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FG to Review 28 Tax Items

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  • 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.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Ireland is Right to Resist US and OECD Led Calls for Global Corporation Tax Rate

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Evaluation of Public Accountability and Tax Culture among Tax Payers in Nigeria

Ireland is right to resist a global minimum corporation tax rate which could end up being a “masterclass in the law of unintended consequences”, affirms the CEO of one of the world’s largest independent financial advisory and fintech organisations.

The comments from Nigel Green, the chief executive and founder of deVere Group, come as Ireland’s finance minister, Paschal Donohoe, signalled the country will push back against attempts to rework the global tax system.

The Organisation for Economic Co-operation and Development (OECD) has been holding talks among 140 countries for several years and now says it hopes to reach a consensus by mid-2021.

Its plans have been given a boost by the Biden administration’s support for a minimum global corporate tax rate. “We’ve had a global race to the bottom in corporate taxation and we hope to put an end to that,” said the U.S. Treasury Secretary Janet Yellen at a hearing in Washington last month.

deVere’s Nigel Green says: “Ireland is right to resist the U.S.-backed calls for a minimum global corporation tax. The plans are misguided and could turn out to be a masterclass in the law of unintended consequences.

“The lack of flexibility would considerably hinder countries’ ability in employing tax policy to generate foreign direct investment (FDI).

“This means that countries which are not especially appealing for investment, except for a low tax regime, will be left hugely disadvantaged.

“Foreign companies and international agencies would likely move elsewhere where there are low taxes as well as other important attractive draws, taking with them direct and indirect jobs and wealth, plus all the other associated benefits of FDI.”

He continues: “America’s call for a global minimum tax is also likely to further disadvantage developing economies.

“Whilst the minimum rate is not yet stated, but once it is, a multinational’s tax rate in each jurisdiction will be set against that minimum and if a lower rate is paid in that jurisdiction, a top-up tax will be demanded. And that extra tax-take will go where the parent company is domiciled.

“Considering that the majority of the world’s major corporations are in developed countries, namely the U.S., it seems the plans are tilted towards the wants and needs of those nations, and in particular of the U.S., already the world’s largest economy.”

The lack of autonomy is another reason why a blanket global corporation tax could curb economic growth, says Mr Green.

“Each country has unique economic characteristics and challenges.  Under the plans, would a country be able to support certain key sectors of their economies, such as tourism or agriculture, by offering rebates when needed for example?  It seems unlikely.”

In addition, for many companies, a global minimum corporation tax will hike their costs of doing business around the world. “Is this then the right policy to pursue as the world is trying to reboot after the pandemic?” asks Mr Green who also argues that these higher costs will ultimately be passed on to consumers and suppliers.

The deVere boss also says that the plans may be flawed as each nation will maintain its unique set of complex exemptions and loopholes that could still be used by powerful corporations.

He concludes: “A global minimum corporation tax rate will do little to level the playing field, and it might make it worse.

“Keeping tax and business policies competitive will help economies recover stronger and quicker.”

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Amazon To Open African Headquarters In South Africa

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US retail giant, Amazon has announced that it would be opening its first African office in South Africa with a real estate investment of over R4 billion. This announcement is coming a week after Twitter choose to open its first African office in Ghana.

Authorities in Cape Town noted that Amazon would be occupying a new development in River Club, a prime section of the city. This new development will create 5,239 jobs in the construction phase alone. Along with 19,000 indirect and induced jobs.

The 15-hectare parcel of land will cost R4 billion and include two precincts. Authorities said the first precinct of 60,000sqm would occupy different layers of development, while the second section of 70,000 will hold Amazon headquarters in Africa.

“US retail giant, Amazon, will be the anchor tenant, opening a base of operations on the African continent. The development is envisaged to take place in phases, with construction set to take place over three to five years.

It is clear that this development offers many economic, social, and environmental benefits for the area. We are committed to driving investment to revitalize the economy, which is slowly recovering following the impact of Covid-19.” This was affirmed by Cape town city officials.

Earlier last week, Techcrunch had reported that Amazon announced the opening of Amazon Salon, the retailer’s first hair salon and a place where Amazon aims to test new technologies with the general public.

Amazon has had its web engineering giant AWS in South Africa for years, but its main e-commerce services have not been available anywhere on the continent.

This announcement came a week after Twitter announced the decision to set up its first African office and headquarters in Accra Ghana. Twitter claimed that Ghana’s democratic and economic strides made the West African country a highly competitive destination over Nigeria and other countries.

It was unclear whether Amazon considered Nigeria and similar parameters as Twitter while deciding its African base.

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Dangote Commits $700M To Sugar Production In Support of Backward Integration Policy

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Dangote Sugar Refinery Plc

The management of Dangote Sugar Refinery Plc has said it is committing over $700m to its sugar projects to support the Backward Integration Policy of the Federal Government to make Nigeria self-sufficient in sugar production.

According to a statement issued on Sunday by Dangote Industries Limited, the company disclosed this to visiting members of the Nasarawa House of Assembly on Friday.

The company noted that Nigeria was one of sub-Saharan Africa’s largest importers of sugar, second only to South Africa with an annual import of over $337m.

The Dangote Sugar management however assured the lawmakers that with the completion of its sugar projects in Nasarawa and Adamawa under the BIP, the nation would be saved more than half of the forex expended on sugar imports annually.

It added that the investment would also lift its people as other people-oriented infrastructures would come with the sugar projects.

The state lawmakers commended the Dangote Group for the choice of the state for the project and the accelerated pace with which the project was being executed, despite occasional delays arising from communal disagreements.

General Manager for the BIP, Dangote Sugar, John Beverley said when the factory was fully operational, it would have the capacity to crush 12,000 tons of cane per day, while 90MW power would be generated for both the company’s use and host communities.

He also disclosed that some 500km roads in all would be constructed to ease transportation within the vicinity. He solicited the support of the lawmakers in controlling the menace of land encroachment by settlers and itinerant farmers.

The Speaker of the Nasarawa State House of Assembly, Ibrahim Abdullah, and his team members, who were conducted around the company’s 78,000 hectares BIP in Tunga Awe Local Government Area commended the company for the project.

Abdullah noted that it would not only open up opportunities in the state but in Africa as a whole, and said the lawmakers were ready to partner and support the company towards the realisation of the sugar project through the relevant legislation.

When phase II of the project is completed, according to the company, it will make it the largest sugar refining plant in Africa.

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