinvest the proceeds of the sale of such shares. Rollover relief provides a mechanism for deferring payment of tax from the sale of an asset, where the proceeds from such sale are reinvested to buy new assets.

The bill also stipulates that all services, including but not limited to telecommunication services, provided in Nigeria will be subject to excise duties.

According to the bill, the Minister of Finance, Budget, and Economic Planning is to be charged with the responsibility for the supervision of the Tariff Review Board.

LCC Warns Against Removal of Tax Waivers

In its response, the Lagos Chamber of Commerce and Industry (LCCI) last week called on the federal government to tread cautiously with its plan to save over N6 trillion by removing tax waivers and exemptions granted to some large enterprises in the oil and gas sector.

The chamber in a statement titled, “LCCI Comments on the 2022 Finance Bill,” noted that President Muhammadu Buhari withheld his presidential assent to the proposed legislation in order to subject it to further review.

The statement signed by the Director General of the LCCI, Dr. Chinyere Almona, cited the statement of the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed during her budget presentation. The minister reportedly stated that the plan to exit some large enterprises from the Pioneer Status Incentives, the government can save about N6 trillion tax expenditure (waivers, exemptions, incentives granted by the government).

LCCI said: “But on the path of caution, we urge the government to be conservative in raising tax rates, since there are new ways of rescuing some tax expenditures to add up to government revenue in 2023. Leaving rates at their levels will not lead to a loss of revenue.”

The LCCI noted that with the divestments by some international oil companies from the oil and gas sector, Nigeria needed to “reposition the industry through a steeply implemented PIA to pave the way for new investments and encourage indigenous companies to reflate the sector with required investments.”

As part of its input in the bill, the LCCI suggested the retention of the Tertiary Education Tax (TET) rate at 2.5 per cent since it was just recently increased from 2.0 per cent to 2.5 per cent. It explained that at the proposed rate of 3.0 per cent, Nigeria’s corporate income tax rate would rise to about 36 per cent, which is one of the highest rates in the world, according to available research.

“Retain the 30 per cent Company Income Tax for all oil and gas companies; consider amending the Petroleum Profit Tax Act with the same provision in the PIA Section 1042,” the chamber said.

Stakeholders’ Engagement

The LCCI also recommended that the Finance Bill should be presented for extensive stakeholders’ consultations before being passed by the National Assembly. It pledged to continue to work to mobilise the private sector to support the implementation of the 2023 federal budget.

It, however, said, “On achieving revenue targets for the budget, the MDAs and Government Owned Enterprises (GOEs) can intensify their revenue mobilisation efforts in an enabling environment where the private sector thrives.

On its part, the Centre for the Promotion of Private Enterprise (CPPE) took exception to what it described as the hasty passage of the bill, saying there was practically no room for public hearing and engagement with stakeholders in the consideration of the bill.

The centre posited that the rushed passage of the Bill by the National Assembly calls to question the representative role of the Assembly.

The Chief Executive of the Centre, Dr Muda Yusuf, who spoke on a News Channel’s programme last week, noted that it was curious and puzzling that the Senate gave just 24 hours’ notice for stakeholders to attend a public hearing on the bill, which is a piece of legislation that has profound implications for investment, citizens welfare and the Nigeria economy.

According to him, the House of Representatives gave a more generous notice of about three weeks, noting however that in a sudden and baffling twist of events, the House passed the bill before the date of the advertised public hearing which was January 13, 2023.

Protests against Additional Tax Burden

Yusuf pointed out that the Bill passed contained the imposition of excise duties on all services with rates to be determined by presidential order. According to him, all of these have far-reaching implications for investors and citizens; affect the cost of production, operating costs and undermine investors’ confidence.

“It has profound inflationary implications. It will effectively move corporate tax to almost 35 per cent which is one of the highest globally.” He appealed to President Buhari not to leave a legacy of an unbearable tax burden for investors in the Nigerian economy, noting that the torrent of taxes, levies, and fees was crippling businesses. Yusuf, therefore, urged the President to withhold assent on the 2022 Finance Bill until the National Assembly properly engages stakeholders as required by legislative protocols.

It is hoped that by the time the new version of the Finance Bill is passed, it will contain the input of the private sector operators and other stakeholders in the Nigerian economy. It is then the much-awaited Finance Bill will reflect the current realities in the Nigerian economy.

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Dear State Governors,
Between N852 billion and N1.41 trillion, which would you prefer? This is a multi-billion dollars question.
In 2020, while the State Governments hit an all-time high of N852 billion in personal income tax revenue, the Federal Government was hit by a 13.4% decline in corporate tax income to N1.41 trillion. As you would expect (and rightly so), Lagos State had c.35% of the States’ personal income tax revenue.
As you may know, States can’t legislate on personal income tax nor on corporate tax. States hardly hustle for more immigrants. But every State is in competition to attract more companies. While governors will be willing to make certain concessions to have multinationals set up in their States, the States are hardly well compensated for attracting those big entities. Instead, the juice of the fruit is gulped by the Federal Government.
This is not to say that there are no benefits that accrue to the States as these corporates employ residents of the States (reduce unemployment rate and social vices) who in turn pay personal income taxes. The argument here is that historically, the bigger juice is often in the corporate tax which is a federal tax. Can the States benefit from corporate tax? Well, not until the laws are amended. While such could be encouraging to the States if for instance, they get 5-10% of the corporate tax generated from their States (as complex as it may be, but not impossible), I would ordinarily subscribe to something different.
What if the Federal (FG) and State Governments switch roles on who collects what with regards to personal and corporate income taxes? What if it becomes the domain of State Governments to register companies in their States? Already, natural persons are granted citizenship by the country (this case, FG). As such, it is logical to have natural persons taxed by the FG who confers citizenship to them, moreover, the most States don’t even have data of their citizens. In the same vein, it becomes more rewarding for States who struggle to make their states competitive and are better at ease of doing business. Unfortunately, weak States will struggle. But that should be a clarion call for governors to work hard to improve their States so as to attract corporates.
This argument appears to have aligned to the detriment of the Federal Government who it appears will be losing revenue to the States. But I have a different view with a different news. Beyond low compliance rate and data paucity, one reason why States lose a lot of tax revenue is the issue of residency. The complexities of place of resident and principal place of residence and its practical realities are often a crazy discussion, with States such as Ogun and Lagos always at loggerheads on that subject. What if this friction is extinguished where it no more matters where an individual lives since all personal taxes are collected by one institution? The claim by some individuals that they paid taxes in one State and therefore need not pay further tax despite earning income spending significant period in 2 or more states will no longer hold.
With a single personal tax gateway, this means that I should be able to account for my consolidated inflows and the taxes paid thereon. This also means that tax compliance officers who have smart gadgets could be deployed anywhere to sensitize and gradually modify behaviors towards compliance, and over time, it becomes the basis for certain kinds of transactions, e.g., to have your kids in any school, to buy property of any kind, with the property sellers required to report on who such properties were sold to and proof of income and tax on such income, to acquire a vehicle/jets, etc.
Beyond these considerations, I make bold to say that the Federal Government is better placed to increase tax revenue through this model. In fact, based on my model, the personal income tax revenue is sufficient to fund the 2023 budget, and I’m not blabbing. If we can rely on available data from the Nigeria Bureau of Statistics (NBS), the Q4-2020 unemployment report (which is the most recent data) puts the labor force at c.69.7 million (this may probably be more now considering that in Q2-2020, this number was over 80 million), and reported unemployment rate was 33.3%. Multiple searches I have done over the past few months indicate that the average monthly salary in Nigeria is N339,000.
Those in this income band have c.11% effective tax rate. In effect, their monthly tax is c.N38K. In effect, Nigeria can generate as much as c.N21 trillion from personal income tax alone. And you don’t need consultants to do this, but if you so desire to have one, compensate the non-salaried tax payer who provides cause for use of a consultant by offering c.2% of the tax paid. By extension, the consultant’s details are provided and of course, torch-lighted periodically. Individuals could be required to provide all their account information in the course of filing. In fact, every layer of perceived complexity can be broken down for improved compliance and increased personal tax collection.
As I have noted on many media, accurate data is required to drive increased revenue. A redesign of our tax model can offer the respite we have dreamed of. I struggle to understand how our country can’t fund a N21 trillion budget; worse still, we can’t even find means to fund 50% of the budget, and as a result we break our guiding laws on fiscal responsibility.
I can’t fail to mention that we need honest people who work in strong institutions to raise our tax revenue. I must emphasize that tax collection is not a means to settle cronies.
So dear federal government, would you prefer N1.41 trillion or N21 trillion of income tax revenue? I implore you to have this conversation with the states and the legislators. The search for an optimal income tax model will remain, and we must explore all possibilities as in our search, we may find a jewel.


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The Director General Budget Office of the Federation, Ben Akabueze has revealed that in 2022, Nigeria lost over N3trn through the non-compliance with the Value Added Tax Act.
Akabueze disclosed this during an interview on TV on Tuesday while addressing issues relating to the 2023 budget.
Recall that from January to September last year, the National Bureau of Statistics revealed that the federal government generated the total sum of N1.83trn from VAT.
The DG attributed the loss in VAT to loopholes exploited by foreign shipping companies who do business in Nigeria yet do not remit tax to the government.
Akubueze said, “Some of the new budget expenditure are normally not in the regular annual budget. We have the N553bn the National Assembly missed out in the numbers that they sent to the president to sign, which include money coming from sale of spectrum and licenses of about $530m.
“There is also a loophole in which foreign shipping companies doing businesses in which revenues in Nigeria are exploited, this is one of the things that the finance act 2023 is plugging and what can be achieved from that source.
“With the implementations of the E-custom project that is driven diligently by the FIRS, we expect to see customs revenue improve significantly as the VAT loss to non-compliance is recorded to probably top N3trn.”
The Budget Office DG also revealed that the VAT losses can be curtailed and significant growth seen through the continuous technology drive of the Federal Inland Revenue Service.


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The Lagos Chamber of Commerce and Industry (LCCI) has cautioned the federal government on plans to raise some taxes as contained in the 2022 Finance Bill recently passed by the National Assembly, and currently awaiting the president’s assent.

The 2022 Finance Bill is initiated to facilitate the financing of the 2023 national budget.

In a statement at the weekend, the Director-General, LCCI, Dr Chinyere Almona, said the government should explore new ways to rescue tax expenditures to boost government revenue in 2023, rather than adding to the tax burden of businesses.

She stated: “Rising from the interactions with our members and several stakeholders in the broader business community has placed a responsibility on itself to share the concerns about the 2022 Finance Bill as approved by the National Assembly, and as it awaits the assent of the President.

“On the path of caution, we urge the government to thread conservatively in raising tax rates, since there are new ways of rescuing some tax expenditures to add up to government revenue in 2023.

“Leaving rates at their levels will not lead to a loss of revenue.”

Almona further stated that, based on feedback from operators in the oil and gas sector and the wider business community, LCCI recommend the following:

“We suggest a retention of the Tertiary Education Tax (TET) rate at 2.5 percent, since it was just recently increased from 2 percent to 2.5 percent. At the proposed rate of 3 percent Nigeria’s corporate income tax rate would rise to about 36 percent, which is one of the highest rates in the world, according to available research.

“Retain the 30 percent CIT for all oil and gas companies and consider amending the Petroleum Profit Tax Act with the same provision in the PIA section 104.”

On achieving revenue targets for the budget, LCCI suggests that Ministries, Departments and Agencies and government owned enterprises can intensify their revenue mobilisation efforts in an enabling environment where the private sector thrives.

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Leading construction firms in Nigeria have seen their profit before tax grow by N3.97bn in the first six months of 2022, according to figures obtained .
Despite growing concerns over the continuous increase in inflation rate, of Julius Berger Plc and Arbico increased their profit before tax to N3.97bn from January to June of 2022.

Both firms had recorded N6.114bn in the same six months of 2021.

In contrast to what was recorded in 2021, Julius Berger and Arbico added over N3.97bn as profit before tax in 2022, with the former taking N3.864bn.

Contrary to the N6.01bn Julius Berger recorded in 2021, the company had a 64 per cent increase in 2022, earning N3.864bn as profit before tax.

Also, Arbico had a 14.4 per cent growth, topping N708m it recorded in the first six months of 2021 to N811m in the same months of 2022.

The company had recorded N583m from January to June of 2021, only to fall short of N42.59m, from N583.2m to N540.6m in 2022.

In a move to douse inflation, the Central Bank of Nigeria raised its benchmark lending rate by 150 basis points to 15.50 per cent, the highest since 2006 when the rate was introduced.

Speaking with The Punch, the National President, Estate Rent Commission Agents Association of Nigerian, Mr Godwin Alenkhe, said the construction industry would not be analysed within the prism of economic indices.

Alenkhe explained that the building of infrastructure was a major component of development in any country.

“The fact is that when you look at the sector, it cannot be predicted on the premise of statistics and economic indices,” he said.

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