BY ANTHONY ADA ABRAHAM
According to a famous quote attributed to Theodore Isaac Rubin, it said “Happiness does not come from doing easy work, but from the afterglow of satisfaction that comes after the achievement of a difficult task that demanded our best.” That is what can simple describe the Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami, a man who has been working tirelessly to see a new beginning of his agency vested with the massive responsibility to generate revenue for the country.
Since inception as the arrowhead of the Federal Inland Revenue Service (FIRS), his aim to bring in changes that haven’t been felt before shook the entire foundation as a devoted tax administrator.
For two years, Nami has canvassed and approached both local and international organisations to partner and bring in changes that would eventually see him becoming the President of the Commonwealth Association of Tax Administrators (CATA).
He has also brought in innovations that are noteworthy thus:
It is an obvious fact that there is no taxation without legislation. Every round of tax reform must therefore begin with a review of the legal framework. As of the date the new Executive Chairman assumed office, the 2019 Finance Bill was already in the works but had only been passed by the House of Representatives. Through concerted efforts by the new Management, the Senate passed the Bill on 11th December2019 and presidential assent was given on 13th January 2020 and the Finance Act 2019 came into effect, setting the tone for several other reform initiatives by the Nami-led FIRS.
The Finance Act 2019 was a wholesale amendment to seven different tax legislations namely: the Companies Income Tax Act, Value Added Tax Act, Capital Gains Tax Act, Stamp Duties Act, Customs and Excise Tariff Act, Petroleum Profits Tax Act and Personal Income Tax Act.
Small and medium businesses were the biggest beneficiaries of the reforms introduced by the Companies Income Tax Act (amendment). Specifically, the amendment divides companies into three categories for taxation. These are small, medium and big companies. Companies with an annual turnover of less than 25 million naira (small companies) are exempted from payment of corporate tax. Companies with an annual turnover of between ₦25 million and ₦100 million (medium companies) are taxable at 20% of assessable profits. Companies with an annual turnover of ₦100 million and above (big companies) remain taxable at the rate of 30% of assessable profits. This reform intervention recognises that small and medium businesses are the main drivers of job creation and economic growth. The reform is therefore aimed at reducing operational cost, encouraging recapitalisation and business expansion by small and medium companies.
Another major reform is with the Value-Added Tax. In addition to clarifying certain ambiguous provisions of the VAT Act, the amendment increased the rate of VAT from 5% to 7.5%. The concomitant reduction in Corporate Tax rates on one hand and an increase in the rate of Value-Added Tax, on the other hand, is consistent with the National Tax Policy which aims at a gradual shift from direct to indirect taxes. The guiding principle behind this stipulation in the National Tax Policy is that indirect taxes potentially offer higher yield while remaining cheaper to administer than direct taxes.
Within the Year 2020 and as a follow-up measure to strengthening the legal framework, a Committee was constituted to further review all relevant tax laws. As a result of the Committee’s work, Draft Bills with amendments to the Federal Inland Revenue Service Establishment Act, the Value Added Tax Act and the Finance Act 2019 were prepared and submitted to the National Assembly (NASS) for further review.
To minimise the incidence of double taxation and to further facilitate international trade and investment between Nigeria and the rest of the world, the FIRS in collaboration with the Federal Ministry of Finance, Budget & National Planning engaged in bilateral/ multilateral agreements.
In 2020, FIRS concluded the negotiation of the Avoidance of Double Taxation Agreements with Turkey. Negotiations are also at different stages with the following countries: Hong Kong, Saudi Arabia, Cyprus, Iran, Germany, Switzerland, India, Botswana, Japan, Greece, New Jersey and Russia. These will be concluded as soon as the few outstanding issues have been resolved.
In the year under review, Nigeria has an active ADTA agreement with 16 countries, namely: South Korea, Spain, Sweden, Singapore, France, Mauritius, UAE, Qatar, Kenya, Morocco, Ghana, Cameroon, Turkey, Sudan, Gambia and Denmark.
Another key tax policy issue which the Management of the Service continues to focus on is that of transfer pricing. The Management has, by way of follow up to the introduction of the Income Tax (Transfer Pricing) Regulations 2018, issued Demand Notes totaling 1.074 billion naira on 222 companies for failing to file their transfer pricing returns in line with the requirements of the Regulations. 54 companies paid penalties imposed on them and these amounted to ₦47.433 million. Currently, the Service is involved in several audits that have the potential for substantial revenue yield resulting from adjustments and additional assessments.
The Service also maintained its relationship with ATAF, WATAF, CATA and the OECD and organised a WATAF workshop on Risk Management in Bamako, Mali in June 2020.
During the 2020 fiscal year, FIRS continued the implementation of various administrative measures to enhance revenue collection to achieve its target. From the onset, the new Executive Chairman identified four cardinal pillars to drive his reform interventions in the area of tax administration.
On Rebuilding FIRS Institutional Framework:
The Management has been committed to building and strengthening the capacity of the Departments and Units of FIRS to deliver their mandates on a long term and sustainable basis. In line with this, the Board approved a new structure for the Service on 17th January, 2020. The new Organogram is composed ofsixGroups and 32 Departments including the Internal Affairs Department that reports directly to the Executive Chairman.
Taxpayer Segmentation has been re-introduced. The Audit and Investigation departments were also reviewed for effectiveness.
The Annual Corporate Plan Retreat was reintroduced and it held between 7th and 8th February, 2020 with the theme “Repositioning FIRS for Efficient Service Delivery.” The 2020 Corporate Plan was approved by the Executive Chairman, FIRS and exposed to the staff at the headquarters.
The Intelligence, Strategic Data Mining & Analysis Department (ISDMA) was established to deploy technological tools analyze tax data and distil for improved assessment of taxpayers.
The Tax Incentive Management Department (TIMD) was also established to manage, implement and report on tax incentives as provided by relevant extant laws and regulations. This department is specifically in charge of the tax affairs of companies/ enterprises enjoying tax exemptions and holidays. Companies enjouying pioneer incentives, NGOs, Cooperative Societies, companies in Export Processing Zones, Free Trade Zones, Oil and Gas Export Processing Zones, those engaged in Downstream Gas Utilization and all others enjoying tax holidays are being managed by this department to forestall revenue leakages, such that companies, enterprises do not use their statuses as a cover to earn taxable income and refuse to pay tax on those income.
The National Tax Week:
The FIRS hosted the first ever National Tax Dialogue in January 2020. The event brought together leaders, institutional stakeholders and tax experts from across the world to discuss matters relating to improving taxation especially in Nigeria. Attendees included President Muhammadu Buhari, AFdB President, Dr. Akinwunmi Adesina, Executive Governor of Ekiti State, Dr. Kayode Fayemi, Executive Secretary of the African Tax Administration Forum, Mr Logan Wort, among others.
The Executive Chairman has approved that a week at the beginning of every year be set aside as the National Tax Week, to host events on tax education awareness, discuss contemporary tax matters, and proffer solutions to fiscal challenges.
On Collaboration with the Stakeholders:
The objective in this regard is to foster cooperation and collaboration between FIRS and key stakeholders in the Nigerian Tax System to provide a unified view of our plans to eliminate critical bottlenecks which hitherto impede efficient tax administration. Some of the stakeholders include:
Federal Ministry of Finance
The collaboration with the Federal Ministry of Finance on the recovery of tax debt from contractors or tax debtors that were uploaded on the FMF (GIFMIS platform) has yielded recoveries of over N500 million.
Corporate Affairs Commission
Through inter-agency collaboration, the Corporate Affairs Commission has provided integration to the Service on its information system for data reporting via the Application Programme Interface. This enables the FIRS to track and bring new corporate taxpayers into the tax net; generate taxpayer-identification number for new taxpayers at the point of incorporation, issue a certificate of incorporation and improve efficiency in the administration of stamp duties.
The Service, through collaboration with the Economic and Financial Crimes Commission; the Department of State Security Services and the Nigeria Police Force established a joint task team known as the Special Crimes Division. The Division is responsible for intelligence gathering, joint investigation and enforcement activities relating to tax evasion and tax fraud. In addition to these collaborative engagements, the new FIRS Board through the Technical Committee of the Board set up a Committee and tasked it with the following terms of reference:
Review all existing memorandums of understanding between the Service and its stakeholders,
Prepare new MOUs for consideration, and
Recommend other agencies/stakeholders the Service may enter into a MOU with to deepen stakeholder collaboration.
The key objective for stakeholder collaboration is information and intelligence sharing to enhance effective and efficient tax administration. The MOUs are intended to provide the framework, scope and obligations for such collaboration.
The Service continued to engage with and sensitise many functionaries of Federal and State Government MDAs in a bid to make them more aware of their tax obligations and ensure improved tax compliance.
Revenue and Projection for 2022
Total revenue remitted to various FIRS accounts with CBN at the end of the year 2020 stood at N4.95trillion. This amount shows a slight shortfall compared to the revenue target for the year, which was N5.07 trillion. This was because of the general economic depression, volatile exchange rates, prevailing global economic crises occasioned by the COVID-19 pandemic and poor tax culture among the populace.
As at November 30, 2021, the Service had collected over 5.03 trillion Naira, being 85 per cent of the national tax target. It projects to meet and even overshoot its target by December 31, 2021.
Tax Bodies in Nigeria Coming Together For the First Time
Since 2014,some professional bodies in taxation have been at loggerhead on the issue of taxation. They have never been or sat at a forum to forge a way forward. It took the FIRS boss, Mohammed Nami for the very first time to bring ICAN, CITN and ANAN seal and affix their signature to a document and affirmed their commitment to the growth and development of tax administration, compliance and practice in Nigeria. What an achievements.
These and many more not in this piece have Mohammed Nami achieved in a space of two years and need recognition and accolades.