The Organised Private Sector (OPS) may be considering withholding remittances of the Value Added Tax (VAT) to the collecting agency following the controversy over who has the right to collect the consumption tax.
It would be recalled that the Rivers State government obtained a judgment from a Federal High Court in Port Harcourt granting the state power to collect VAT and income tax against the prevailing norm of the consumption tax collection by the Federal Inland Revenue Service (FIRS).
Lagos State also followed Rivers State by enacting its own VAT Law. Since then, some states had also expressed their readiness to also enact laws to enable them to start collecting VAT as well.
But the FIRS last week obtained a ruling of the Appeal Court asking all parties to the issue to maintain status quo ante, which has been interpreted by parties concerns in the case in various ways to suit their position.
However, representatives of the OPS which included the Lagos Chamber of Commerce (LCCI), the Nigerian Employers’ Consultative Association (NECA) and the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) have called on the federal government to act fast in addressing the raging VAT controversy between the FIRS and some state governments.
The Director-General of the NECA, Timothy Olawale, said businesses should not remit their VAT until the matter is finally dealt with in the court of law.
“In this regard, an employer (business firm) can open an Escrow Account for the money, which must be different from other accounts of the company.
“This should be remitted upon the final judgment of the court, as it appears that the case could get to the Supreme Court,” adding that “the FIRS and the states’ Inland Revenue Services should be notified of this development officially,” Olawale was quoted by THISDAY as saying.
He said the concern of businesses, “is basically who to remit deducted VAT to due to the pending appeal in order to avoid penalties and double payment.”
He also advised that firms could, “approach the court by way of interpleader proceedings to determine to who they should remit the deducted VAT.”
An interpleader, according to Olawale, “is a process whereby somebody in possession of anything i.e. money, properties, etc, and he is not the owner. But two or more people are laying claim to that money or property. The person in possession approaches the court to determine who that money or property should be given to or how it should be handled or what should be done.”
The Director-General of NACCIMA, Ayo Olukanni said that “the contention over VAT has introduced uncertainty into the business space and it is our hope that it will be resolved definitively and quickly.”
Similarly, the Director-General of LCCI, Chinyere Almona, stated that the first concern of the chamber, “is the confusion that businesses face as to who is in charge of VAT collection. This is not healthy for the business community and planning.”
Almona stated that businesses should not be subjected to unnecessary hurdles and made to pay the same tax twice from different agencies and urged “the federal government to urgently establish an understanding with states on what is best for the nation and businesses.
She noted that VAT was introduced in 1993 to replace the sales tax in the states. With an initial sharing formula original formula allocated 50 percent to the federal government, 35 percent to the state governments, and 15 percent to local governments.
But this was altered in January 1999 when the formula was adjusted to be 15 percent to the federal government, 50 percent to state governments, and 35 percent to local government.
“Presently, the states and local governments share their allocations using the factors of equality 50 percent; population 30 percent and derivation 20 percent.
“We advise that the current sharing formula for the states and local governments be adjusted using the factors of equality 20 percent, population 30 percent, and derivation 50 percent going forward. This arrangement should be agreeable to all concerned parties.
“This can drive innovation on revenue generation in all the states towards increasing their internally generated revenue. It will also make the states more sensitive to the needs of businesses in their respective States, knowing that an enabling business environment is likely to boost tax revenues,” Almona said.
Private Sector Seeks FG’s Directive on VAT Payment
The Organised Private Sector of Nigeria (OPSN) on Sunday in Lagos called on the Federal Government to urgently make a pronouncement on the ongoing controversy over VAT payment so that businesses will know what to do.
OPSN chairman, Mr Taiwo Adeniyi, made the call at a news conference and said delays in addressing the issue could cause negative effects on businesses, most especially in the collection and remittances of VAT.
“We are aware that by Sept. 21 we get penalised if we do not pay or remit the VAT for the month of August.
“We are also aware that laws are not made in retrospect. It then means that even if those laws have been enacted, particularly the Lagos State law which came into effect in September, it will not affect the payment by businesses in the state.
“Due to our remittances, we have issues with the fact that the law for Rivers was made in August and the majority of the businesses in Lagos usually will have a relationship with the Rivers State Inland Revenue too.
“The confusion in the public space is the reason we are calling on the government to come to our aid as we want to pay.
“It is for the government at the center to make a pronouncement as to what becomes of us,’’ he said.
Adeniyi, who is also the President of, Nigeria’s Employers Consultative Association (NECA), said that the ongoing challenge had the potential to make businesses pay double VAT in view of demands by the FIRS and state governments.
He said that businesses, as the collecting agents, were practically unclear on the authority to remit to and without a clear path, this would further aggravate the pain on businesses.
“It is a popular saying that where two elephants fight, it is the grass that suffers.
“It is no longer news that Nigerian businesses have been battling with myriads of challenges, making the survival of enterprises and ease of doing business in the country among the worst in this part of the world,’’ he said.
There has been controversy over the collection of VAT after a Federal High Court ruled that it was not the duty of the Federal Government to collect the tax.
VAT is normally collected by the Federal Government since the military era and the money is shared by the three tiers of government.
Following the court ruling, however, Lagos and Rivers states passed laws that allowed them to collect VAT.
FIRS, which used to collect the VAT on behalf of the Federal Government, has challenged the court ruling at the appellate court.
OPSN comprises the Manufacturers Association of Nigeria, the Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture, NECA, Nigeria Association of Small Scale Industries and the Nigeria Association of Small and Medium Enterprises.
Global Banking Sector Grows 40% Reviving Pandemic Losses in Just 12 Months
In 2020, the global banking sector took a hit following the economic impact of the coronavirus pandemic, which was reflected in the overall market capitalization. However, with the ongoing global recovery, the banking industry has regained most of the losses incurred during the health crisis.
According to data acquired by Finbold, in just 12 months between Q2 2020 and Q2 2021, the global banking sector’s market cap has surged 39.62%, adding €2.1 trillion from €5.3 trillion to €7.4 trillion. On the path to recovery, the market cap slightly plunged in 2020 Q3 to €5.2 trillion before gaining 17.3% the next quarter.
Among the Western European banks, Spain’s BBVA bank recorded the highest total shareholder return rate at 19.7% between April 2021 – July 2021, followed by Société Générale from France at 13.8%, while Banco Santander, also from Spain, ranks third at 12.1%. United Kingdom’s Barclays is the worst performer with a TSR of -8%. Data on the global banking sector’s market cap is provided by Banking Hub.
How banking sector sustained growth
The registered market capitalization is supported by the large-scale reopening of economies due to the vaccine rollout. Additionally, the banks, especially from major economies like the United States and Europe, have reaped from policies meant to cushion the economy from the adverse effects of the pandemic. Notably, the decisions by most banks to retain a low-interest-rate environment has been beneficial to banks.
Worth noting is that during the pandemic, banks found themselves in a tight spot. Historically, the banking sector has been considered the custodian of the economy but the pandemic also plunged the banks into a crisis. The banking sector’s profits were adversely affected considering they are bound to the business cycle and interest rates.
At the same time, banks also put in place measures like approaching loans with caution due to uncertainty in repaying which directly impacted profits. However, banks were tapped to facilitate the distribution of stimulus packages boosting their capital reserves in return.
Worth pointing out is that institutions like the European Central Banks allowed banks to continue using their capital buffers flexibly with a planned extension until 2022. With such moves helping banks sustain growth, it eliminates the worry of straining capital buffers while the health crisis is still impacting the banks’ balance sheets.
Furthermore, the crisis highlighted the need for banks to keep huge reserves of capital that can be activated in the wake of economic turmoil. Although most banks have historically relied on assets for future cushion, a crisis like the coronavirus calls for more capital because selling assets in such an environment is challenging.
Besides the policies, the banking sector recovery was partly aided by existing operational risk management arrangements. The pandemic tested all financial market participants and most leading banks successfully invoked business continuity plans. The plans ensured that the financial markets continued to run smoothly and orderly.
The sector’s recovery has also been accelerated by other factors like the increased adoption of pre-pandemic trends like digitalization and sustainability. Digitization of operations has been backed by consumers who are willing to conduct transactions online. At the same time, the digital shift has presented a competitive factor in the sector, with institutions that had established online presence benefiting the most.
Notably, the recovery was at some point under threat during the third quarter of 2020 amid concerns of the pandemic’s second wave. However, the sector sustained the gains with the rollout of the vaccine. Furthermore, moving into 2021, the industry appears not to be bothered by the Delta variant.
The future of the banking sector
By sustaining the market capitalization for two consecutive quarters, it can be assumed that the banking sector response to the health crisis is bearing fruits. However, it is still early to determine if the recovery is sustainable.
The rally will be tested, especially when central banks eliminate all the policies meant to cushion the economy. However, in the long run, banks will have to tailor their operations towards changing consumer behaviour.
How Stanbic IBTC is Transforming Nigeria’s Trade Landscape
Stanbic IBTC Bank PLC, a subsidiary of Stanbic IBTC Holdings PLC, has reiterated its commitment to fostering international trade and help the nation actualise its economic growth and development goals.
The Bank said it will continue to fine-tune its three-pronged approach to facilitating trade activities for clients. These are the development of bespoke financial solutions to help boost trade for clients; sponsorship of relevant trade shows that bring together stakeholders in global trade, including exporters and importers; and organisation of seminars and workshops to provide clients and other stakeholders with industry insights and enlighten them on global trade opportunities.
“Our goal is to become the ‘go-to’ Bank as far as global trade is concerned, with emphasis on Africa-China trade. This approach is of immense value to our clients and will help us achieve our fundamental purpose, which is to drive Nigeria’s growth,” Chief Executive Stanbic IBTC Bank PLC, Wole Adeniyi, said.
In line with this resolve, Stanbic IBTC organised a webinar on the African Continental Free Trade Area (AfCFTA). The webinar themed: ‘AfCFTA State of Play: Understanding Potential and Maximising Opportunities for the Customer’, emphasised Stanbic IBTC’s readiness to leverage the trade opportunities of the AfCFTA agreement to unlock business opportunities for its clients in the small and medium-sized enterprises (SMEs) sector as well as its corporate clients.
In 2019, Stanbic IBTC launched its Africa China Agent Proposition (now called Africa China Trade Solutions – ACTS) to boost trade transactions between Africa (Nigeria) and Asia, especially China, and help customers consummate the best business deals without having to travel to China.
According to Stanbic IBTC, ACTS will give customers exclusive access to an array of exporters in China through an accredited agent, Zhejiang International Trading Supply Chain Co Ltd, also known as Guamao.
Stanbic IBTC has held various fora as part of its sensitisation drive on ACTS and the currency swap agreement between Nigeria and China. These fora provided insight on how best to help clients and businesses leverage the opportunity and assess the impact of the Chinese economy on trade in Nigeria and Africa as a whole.
According to Wole, these workshops were geared towards deepening trade connections with the Chinese business community, thereby stimulating strong trade and business ties between Africa, with a special focus on Nigeria and China.
Stanbic IBTC Bank was a platinum sponsor of the 2021 Global Trade Review (GTR) West Africa Conference themed ‘Connecting the Region’s Trade Experts. The GTR West Africa Conference is an annual regional event for trade discussions and networking among leading practitioners in trade, export, and commodity finance to strategically explore the latest developments, strategies, and solutions needed to drive growth.
Experts have continued to commend Stanbic IBTC on this bold approach to educate its clients and investors about the benefits of AfCFTA, the Nigeria China currency swap deal, and the ACTS proposition, all geared towards helping clients unlock business opportunities.
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