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130 Countries Signs Commitment to Global Tax Rate, Nigeria Abstains

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Global Tax Rate-Investors King

Efforts to force multinational companies to pay a fairer share of tax have taken a decisive step forward after 130 countries and jurisdictions agreed to plans for a global minimum corporate tax rate.

In a landmark moment for the world economy, the Organisation for Economic Co-operation and Development (OECD) issued a statement committing each of the countries to a two-pillar plan to radically reshape the global tax system.

Building on an agreement between the G7 in London last month, the latest breakthrough brings together all of the nations in the G20 group of the world’s biggest economies, including China, India, Brazil and Russia.

However, some countries, including Ireland, Hungary, and Estonia, are yet to sign the reforms, which are being negotiated with 139 participants in talks organised by the Paris-based OECD.

The others not to have signed at this stage are Barbados, Kenya, Nigeria, Sri Lanka and St Vincent & the Grenadines. Peru abstained because it currently does not have a government.

Several jurisdictions with low or zero corporation tax rates commonly regarded as tax havens – including the Cayman Islands and Gibraltar – were among signatories to the deal. Sources close to the process said it was clear to these places that the “writing was on the wall”.

The principle of the agreement is that multinationals would be forced to pay a minimum of 15% tax in each country they operate in. It also includes plans to prevent the shifting of profits into tax havens by tech giants and other multinationals by enabling signatory countries to tax the world’s largest companies based on revenues generated within their borders.

The OECD said more than $100bn (£73bn) was expected to be raised by curbing profit shifting. About $150bn is expected to be raised from the global minimum tax rate.

The announcement comes ahead of further talks on tax reforms expected to be held between finance ministers at G20 meetings in Venice next month, with ambitions for a final global deal to be agreed upon by October and implemented in 2023.

Mathias Cormann, the OECD’s secretary-general, said: “After years of intense work and negotiations, this historic package will ensure that large multinational companies pay their fair share of tax everywhere.”

Some nations and jurisdictions with low tax rates, including Cyprus, were not part of the OECD talks, while the nine countries that refused to join the agreement at this stage set low tax rates below 15%. Ireland’s headline corporate tax rate is 12.5% and Hungary’s is 9%.

Sources said Ireland had been engaged in positive and constructive talks but was holding back from an agreement given its lower tax rate and a desire to see further progress in the US, where Joe Biden must push US tax reforms through a divided Congress.

Hopes remain, however, that a global deal will be achieved. The 130 nations that have signed so far account for 90% of the world economy. Biden said the breakthrough put the world in a “striking distance of full global agreement to halt the race to the bottom for corporate taxes”.

“With a global minimum tax in place, multinational corporations will no longer be able to pit countries against one another in a bid to push tax rates down and protect their profits at the expense of public revenue,” he said.

Details contained in the OECD statement confirmed an exemption for financial services and natural resources companies as part of the “pillar one” agreement. Finance firms and mining giants will, however, be subject to the minimum tax rate. The UK chancellor, Rishi Sunak, had pushed for the City of London to be excluded from the global tax overhaul amid concerns it would undermine the UK financial services industry.

Sunak said he was pleased to see momentum had been continued after the G7 meetings in London last month. “The fact that 130 countries across the world, including all of the G20, are now on board marks a further step in our mission to reform global tax,” he said.

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Economy

Finance Minister Edun Lauds Nigerians for Enduring Economic Reforms Amidst Hardships

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The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, has commended Nigerians for enduring the hardships caused by the economic reforms of President Bola Tinubu.

Minister Edun, who spoke on Thursday during an interactive session with the Senate Committee on Finance at the National Assembly in Abuja, highlighted that these reforms have begun to yield positive results.

Edun explained that two critical reforms initiated by the Tinubu government are now at the stage of delivering results.

He added that these reforms will restore the fiscal viability of the country.

“The two critical reforms on the market-based price of Premium Motor Spirit (PMS) and foreign exchange are now at the stage of delivering results, which will, by extension, restore the viability of the nation’s economy through fiscal restoration.”

“These two pillars of the economic reforms, which are now taking positive shape, portend additional revenue for the government, recovery of NNPCL’s finances, and a strong foundation for growing the economy, attracting investment, and creating jobs.”

“I think we need to commend Nigerians for staying the course to this stage of realizing these benefits,” he stated.

The Chairman of the Committee, Senator Sani Musa, said that the session was important as it gave stakeholders the opportunity to deliberate on pressing issues.

He said, “Today, we gather to deliberate on pressing matters related to the sale of crude oil to domestic refineries in Nigeria in naira, its implications on the approved Medium-Term Expenditure Framework and Fiscal Strategy Paper for 2024-2026, and what we should expect for 2025-2027.”

The committee reaffirmed the need for accountability in the NNPC, stating, “Additionally, we will examine shortfalls in NNPCL revenue remittances, focusing on key areas such as foreign and domestic excess crude accounts, the signature bonus accounts, NNPCL cash call accounts, and any outstanding or remitted revenue linked to under-recoveries.”

“This meeting underscores our commitment to transparency, accountability, and responsible management of our national resources.”

Musa concluded that with relevant collaboration, solutions can be identified.

He stated, “I am confident that with the collaboration of the Ministry of Finance under the able leadership of the Coordinating Minister of the Economy, the Office of the Accountant General of the Federation, the Central Bank of Nigeria, the Revenue Mobilization and Fiscal Commission, and other critical stakeholders present here, we will identify solutions and ensure that due processes are upheld for the benefit of our economy and the Nigerian people.”

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President Tinubu Approves Concrete Redesign for Abuja-Kaduna Road Amid Contract Termination

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The Federal Government has announced plans to address the difficulties faced by road users on the Abuja-Kaduna-Zaria-Kano road with the redesign of the dual carriageway.

This announcement was made by the Minister of Works, David Umahi via a statement on Wednesday.

The Ministry revealed that the 127 kilometers project has been approved by President Bola Tinubu.

This development comes two days after the Ministry of Works announced the termination of its contract with Julius Berger for the Section I (Abuja-Kaduna) of the Abuja-Kaduna-Zaria-Kano Dual Carriageway project in FCT, Kaduna, and Kano States.

Investors King understands that the contract for the rehabilitation of the road was awarded to Messrs Julius Berger (Nig.) Plc on December 20, 2017.

The project, initially valued at N155.7 billion, with a 36-month completion period was further categorized into three sections.

However, only Section II (Kaduna-Zaria) has been completed and partially handed over.

Section III (Zaria-Kano) is partially finished while Section I remains in a severely deteriorated state.

A statement from the Ministry explained that the decision to terminate the contract with Berger was based on non-compliance with reviewed cost, scope, and terms, stoppage of work, and refusal to remobilise to site.

The ministry on Wednesday, November 6, confirmed that Section I has been redesigned and re-scoped.

The statement reads, “The President, His Excellency, Bola Ahmed Tinubu, GCFR has approved that the remaining 127 kilometres of the Rehabilitation of Abuja – Kaduna – Zaria – Kano Dual Carriageway, Section I (Abuja – Kaduna) be redesigned using continuously reinforced concrete pavement (CRCP) instead of the present asphaltic one.”  

“The contract, divided into three (3) sections, was awarded to Messrs Julius Berger (Nig.) PLC on 20th December 2017 at an initial sum of N155, 748,178,425.50 billion (one hundred and fifty-five billion, seven hundred and forty-eight million, one hundred and seventy-eight thousand, four hundred and twenty-five naira, fifty kobo) with a completion period of thirty-six (36) months.” 

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Tax Expert Warns Tinubu: VAT, PAYE Hikes Will Deepen Hardship for Nigerians

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Company Income Tax (CIT) - Investors King

Due to Nigeria’s economic situation, tax expert Adebisi Oderinde has urged President Bola Ahmed Tinubu to halt plans to increase the VAT and Pay-As-You-Earn (PAYE) tax rates.

Oderinde, who is also the CEO of AOC-Adebisi Oderinde & Co, made the statement during the inauguration of the company’s Head Office in the Kara area of Ogun State.

He said the country’s economic conditions are challenging and particularly unfavorable for SMEs and warned that implementing tax reform could destabilize many small businesses as inflation has already eroded purchasing power in Nigeria.

With over 28 years of experience as a tax consultant, Oderinde noted that new tax reforms would likely worsen hardship across the country.

“My advice is to make hay while the sun shines, as the journey of a thousand miles begins with a single step, and slow and steady wins the race. The country is hard! As a tax practitioner, I continue to pray for our President, but he must heed the advice of elders, especially when it concerns tax reform,” he said.

“This is not the right time to reform any tax, nor to adjust rates. Nigerians’ purchasing power is very low. While some may think of VAT reform as beneficial, it would have a negative impact, especially on Lagos State. One part of the reform aims to cancel the consumption tax, which would hit Lagos hard, as the state earns more from consumption tax than any other state in the federation,” he added.

Oderinde further advised northern Nigeria not to support the proposed policy, warning it could disproportionately affect the region.

“They also want to increase PAYE, and recent data from the NBS in 2023 shows that the total IGR from the 36 states plus the FCT is about N2.4tn, with PAYE accounting for about 63%. If PAYE is raised, it will impact many states significantly. Instead of focusing on VAT, the northern states should consider that an increase in PAYE would affect them even more than VAT,” he explained.

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