FIRS Explains Tax Waivers on Penalties

• FIRS Explains Tax Waivers on Penalties

The Federal Inland Revenue Service (FIRS) yesterday explained that its recent decision to grant tax waivers on penalty and interest was part of the federal government efforts to improve the ease of doing business among micro, small and medium scale enterprises (MSMEs) in the country.

The waiver to MSMEs on tax penalties and levies is from 2013 to 2016.

Speaking yesterday in Lagos at a public-private dialogue (PPD) which focused on: “Tax and regulatory policy framework for MSMSE in Nigeria,” organised by the National Association of Small and Medium Enterprises (NASME) with the support of Deloitte and Enable2, the Chairman of FIRS, Mr. Babatunde Fowler, noted that in terms of the waivers, MSMEs have to apply before the close of the window on December 31, while adding that another condition which the MSMEs have to fulfill was the payment of 25 percent of the outstanding taxes.

He stated that it was the desire of the federal government to give waivers on interests and penalties to MSMEs, stressing that the government was working to reduce the tax burden on the citizens. He expressed optimism that before the end of the year, the new tax law will become effective.

Fowler explained that due to the nature of business and the level of record keeping of MSMEs, his agency decided to give them extra time to present their records. The FIRS boss said his agency would also educate the MSME operators on all the charges, dues, levies or even penalties are not taxes.

He added: “Going forward we believe by next year everyone should be complying in terms of taxes, and the issues of tax holidays will not arise.

We have also deployed technology free of charge to all states of the federation, including the state government so that the tax portion can be remitted directly; even the state tax and the federal portion are remitted directly.

“Within the allowable structures, we will assist the states through programme capacity; we have to understand that there is a little federal and the state can do. They have their own constitutional independence; therefore there is a limit to how far we can go.

“The federal government does have the MSMEs as it number one priority because we believe that for any economy to work, you (MSMEs) have to work. Those who have assets in excess of 300 million are at the top scale. In terms of the waivers, the taxing authorities in Nigeria are distinct. We do have the prerogative to make policy on the federal taxes.

“The state’s internal revenue service boards are totally autonomous and they also have to make separate policies. This has slowed the duplication of taxes in Nigeria. What we have discovered is that there are now illegal charges collected by some officials who call themselves revenue operators at the local government level.”

In her remark, the Minister of Finance, Mrs. Kemi Adeosun, represented by the Director of Technical Service Department, Hajia Larai Shuaibu, noted that as part of measures to encourage businesses with a tax system that is easy to understand, the government constituted the National Tax Policy Review Committee (NTPRC) to review the National Tax Policy Document.

She stated that the exercise was setup with a view to addressing the modalities for simplifying the processes and reducing the tax burden on small businesses.

Adeosun called for the review of qualification for lower income tax rate applicable to small businesses in line with current economic realities, adding that the income tax rate for small businesses should be further reduced as an incentive to encourage compliance and promote MSMEs.

She noted that the review would be a continuous exercise, as a means of evolving global best practices and keeping with the domestic socio-economic realities. According to her, government has initiated the process of working towards having some recommendations of the committee as part of its 2017 fiscal Policy Measures.

The Minister added: “The Ministry of finance shall work with the legislature to ensure that the requisite changes to tax laws are enacted together with the Appropriation Act of the same year. This would require the executive to timely present the tax laws as executive bill for the timely consideration of the National and State Houses of Assemblies.”