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Tuesday, March 10,
2020 01:05 PM / by CSL Research / Header Image
Credit: Putnam County
Yesterday, the Executive chairman of the Federal Inland
Revenue Service (FIRS) appeared before the National Assembly to discuss and
provide updates on the activities of the service. During this meeting, he
discussed some loopholes which according to him have been identified and will
be addressed to boost tax revenue collection.
According to the tax chief, several multinationals within
the country have failed to remit the required tax payment to the service by
lying on their pioneer status to get tax exemption from the government for five
years instead of the three years prescribed by the constitution. According to
him, these companies resort to retooling their factories and applying for
additional two-year tax holiday in addition to the initial three. To combat the
this, the tax chief requested the National Assembly to assist the service by
reviewing the laws relating to the pioneer status of companies which would
remove any ambiguity as to qualification for tax holiday.
Another highlighted loophole is in contracts awarded by
the Ministries, Departments & Agencies (MDAs). According to the tax chief,
these MDAs have refused to comply with the new 7.5% VAT on contracts awarded
and continue to remit VAT at the old 5.0% rate. However, the MDAs insist that those
contracts were awarded based on the old 5.0% rate. To monitor this, the service
is seeking advanced technology to aid proper monitoring of activities within
the MDAs.
Nigeria's tax to GDP ratio remains one of the poorest globally.
We view improving the tax collection protocols as a major need to support the
vulnerable revenue profile of the Federal government. With oil revenue under
severe threat from weaker prices, we think it is imperative for the government
to ensure tax collection processes are effective and efficient.
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