Wednesday, April 29, 2020 / 2:54 PM / Bukola Akinyele for
WebTV / Header Image Credit: PwC
Partner and West African Tax Leader, Price Waterhouse Coopers, Mr. Taiwo Oyedele as called for more coordination, Data harmonization and tax reforms to improve domestic economic output. Speaking on WebTV's Coronanomics Program, the tax expert identified the need for the Federal, State and Local Governments to simply tax processes and expand the fiscal opportunities by leveraging data and effective planning.
Sharing his thought on tax implication for businesses in Nigeria during COVID-19 Pandemic, Ayodele said, "we could have done a lot of things better but we still have the time to plan, the response has been slow particularly from different arms of government, the measures introduced so far are codified".
He noted that the Federal Internal Revenue Service( FIRS ) has introduced fresh measures such as the extension of the dates of filing returns and the submission of tax returns online. Oyedele said that only a few states have responded to revised tax conditions during the ongoing pandemic.
Oyedele expected the different tax authorities to come together under the platform of joint tax board (JTB) to introduce uniform measures across the country and agree on state-specific measures to accommodate peculiarities. He commended the ministry of Finance (MoF) for introducing some new tax measures but these were not enough to tackle the size and the scale on the fiscal challenge the country was facing.
Speaking on key tax measure that could reposition the Nigerian economy with-COVID-19 given a tax gross domestic product (GDP) of 7%, Ayodele responded that many economies that run efficient governments, provide top quality infrastructure, and provide good public services rely on robust tax revenues. He said, unfortunately Nigeria cannot presently afford this due to the country's low tax revenue and huge infrastructure gap. He noted that countries that provide their citizens with large scale palliatives to reduce the adverse effects of the COVID-19 have accrued accumulated tax revenues that provide fiscal buffers to shocks such as the pandemic.
The accountant observed that in 2017 Nigeria developed a national approach to tax policies but implementation was slow, the tax net has been up but we don't have data to track citizens in order to be paying taxes. According to him, Nigeria tax organizations data does not correlate with one another and the country does not have the fiscal space to access what we need to do at this period of the Pandemic.
He said, before COVID-19 Nigeria was already struggling in terms of low revenue, COVID-19 simply amplified the problems and this was the time the country needed to take important decisions about how to improve tax revenue, how to increase the tax base, and how to eliminate tax incentives that do not add value to the economy.
He cited government enterprises as part of companies who do not pay regular tax, Ayodele said that if all the government companies at local ,state and federal levels pay taxes it would add to GDP, pushing the tax to GDP ratio to 10%.
On a recently released document from the FIRS urging businesses that were doing well during the COVID-19 period to pay accelerated taxes, he was of the opinion that one size does not fit all, targeting sectors that are doing well to accelerate their tax obligations to support vulnerable sectors was not a holistic perspective of business and revenue cycles .
He said, what was critical was the elimination of public sector wastage, he noted that the monthly allowance of governors was equivalent to several months of salary which was a fiscal wastage. He insisted that Nigeria should focus on fiscal pressure points and not government salaries.
According to him, the Nigerian government has not been able to earn the trust of the people, in order earn this trust officials at the Federal, state and local governments must be transparent, they must be transparent in the money they generate, what the money is spent on and also they must be transparent in the process of awarding contracts. He said, the same would apply to the private sector, individuals and community leaders.
Speaking on where states will generate money. The tax expert gave said that every state should look at their affairs differently, in a state that has a large number of high net worth individuals this would be the time to pay attention to easing property tax generate income. Likewise, for states who do not have many high net worth individuals such states should manage the little resources they have efficiently and maximise value from revenue.
Reviewing the Finance act signed in 2020 which transformed the fiscal space and encouraged Small & Medium Enterprises (SMEs), Oyedele explained that the Finance Act introduced several palliatives for SMEs before the COVID-19 pandemic started they included exemptions from paying company income tax, exemption from charging VAT for companies with less than N25m turn over, exemption from stamp duty on money transfers of N10, 000 or less.
He noted that when introducing new laws the country needed to invest in capacity building at federal and state levels, the tax expert said, the challenge to implement the Finance Act is compounded by COVID-19.
Ayodele believed Nigeria's fiscal situation required coordination, harmonization especially leveraging data and ensuring that it becomes a strategic form of revenue in supporting state to boost infrastructure, business and individuals at the time of a COVID-19 pandemic.