KPMG set to launch tax risk management report on Nigerian firms

KPMG Nigeria has announced plans to make public the result of a tax risk management report on the readiness of Nigerian firms to embrace a more aggressive tax drive likely to be introduced by the federal government in the face of lingering shortfall in government revenue as a result of the global slump in oil prices which may continue in 2016 and beyond.

The report, which the firm said will be made public at a formal launch on Thursday, November 19, at a KPMG Tax Breakfast meeting scheduled for the Wheatbaker Hotel, Ikoyi, covered a period of three months and focused on 60 Nigerians businesses across all sectors of the economy.

Speaking at the media briefing ahead of the launch, Victor Onyekpa, head and partner, KPMG’s tax, regulatory and people services division, explained that the 2015 federal budget already had a shortfall of N800billion with projected revenue of N3.6 trillion against N4.46trn expenditure, which would only mean that the Buhari-led government would seek a “more aggressive tax drive” to shore up the shortfall.

Explaining the highlights of the report, Nike James, also a partner at KPMG’s tax, regulatory and people services division, stated that the firm undertook the survey for two major reason which were to help firms get their tax management right and to help them develop “fit-for-purpose” tax departments that could accurately do the job of preparing their tax figures without underpaying taxes with all its attendant penalties or overpaying on taxes to the displeasure of their boards..

According to James, who led the team that carried out the survey along with Ikechukwu Ene, also a manager with KPMG’s tax, regulatory and people services division, the survey focused on five key areas.

Explaining each, the tax expert stated that firstly, the survey sought to evaluate the extent to which companies appreciate the need to design strategies for managing and controlling taxes within their businesses. The findings revealed that “only 30percent of respondents reported Tax as being strategic enough and noteworthy of discussion at the board room level.”

On the second area which is risk management practices in tax departments, the survey, according to James, revealed that “many of the respondents do not have formal structures for the identification of business issues and transactions that generate tax risks, much less having the ability to monitor and manage these risks.”

The third area the survey focused on was each organisation’s human resources that were saddled with the handling of their tax departments and the survey revealed that “over 60 percent of respondents believe that their tax departments are not adequately staffed and do not have the right people” in place, James explained.

On each firm’s tax department operations which were the fourth area of focus, she explained that the survey saw this area as being very important as it was the major reason organisations “suffer significant back-duty taxes in areas where they should merely have acted as agents of the government for collection and remittance of such taxes.” The result was also not impressive due to a downward spiral from board room level which had affected the operations of each firm’s tax department.

In the area of tax department set-up, the survey assessed “the extent to which organisations have instituted workflows and processes as an important aspect of good governance as this has a direct impact on the risk of inaccuracies in tax reporting and ultimately tax failures that result in significant tax audit liabilities.”

James explained that even for blue-chip companies and conglomerates with several branches in many parts of the country, the survey found that there was no standardisation from place to place, which made inaccuracies likely.

While fielding questions from the press on the proposed launch, Onyekpa stated that Babatunde Fowler, the acting executive chairman of the Federal Inland Revenue Board (FIRS), would deliver the keynote address while Jane McCormick, KPMG’s head of tax for Europe, Middle East and Africa (EMA) region, will share a global perspective on tax risk management and optimisation of the tax department