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Companies With Less Than N10m Turnover Should Be Exempted From VAT — CITN President

In this interview with NIKE POPOOLA, the President, Chartered Institute of Taxation of Nigeria, Olajumoke Simplice speaks on challenges of meeting tax projections in recent years among others

The Federal Government recently announced plans to increase Value Added Tax from five per cent to 7.5 per cent. Do you feel this is appropriate?

It is appropriate. There is no right time for it. The problem in this country is that we fail to face reality. The VAT Act was promulgated in 1993 and came into effect in 1994. Our VAT is the lowest when compared with other countries. The idea then was that, let us start from there and continuously, we will move it up. But 25 years on, nothing has been done. In 2007, when the idea was moved, it was killed. Earlier this year, when it was moved, it was killed. So when is the right time?

You know it is a consumption tax, so it is very easy to collect, it is very easy to pay because you pay without knowing that you are paying tax as you are enjoying what you are collecting.

There are exempted items that affect everyday life of the common people. All those things have been exempted, leaving virtually the luxury items. It is the middle people and the rich that will buy the luxury items.

What are the other side effects of this increase?

The problem is that it will affect cost of goods and items in the fact that manufacturers will have to pay higher VAT. And what should be done is to amend the tax law. There should be threshold for registration for VAT. Companies with less than N10m revenue should be exempted from registration. For manufacturers, they should exempt raw materials from VAT, so it will not affect the cost of production. We need to look at the areas of the companies income tax to amend. We can reduce the companies income tax and personal income tax. That will release more money to employees and they will have more money to spend, and they will pay tax. I think what we need to do is to request for accountability because we are doing our obligation to the country. The government should reduce the cost of governance.

Going by the query that tax collection between 2012 and 2014 was better than 2015 and 2018, is that not an indication that the decline was caused by the bad economy under the present administration?

They need to make some research before they come out to condemn somebody. Between 2012 and 2014, how much was oil price? Oil was over $100 per barrel. And if you look at the figure for collection for those years, oil majorly was over 50 per cent. While in the period of Babatunde Fowler, we saw oil price falling below $50; look at the disparity. Of course, collection will be low. When things like that happen, you are forced to look inward, and that was what Fowler did.

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What were the areas he looked at?

He looked inward by looking at the Value Added Tax. He looked at what was happening, looked at the people who were outside the tax net, and brought them in. By that, he succeeded in moving the number of tax payers from 10 million to 20 million. If you look at collection now, we are moving from oil revenue to non-oil revenue. And that is the way it should be. He is institutionalising taxation away from oil revenue. This is what the government should appreciate. People who are making noise are making noise because they are not looking at the economic climate of the nation. It is very bad. I don’t have the figures now, but I can tell you non-oil revenue is over 50 per cent, oil revenue is less than 50 per cent. That is the way it should be and going forward. He has given us indices of how to go about it.

Look at people who are not in the tax net. Issues of Voluntary Asset Income Declaration came, issues of bank statement, using data, that is what this country needs. Bringing out people who have millions in their accounts and are not paying taxes. How will you have billions in your accounts and you are not contributing to the economy that gave you those billions. How can you have N100m in your account and you are not even paying a kobo to the coffers of the government that gave created a conducive environment and the enablers for such person to make that money. As far as I am concerned, I think it is the people that Fowler has touched that are fighting back. He is fighting them and they want to fight back. I know that Fowler means well for this nation, and it will be sad if he is sacrificed just like that.

Voluntary Assets and Income Declaration Scheme was being implemented before it was stopped. How will you describe the impact of this on the revenue?

VAIDS was just for a period, it was a targeted period of one year. The Federal Government started it on the first of July 2017, and it was meant to end in March 2018. But it was extended till 30th June 2018. With the Voluntary Assets and Income Declaration Scheme, they said ‘if you have not been paying taxes, come and pay. This is my asset, this is my income, I want to pay tax.’ And the opportunity came that once you do that for those periods, ones you pay the taxes and you are cleared, you will not be audited for that same period again. For instance, ‘you come out to say since 2014, I have earned N1bn; I have not paid taxes on this N1bn, now I want to pay. This is the value of my assets and my income and it is taxed,’ you now pay tax on it, that is from 2014 to 2015. What the law says is that for those periods, you will not be audited again. You are forgiven. But beyond that period, 2015 to 2016, you can still be audited if you have income and assets to declare and you did not declare then, you will be audited. VAIDS is for a one -year period, so after, anybody that is caught will be audited, pay interest and could even go to jail, since such person did not come up to declare his or her assets and income. Forensic audit will be carried out.

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Since the coming to power of the present regime, thousands of jobs have been lost while a lot of business concerns have either closed down or recorded losses and these entities were expected to pay taxes. Should Fowler still be blamed for this?

The economic climate was not right. There was recession. People were smuggling raw materials, all these things add to the effects of the macro economy. Businesses were closing down, companies were reducing their workforce. If you look at the companies available, if you look at their financial statement, how much they spend on energy, it is huge. Most of these companies have sophisticated equipment they use for production that cannot afford that,    such equipment will suddenly stop working. Some, because of the sensitivity of their equipment, they are always on generator. Those that are running on gas have to.

What of the impact of exchange rate?

It was also during this period that foreign exchange went from N150 to N250 to N500. And what does the law say? The law says that tax is on profit. But if you make losses, there is nothing anyone can do. For those periods, I can confirm to you that a lot of companies made losses because they made exchange losses. For instance, you bought raw material from England that you purchased for N150 to a dollar, you tell your suppliers. Because of the good relationship between you and your suppliers, he packaged your raw materials and send to you. That raw material you have used to produce your goods, remember you have not paid your suppliers. You now have money and woke up to pay, but the exchange rate went up to N500 to $1. You have to pay. It is a loss, and when a company makes loss, you don’t pay taxes. And those periods, a lot of companies almost went under. These are the issues.

What is CITN doing to promote professionalism in taxation?

The duty of the CITN is to be in charge of capacity building for tax professionals. We train, we retrain, we do exams for those who want to become our members. When you become our member, we don’t stop there. We have what we call mandatory professional training programme, and we do that across the nation. So we take training to the doorstep of our members wherever they are in this country. In fact, we are also planning to do the training online, it has started from first of September. Members of CITN in diaspora can now do training. So we take training as basic because you can’t give what you don’t have. What Fowler is doing is to bring the consciousness of taxation to us, everybody is talking about taxation and that is the way it should be.

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Do you partner other foreign tax bodies on training?

For training, we don’t just train in Nigeria. We collaborate with international tax bodies, we are in relationship with South African Institute of Taxation, Chartered Institute of Taxation, Ghana, we are in relationship with the Chartered Institute of Taxation UK, we are in relationship with Global Tax Advisers Platform. The CITN relates with the West African Union of Tax Institute, of which I am its president because the position is for Nigeria. We meet with other tax bodies and discuss tax issues in the different countries. The institute is networking and we want to do it seriously. Next year, we want to have another conference in Dakar. It is part of the training. We are also opening the aspect of Internet training, and e-learning. If you cannot leave your desk because you are a very busy person, do the training online. That is what we are doing to train good professionals that people can walk to and say, they have these issues on taxation. We also do advocacy on issues that affect companies, and tax matters. We do enlightenment. We can do sectoral training, and seminar.

In what ways do you think that the signing of the African Continental Free Trade Agreement will impact the economy and tax generation?

Before the AfCFTA came on board, we discussed it. We looked at the pros and cons. If Nigeria should sign, what is in it for us? If we refuse to sign, what is in it for us? And we came to the conclusion that it is in our interest to sign because it is going to be a global specialisation area. Nigeria will be forced to develop its infrastructure after signing into the programme. Nigerian manufacturers can easily move their goods to West African countries, and the West African countries can move their goods into Nigeria easily. We have a lot of materials in this country that we can develop and export. We have professionals we can export. It will have a positive effect on tax in the country.

{Culled from The Punch}.

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Updated: September 29, 2019 — 1:48 pm

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