The Federal Inland Revenue Service (FIRS) has said that some Government Ministries, Departments and Agencies (MDAs) are insisting that the contracts they awarded were based on the old 5 percent VAT rate and therefore cannot pay 7.5 percent at the point of completion.
FIRS Executive Chairman, Mohammed Nami who disclosed this Monday at a meeting with the James Faleke-led House of Representatives Committee on Finance, also said some business premises in the country were resisting efforts by the Service to deploy technology in the collection of government revenue by connecting them to a common server where it could monitor their transactions as it is done all over the world.
Nami accused some multi-national companies operating in the country of not paying the required tax to the government as they fake the issue of pioneer status to get tax exemption for a period of five years instead of the three years contained in the laws.
According to him, the FIRS is seeking the support of the National Assembly to amend the laws dealing with pioneer status for companies, insisting that several companies in the country were abusing the law and getting undeserved tax waivers.
He said FIRS had sent an executive bill to President Muhammadu Buhari through the office of the Attorney General of the Federation to allow the agency to deploy technology in generating revenue to enable it to raise huge revenue for the government.
Nami decried the problem of revenue leakages which has made Nigeria, though the number one economy in Africa, to rank far behind South Africa in terms of tax- –to GDP, explaining that while tax to GDP in Nigeria stands at about 6.3 percent, tax to GDP in South Africa is 27 percent, and that Nigeria’s tax rate stands as the lowest in Africa.
The FIRS Chairman said as a result of these leakages, the service is was not able to generate revenue for the government to fund the budget as several Nigerians who are supposed to pay tax in the country were avoiding it.
He said private companies recruited by the FIRS to help collect revenue on its behalf were poorly remunerated as they are entitled only to 1 percent of the amount they collect, which may not be enough to offset their expenses, hence some of the tax consultants resort to underhand dealings, negotiating with taxpayers on reducing their declaration so that they can get more money to off et their expenses.
Nami also lamented the underpayment of revenue in the oil and gas sector and some multinationals who hide under the pioneer status clause in the laws to evade paying taxes, adding that while the law allowed for a three year tax holiday based on the pioneer status, these companies now resort to retooling the factories and apply for another two years tax holiday.
He disclosed that FIRS was working on taxing companies with significant economic presence in the country that are currently not paying tax such as Google, Ali Baba, among others through which internet business is being carried out.
The FIRS boss also disclosed that since the Finance Act has given the FIRS the express power to collect stamp duty, it intends to deploy technology in carrying out the function, adding that it is seeking to connect the money deposit banks, the Central Bank of Nigeria with technology so that the 50 kobo stamp duty will drop immediately into government account.
“When you make a transfer of money above N10,000 to somebody, the 50 kobo stamp duty is deducted. But this money does not drop into government account as it ought to. These monies are being kept by the bank. What we are working on right now is to ensure that the stamp duty drops into government account immediately. That is the practice across the world”, he said.
Nami revealed that on assumption of duty, he discovered that about 1139 staff were recruited and posted to tax offices across the country to administer tax matters without adequate training.
“Some of these people are graduates of Engineering, Law and other disciplines.
They are not graduates of taxation. But they were posted to administer tax for the government. We have begun the process of training these people in tax administration as a way of improving our operations”.
The Chairman said as a result of the clause in the Finance Act which exempt companies below the threshold from paying Value Added Tax, some companies have started devising means of evading payment of VAT, by claiming that their capital base is less than N25 million.
He said some of these companies are also involved in the collection of VAT, but are not remitting the same to the government, adding that some government Ministries, Departments and Agencies are also involved in trying not to pay the 7.5 percent VAT.
Nigeria’s Chief Tax Collector said FIRS has written to the President through the office of the Attorney General of the Federation seeking an executive order on the use of technology to monitor transactions in the non-oil sector as it is always easy to monitor transactions in the oil sector.
He said the technology will be connected to supermarkets and other business premises as it is done in other places to enable the service monitor transactions and ensure that what is due to government is collected.
Nami however said that at the moment, the policy which the service is trying to introduce is being resisted by Nigerians and sought the support of the lawmakers to ensure that this is enforced when the executive order is signed by the President.
He said that if the FIRS was able to connect businesses in the e-commerce concept, it would be able to generate huge resources for the government
Nami disclosed that transfer analysis carried out by FIRS indicated that in 2019 alone, about 613 trillion transactions were carried out by Nigerians, pointing out that they are currently analysing the transactions to determine the number that qualified for the 50 kobo stamp duty.
He expressed confidence that a minimum of between 30 to 40 percent of the total transaction will qualify for the payment of the 50 kobo stamp duty, stressing that at the money, the stamp duty warehoused in the Central Bank stands at about N45 billion.
He also informed the members that a particular multi-national company whose name he did not disclose has failed to pay tax to the Nigerian government since 2011, but has rather been declaring losses in order not to pay tax.
He said the company whose product is available on the Nigerian table on a daily basis was in the habit of taking it raw material from one country, send it to another country that is tax-free and from there obtain a no-tax certificate before bringing the raw materials into the country.
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