• Thursday, December 07, 2023
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Striking a balance between what, when to pay taxes


We are beginning to see a scenario where tax managers and administrators are finding it difficult to agree on what is payable as tax. When a tax manager uses best of judgment approach, the tax administrators prove such wrong, thereby raising questions on the role of truth in self-assessment tax regime.

The challenge remains the need to strike a fair balance in getting the work done, meaning that co-operation is the word. In today’s tax world, many countries want to make sure that their tax base is not eroded by tax abuse, but for many tax managers operating in Africa (Nigeria inclusive) this can be a painful experience because they are dealing with such rapid growth in inbound investment. Emerging countries tend to experience large volumes of tax policy and tax administration as they develop the laws and processes to secure what they feel are the right levels of tax transactions. Experts still believe the need to strike the right balance in providing a business-friendly tax environment for investors while making sure that when foreign investors come into a country, they pay a fair share of the tax burden. This is particularly as large multinational companies now recognise that Africa could be the next economic frontier.

Many schools of thought believe that Africa does not need to follow the same path of confrontation by tax authorities and taxpayers in many Organisation for Economic Co-operation and Development (OECD) countries, because there are better ways of structuring and managing this relationship. “It is not easy, and it is a challenge to overcome a lack of trust. But the idea of a relationship that builds on openness and transparency is one that both tax administration and businesses would benefit, especially in the complex area of transfer pricing. This balance must be found if Africa is to continue its stellar development and reap the ensuing rewards,” says Jeffrey Owens, senior policy adviser to the Global Vice Chair – Tax.

According to him, “the world has accepted that securing high levels of tax compliance requires not only robust enforcement but also improved taxpayer service. They have therefore developed more sophisticated risk management tools, a greater willingness to group taxpayers into high- and low-risk groups and a ‘lighter touch’ audit approach to tax administrations are actively increasing levels of commercial awareness and industry specialisation, and many auditors now have a better awareness of how business operates.”

In their recent global tax policy and briefing, titled “The role of multinational companies in Africa’s development: The tax dimension,” the tax expert says “it can take many years for a tax regime unaccustomed to policing cross-border commerce to mature. So, some key nations rely on existing legislation and processes that globetrotting taxpayers may view as unsophisticated, complex, and without doubt, culturally different.”