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We’ll go After Billionaire Tax Defaulters – FIRS

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FIRS
  • We’ll go After Billionaire Tax Defaulters – FIRS

The Federal Inland Revenue Service will soon go after the bank accounts of defaulting taxpayers, who are raking in billions of naira in Nigeria and are not paying taxes, according to the FIRS Chairman, Tunde Fowler.

In doing that, the FIRS, through all banks in the country, would do substitution on the accounts, Fowler said, adding that over 6,772 of such defaulting billionaires had been identified by the agency through bank data.

Fowler, who disclosed this at a stakeholders’ meeting, according to a statement on Sunday, noted that most of such taxpayers, who had between N1bn and N5bn in their accounts, had no Taxpayer Identification Number, or had TIN but were not filing any tax returns.

The FIRS chairman stated, “What we have done is what we call substitution, which also is in our laws, and which empowers us to appoint the banks as collection agents for taxes. So, all these ones with TIN and no pay, and no TIN and no pay, totalling 6,772 will have their accounts frozen or put under substitution pending when they come forward.

“First, they refused to come forward in 2016; they refused to come forward under VAIDS and are still operating here. So, we are putting them under notice that it is their civic responsibility to pay tax and to file returns on these accounts.”

Fowler further explained, “We looked at all businesses, partnerships and corporate accounts that have a minimum turnover of N1bn per annum for the past three years. First of all, the law states clearly that before you open a corporate account, part of the opening documentation is the tax ID. From the 23 banks, we have analysed so far, we have 31,395 records, out of which effectively, minus duplications, we had 18,602.

“We broke those into three categories. Those that have TIN tax ID; those that don’t have TIN, and of course, no TIN no pay; and those that have TIN and have not even paid anything.

“So, on a minimum, every company or business included here over the last three years has had a banking turnover of N3bn and above. Some of them have had banking turnover of over N5bn and have not paid one kobo in taxes. Now, the total number of TIN and no pay is 6,772.”

Paraphrasing the Nobel Laurette, Prof Wole Soyinka’s famous quotation of a wasted generation, Fowler said this generation should not repeat Soyinka statement by their conduct, adding, “I plead with the banks to support us; in supporting us, you are supporting Nigeria. In supporting Nigeria, you are supporting all Nigerians and those who have chosen Nigeria as home. And most of all, you are supporting a future that we can leave behind for the upcoming youths of Nigeria.

“I remember this when we were growing up, a statement made by Wole Soyinka that our generation was a wasted generation. That has remained in my mind for many years. Wole Soyinka is still alive. His generation is a generation of 80s and above. Let us not look back and say also our generation has not left any value behind. I think it is time for us to change.”

He noted that the FIRS was also paying closer attention to audit, stating, “We have started a comprehensive audit exercise that involves both national and regional audits…because we got to a position where we found out that majority of the major organisations that were allowed to do self-assessment did not truthfully declare or pay the taxes that were due. To date, we have raised assessment of over N805bn from 1,324 national audits, out of which 499 (taxpayers) have N219bn.”

He did not spare the FIRS even though it had made over N1tn in its collection between January and August this year.

Fowler added, “If you look at the 2018 revenue to date, between January and August, we have done N3.5tn, which is N1tn over 2017. But the main point I want to make is that majority of taxpayers that accounted for this revenue have not changed. The laws have not changed. And to a great extent, the consultants to these companies have not changed. If you look at 2017, there was an increase of close to N800bn over the 2016 collection.

“The increase in 2018 so far showed N1tn. If the same consultants advised or reviewed the accounts of the majority of the taxpayers, one would wonder why such large increases occurred. It is either the taxpayers did not disclose fully their financials to the consultants or the consultants were involved in tax planning. Either way, it is not for the wellbeing of our nation, Nigeria.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

Goldman Sachs Urges Bold Rate Hike as Naira Weakens and Inflation Soars

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Central Bank of Nigeria (CBN)

As Nigeria grapples with soaring inflation and a faltering naira, Goldman Sachs is calling for a substantial increase in interest rates to stabilize the economy and restore investor confidence.

The global investment bank’s recommendation comes ahead of the Central Bank of Nigeria’s (CBN) key monetary policy decision, set to be announced on Tuesday.

Goldman Sachs economists, including Andrew Matheny, argue that incremental rate adjustments will not be sufficient to address the country’s deepening economic challenges.

“Another 50 or 100 basis points is certainly not going to move the needle in the eyes of an investor,” Matheny stated. “Nigeria needs a bold, decisive move to curb inflation and regain investor trust.”

The CBN, under the leadership of Governor Olayemi Cardoso, is anticipated to raise interest rates by 75 basis points to 27% in its upcoming meeting.

This would mark a continuation of the aggressive tightening campaign that began in May 2022, which has seen rates increase by 14.75 percentage points.

Despite this, inflation has remained stubbornly high, highlighting the need for more substantial measures.

The current economic landscape is marked by severe challenges. The naira’s depreciation has led to higher import costs, fueling inflation and eroding consumer purchasing power.

The CBN has attempted to ease the currency’s scarcity by selling dollars to local foreign exchange bureaus, but these efforts have yet to stabilize the naira significantly.

“Developments since the last meeting have definitely been hawkish,” noted Matheny. “The naira has weakened further, exacerbating inflationary pressures. The CBN’s policy needs to reflect this reality more aggressively.”

In response to the persistent inflation and naira weakness, analysts are urging the central bank to implement a more coherent strategy to manage the currency and inflation.

James Marshall of Promeritum Investment Management LLP suggested that the CBN should actively participate in the foreign exchange market to mitigate the naira’s volatility and restore market confidence.

“The central bank needs to be a more consistent and active participant in the forex market,” Marshall said. “A clear strategy to address the naira’s weakness is crucial for stabilizing the economy.”

The CBN’s decision will come as the country faces a critical period. With inflation expected to slow due to favorable comparisons with the previous year and new measures to reduce food costs, including a temporary import duty waiver on wheat and corn, there is hope that the economic situation may improve.

However, analysts anticipate that the CBN will need to implement one final rate hike to solidify inflation’s slowdown and restore positive real rates.

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Economy

Currency Drop Spurs Discount Dilemma in Cairo’s Markets

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Egyptian pound

Under Cairo’s scorching sun, the bustling streets reveal an unexpected twist in dramatic price drops on big-ticket items like cars and appliances.

Following March’s significant currency devaluation, prices for these goods have plunged, leaving consumers hesitant to make purchases amid hopes for even better deals.

Mohamed Yassin, a furniture store vendor, said “People just inquire about prices. They’re afraid to buy in case prices drop further.” This cautious consumer behavior is posing challenges for Egypt’s consumer-driven economy.

In March, Egyptian authorities devalued the pound by nearly 40% to stabilize an economy teetering on the edge. While such moves often lead to inflation spikes, Egypt’s case has been unusual.

Unlike other nations like Nigeria or Argentina, where costs soared post-devaluation, Egypt is witnessing falling prices for high-value items.

Previously inflated prices were driven by a black market in foreign currency, where importers secured dollars at exorbitant rates, passing costs onto consumers.

Now, with the pound stabilizing and foreign currency more accessible, retailers are struggling to sell inventory at pre-devaluation prices.

Despite price reductions, the overall consumer market remains sluggish. The automotive sector has seen a near 75% drop in sales compared to pre-crisis levels.

Major brands like Hyundai and Volkswagen have slashed prices by about a quarter, yet buyers remain cautious.

The economic strain is not limited to luxury items. Everyday expenses continue to rise, albeit more slowly, with anticipated hikes in electricity and fuel prices adding to the pressure.

Experts highlight a period of adjustment as both consumers and traders navigate the volatile exchange-rate environment. Mohamed Abu Basha, head of research at EFG Hermes, explains, “The market is taking time to absorb recent fluctuations.”

Meanwhile, businesses face declining sales, impacting their ability to manage operating costs. Yassin’s store has offered discounts of up to 50% yet remains quiet. “We’ve tried everything, but everyone is waiting,” he laments.

The devaluation has spurred a shift in economic dynamics. Inflation has eased, but the pace varies across sectors. Clothing and transportation costs are up, while food prices fluctuate.

With the phasing out of fuel subsidies and potential electricity price increases, Egyptians are bracing for further financial strain. The recent 300% rise in subsidized bread prices adds another layer of concern.

The situation underscores the balancing act between maintaining consumer confidence and attracting foreign investment.

Economists suggest potential stimulus measures, such as lowering interest rates or increasing public spending, to boost demand.

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Economy

MPC Meeting on July 22-23 to Tackle Inflation as Rates Set to Rise Again

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Interbank rate

The Monetary Policy Committee (MPC) is set to convene on July 22-23, 2024, amid soaring inflation and economic challenges in Nigeria.

Led by Olayemi Cardoso, the committee has already increased interest rates three times this year, raising them by 750 basis points to 26.25 percent.

Nigeria’s annual inflation rate climbed to 34.19 percent in June, driven by rising food prices. Despite these pressures, the Central Bank of Nigeria (CBN) projects that inflation will moderate to around 21.40 percent by year-end.

Market analysts expect a further rate hike as the committee seeks to rein in inflation. Nabila Mohammed from Chapel Hill Denham anticipates a 50–75 basis point increase.

Similarly, Coronation Research forecasts a potential rise of 50 to 100 basis points, given the recent uptick in inflation.

The food inflation rate reached 40.87 percent in June, exacerbated by security issues in key agricultural regions.

Essential commodities such as millet, garri, and yams have seen significant price hikes, impacting household budgets and savings.

As the MPC meets, the National Bureau of Statistics is set to release data on selected food prices for June, providing further insights into the inflationary trends affecting Nigerians.

The upcoming MPC meeting will be crucial in determining the trajectory of Nigeria’s monetary policy as the government grapples with economic instability.

The focus remains on balancing inflation control with economic growth to ensure stability in Africa’s largest economy.

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