The COVID-19 pandemic has forced the world’s economies to stall. While some individual companies have experienced unprecedented booms, the World Economic Forum predicts that global growth in 2020 will fall by 4.9%.
Such a blow to the economy has presented a major challenge for governments and businesses alike when it comes to tax collection and compliance. Already the International Monetary Fund (IMF) forecasts that most countries around the world will experience a significant decline in tax revenue because only a portion of brick-and-mortar sales have transitioned online and others failed to materialize altogether.
The pandemic-induced tax revenue loss will be especially challenging for African countries, where already almost 86 % of people work in the informal economy, including millions of small business owners and traders who are struggling with tax compliance, as well as now dealing with the pandemic. Despite seeing unprecedented economic growth and political maturity over the last few decades, tax revenue across the sub-Saharan region has been declining for the last 15 years. Due to illicit financial flows, which include tax avoidance, corruption, and theft, Africa loses almost $89bn a year—around 3.7% of the total continent’s GDP.
Inefficient tax collection systems
But tax avoidance is a two-sided problem. According to Mindaugas Glodas, CEO at NRD Companies, a global IT and consulting group of companies specializing in governance and economic digital infrastructure, such a level of under-declaration of sales in Africa comes as no surprise given the fact that the current tax collection systems and policies are ineffective, creating significant barriers for businesses to comply with tax obligations.
“For example, business owners might be required to have a dedicated fiscal device needed to record tax information, which, especially for small businesses, is too expensive to purchase and maintain,” said Mr Glodas. “Such an obligation also sets up an entry barrier for SMEs due to their already scarce funds. This cannot continue because tax revenue is crucial when it comes to ensuring essential social and economic benefits like pensions, healthcare, and education. As governments start to draw up post-pandemic recovery plans, it is imperative that they address the ineffectiveness of tax collection systems and policies and lend a hand to businesses themselves.”
So far, businesspeople in African countries, which have introduced fiscal requirements for point-of-sale, have been using cash registers with Electronic Fiscal Devices (EFDs) or a specific type of ECR, online cash registers (OCRs). However, ECRs have a variety of risks related to the integrity of transactions and reporting, as well as are out of step with current demands. On top of that, they require to be equipped with a fiscal device—a luxury for the majority of African businesses. While OCRs are generally a better option, the current generation also needs a fiscal device.
An all-encompassing solution
To address these shortcomings, NRD Companies has developed Virtual Fiscal Device Management System (VFDMS)—a new-generation online cash registry system, deployed in tax authorities, and which is capable of transmitting a continuous real-time flow of nationwide data critical for assessing tax compliance without the need for a fiscal device. First of its kind in the world, VFDMS can be installed on the site of tax administration and retailers can connect to it via computers or smartphones. Tax administrators can impose offline data collection rules and manage the behaviour of the apps used by the taxpayers, e.g. to allow or disallow offline capability and to set the maximal period of offline operation.
“VFDMS can be a decisive factor for small businesses as it minimizes upfront investment and can be operated simply through an app,” said Mr Glodas. “Together with the necessary policies, such a system is capable of reducing illegal activities and increasing tax compliance. Also, the real-time flow of tax data helps governments to plan the budget accordingly.”
NRD Companies is already putting the finishing touches on the first-ever implementation of VFDMS in Africa in Zanzibar, where tax evasion has been a significant problem. The new system will be used for issuing fiscal digital receipts, signed by a server in real-time, for every online transaction taxpayers make. The Zanzibari government reckons this move will help optimize revenue collection by promoting voluntary compliance and public confidence through effective, efficient, transparent, and fair administration of tax laws, at the same time reengineering business processes and modernizing technology.
VFDMS’s digital capabilities are also integral considering the fact that the world is becoming increasingly digitized. The World Economic Forum predicts that 70% of new value created over the next decade will be based on digital business models, thus leading to increasing online sales, which can be operated through VFDMS as well. With e-commerce on the rise, African countries might face another challenge of collecting taxes, only this time on digital trade.
US Senate Passes $1.9 Trillion Stimulus Package
US Senate Passes $1.9 Trillion Stimulus Package
President Biden’s $1.9 trillion economic stimulus plan would have far-reaching effects on society as the country tries to turn the corner on a pandemic that has killed more than half a million people in the United States.
The mammoth bill approved by the Senate on Saturday would provide direct payments to Americans, extend jobless benefits and provide a huge financial infusion to states and local governments as well as to schools to help them reopen. It provides funding for priorities like coronavirus testing and vaccine distribution. And it amounts to an ambitious antipoverty program, offering significant benefits for low-income people.
Here’s a guide to what’s included in the plan, which is scheduled to go before the House for final approval on Tuesday and then would head to Mr. Biden for his signature.
The bill would give out $1,400 stimulus checks.
Individuals making under $75,000 and married couples making under $150,000 would receive direct payments of $1,400 per person. The bill would also provide $1,400 per dependent.
The payments would gradually decrease above those income levels and disappear entirely above an income cap: $80,000 for individuals and $160,000 for married couples.
Those caps were lowered from the thresholds in the House’s version of the stimulus plan, which set the cutoffs at $100,000 for individuals and $200,000 for married couples.
The current $300-per-week boost to unemployment benefits would continue.
The Senate bill extends unemployment programs through early September, including the $300-per-week federal supplement provided in the last stimulus plan passed in December.
Mr. Biden had proposed bumping up that supplemental benefit to $400 per week, which the House agreed to, but the Senate kept it at $300 weekly.
The Senate bill also includes a provision intended to avert surprise tax bills for people who lost jobs, waiving federal income taxes for the first $10,200 of unemployment benefits received in 2020 for households earning under $150,000.
The child tax credit would become more generous, among other benefits.
For 2021, the bill would temporarily expand the child tax credit, which is currently worth up to $2,000 per child under 17. Under the legislation, the tax credit would be as much as $3,600 for children up to age 5 and as much as $3,000 for children 6 to 17.
The bill would make the full value of the credit available to low-income people who are currently ineligible or receive only a portion. And for the second half of this year, it would have the federal government send advance payments of the credit to Americans in periodic installments, akin to a guaranteed income for families with children.
The legislation would also expand the child and dependent care tax credit for 2021, and it would expand the earned-income tax credit for workers without children for this year as well. Through 2025, it would exempt student loan forgiveness from income taxes.
Money would go to fight the pandemic and to help states, local governments and schools.
The bill would provide funding for vaccine distribution as well as coronavirus testing, contact tracing and genomic sequencing. It would give money to the Federal Emergency Management Agency as well.
It would provide $350 billion for states, local governments, territories and tribal governments, and it contains about $130 billion for schools. It also includes funding for colleges and universities, transit agencies, housing aid, child care providers and food assistance.
In addition, the bill contains funding to help businesses, including restaurants and live venues, and it includes a bailout for multiemployer pension plans that are financially troubled.
The Affordable Care Act would get a boost.
The bill would temporarily increase subsidies for people purchasing health insurance through the Affordable Care Act’s marketplaces. It includes billions of dollars for public health programs and veterans’ health care.
It also seeks to help those who have lost jobs keep the health insurance coverage they had through their employer, covering the full cost of premiums through a federal program called COBRA through September.
One thing missing: a minimum wage hike.
As part of the stimulus plan, Mr. Biden wanted to raise the federal minimum wage, which is now $7.25 per hour, to $15 per hour.
The stimulus bill passed by the House would increase the wage to $15 per hour by 2025, but the Senate parliamentarian said the provision violated the strict rules that Senate Democrats had to follow to pass the bill through a special process that shielded it from a filibuster and allowed for its approval with only Democratic support. A vote in the Senate on Friday to add the wage increase back to the bill failed.
The Senate bill also dropped funding for a rail project in Silicon Valley in Northern California and a bridge between upstate New York and Canada, two provisions that were included in the House bill and drew criticism from Republicans.
Seplat Petroleum Pays US$564.165 Million to Federal Government in 2020
Seplat Petroleum, an indigenous Nigerian upstream exploration and production company, announced it paid a total sum of US$564.165 million to the Federal Government in 2020.
In the report on payments made available to the Nigerian Stock Exchange and seen by Investors King, Seplat Petroleum paid US$389.576 million to the Nigerian National Petroleum Corporation (NNPC) as production entitlement in 2020.
Production entitlement is the government’s share of production in the period under review from projects operated by Seplat.
This comprises crude oil and gas attributable to the Nigerian government by virtue of its participation as an equity holder in projects within its sovereign jurisdiction (Nigeria).
Also, Seplat paid US$130.009 million to the Department of Petroleum Resources in 2020. A breakdown of the amount showed US$111.633 million was paid as royalties while US$18.376 million was paid as fees.
Similarly, US$579,361 was paid as a fee to the Nigeria Export Supervision Scheme.
The energy company made another payment of US$17.935 million in fee for 2020.
While the Nigerian Content Development and Monitoring Board received US$4.826 million in fee from Seplat in 2020.
Seplat paid US$21.239 million in taxes to the Federal Inland Revenue Service in 2020.
Therefore, Seplat Petroleum paid a total sum of US$564.165 million to the Federal Government in the 2020 financial year. See the details below.
FIRS Sets N5.9 Trillion Revenue Target for 2021
FIRS to Generate N5.9 Trillion Revenue in 2021
Mohammed Nami, the Chairman of Federal Inland Revenue Service, FIRS, on Friday said the agency is projecting total revenue of N5.9 trillion for the 2021 fiscal year.
Nami stated this while meeting with the House of Representatives Committee on Finance led by Hon. James Falake on the Service’s 2021 budget defence of its proposed Revenue and Expenditure Estimates.
According to the Chairman, N4.26 trillion and N1.64 trillion were expected to come from non-oil and oil components, respectively.
However, Nami put the cost of collecting the projected revenue at N289.25 billion or 7 percent of the proposed total revenue for the year, higher than the N180.76 billion spent in 2020 to fund the three operational expenditure heads for the year.
He said: “Out of the proposed expenditure of N289.25 billion across the three expenditure heads, the sum of N147.08 billion and N94.97 billion are to be expended on Personnel and Overhead Costs against 2020 budgeted sum of N97.36 billion and N43.64 billion respectively. Also, the sum of N47.19 billion is estimated to be expended on capital items against the budgeted sum of N27.80 billion in 2020. The sum is to cater for on-going and new projects for effective revenue drive.”
Speaking on while the agency failed to meet its 2020 target, Nami said “There’s lockdown effect on businesses, implementation directive also for us to study, research best practices on tax administration which involves travelling to overseas and we also have to expand offices and create offices more at rural areas to get closer to the taxpayers, we pay rent for those offices and this could be the reason why all these things went up.
“And if you have more staff surely, their salary will go up, taxes that you’re going to pay on their behalf will go up, the National Housing Fund contribution, PENCOM contribution will go up. Those promoted you have to implement a new salary regime for them. There’s also the issue of inflation and exchange rate differential”, he said.
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