- FG to Review 28 Tax Items
The Federal Government is to carry out about 28 major reviews and amendment to the current tax laws and regulations to ensure a smooth take off of the National Tax Policy.
Details of the review are contained in the National Tax Policy document, which was approved by the Federal Executive Council last month.
An analysis of the document by our correspondent shows that 11 items are listed for review under “Appendix A” of the document; while 17 major amendments are expected to be carried out under “Appendix B” of the tax policy.
Those items listed for review under “Appendix A” are tax deductions based on the National Office for Technology Acquisition and Promotion; transfer pricing regulations; and pre-incorporation expenses.
Both transactions are currently being regulated under Section 27 of the Companies Income Tax Act.
Others are interest and penalties for tax default; capital allowance on some certain items; artificial transactions; ministerial and Federal Inland Revenue Service approval for tax deductions; clarity on withholding tax regulation; pioneer legislation; infra-group transaction; Stamp Duty Act and Franked Investment Income.
In justifying some of the items listed under “Appendix A” for amendment such as transfer pricing, the document said the review would align the issuance of foreign exchange, tax deduction with technology transfer.
It said, “As transfer pricing is tax legislation, the TP documentation should supersede NOTAP approval for the purposes of tax deduction.
“This policy should be harmonised between the ministries of Information and Technology, the Central Bank of Nigeria, and the Ministry of Finance.
“Aligning NOTAP with TP regulations to ensure NOTAP agreed to payments is always consistent with the TP basis for deduction to ensure NOTAP is more commercial in application.”
For incorporation tax, the document said the amendment would assist to provide clarity and allow a deduction for legitimate business expenditure.
It added, “There is no rule that specifically deals with such expenses. There should be a specific provision to allow a deduction for such expenses either via capital allowances or a revenue deduction.”
Under Appendix B, the document listed some of the areas for review as commencement, change of accounting and cessation rules; Excess Dividend Tax; minimum tax; taxation of insurance companies; Value Added Tax; intra-group transactions and stamp duty.
Others are Capital Gains Tax; withholding tax on dividend declared by companies engaged in gas utilisation projects; restriction of capital allowance claim; holding companies; and Real Estate Investment Trusts.
The document showed that despite the potential of taxation as a dynamic tool for sustainable national development, the Nigerian economy over the years had not derived the maximum benefits of its tax system in terms of revenue generation.
It added that the nation’s tax system had been plagued by numerous challenges such as lack of robust framework for the taxation of the informal sector and high network individuals, thus limiting the revenue base and creating inequity; fragmented database of taxpayers and weak structure for exchange of information by tax authorities, resulting in revenue leakage.
It listed other challenges facing the tax system as inordinate drive by all tiers of government to grow Internally Generated Revenue, which had led to the arbitrary exercise of regulatory powers for revenue purpose; and lack of clarity on taxation powers of each level of government and encroachment on the powers of one level of government by another.
In the same vein, it noted that the country’s tax system was affected by poor accountability of tax revenue; insufficient capacity, which had led to the delegation of powers of revenue officials to third parties, thereby creating complications in the tax system; and the use of aggressive and unorthodox methods for tax collection.
Billionaire Watch3 weeks ago
Startups4 weeks ago
News4 weeks ago
News4 weeks ago
Bitcoin4 weeks ago
Naira4 weeks ago
Forex3 weeks ago
Treasury Bills4 weeks ago