Victor Athe is a Partner, Tax Services,Stransact Chartered Accountantsand Audit, an RSM correspondent firm in Nigeria. In this interview, Athe speaks on why Nigerians are feeling overburdened by existing taxes and VAT, the 2023 finance Act, public debt to GDP ratio and how the Federal government can harmonise tax collection among other issues.
What is the philosophy of Stransact Chartered Accountants and Audit in offering support to businesses?
Stransact currently offers a broad spectrum of professional services covering tax compliance/advisory services, all aspects of transfer pricing (TP) and its related services, transactions advisory, deals advisory, accounting, audit and all other attest-type services. Our strategy for our target market is to provide these professional services to our clients with the same or a superior level of quality compared to what is offered by the big brands in the market. This way, we constantly help our clients derive strategic value in all their transactions,that are significantly in excess of the costs to them.
Last year, Nigeria enacted the Finance Act 2023 (FA 2023). What is your structural assessment of this Act?
The Nigerian Companies Income Tax Act (CITA) provides specific rules for the taxation of foreign entities engaged in international shipping and airline transportation in Nigeria. The profits which these foreign entities specifically derive in Nigeria are typically subjected to tax using a deemed income approach (where income tax rate is applied on a fair and reasonable percentage of their gross revenues). The FA 2023 now requires that the gross revenue statements submitted by these foreign entities when filing their annual income tax returns would now have to be certified by an external auditor. The agencies that maintain regulatory oversight over shipping and air transport companies have also been mandated to ensure that these foreign companies present evidence of adequate tax compliance in Nigeria before all relevant regulatory permits and approvals are approved for them. In my view, the additional requirements introduced by the FA 2023 would actually help ensure that the tax bases relating to the economic activities carried on by the foreign entities in Nigeria are not eroded. This way, the country can reap its fair share of taxes from the enormous economic activities of these foreign businesses.
What are the key challenges and opportunities for businesses in relation to taxation in the current economic and regulatory landscape?
There are undoubtedly a plethora of challenges in Nigerias current economic and regulatory landscape as it relates to taxation, including multiplicity of taxes, poor tax administration, non-availability of database, tax touting, ambiguity of Nigerian tax laws, non-payment of tax refunds, issues around utilisation of withholding tax credit notes, wrong interpretation of tax laws during tax dispute resolutions, etc. Most of these issues generally result in a low tax morale in taxpayers (both businesses and individuals). Recent studies have shown that a key determinant of tax morale is the perceived quality of the tax administration. Increase in tax morale has also been linked to satisfaction with public services, supporting the existence of the fiscal contract between taxpayers and the state-a willingness to pay tax in return for effective public services. Notwithstanding the existing challenges, there are lots of tax incentives that have been structured to encourage increased investments in the Nigerian economy. Some of the existing incentives include tax holidays, tax exemption schemes, repatriation of foreign capital/profits at official exchange rates, export incentives, Export Expansion Grant (EEG) Scheme, gas utilisation incentives, tourism incentives, reduced tax rates on interest income among others.
How can tax contribute to the growth of the countrys GDP?
There is evidence to support the fact that countries with high tax to gross domestic product (GDP) ratios have higher tax morale. Improving tax morale holds the potential to increase government revenue from taxation with relatively little enforcement efforts. States are battling with taxes too.
What do you think is holding back some states in addressing the issue of multiple taxation?
The Nigerian Constitution on which all other laws run, contains the exclusive, concurrent and residual legislative lists. Each specifies the type of taxes that the various tiers of governments in Nigeria should have legislative powers over. The debacle on whether the federal government or state governments should collect Value Added Tax, VAT, is yet to be conclusively resolved due to the peculiar complications and complexities around the issue. The practice of coming up with different names for the same tax type by federal, state and local government agencies and ministries is tantamount to tax duplication.
Duplicatio
