2017 tax diary – With 2017 following a recession year, there was a huge pressure on the government to control the escalating inflation, currency depreciation and find a means of funding government expenditure through non-oil revenue. Based on the foregoing, the Nigerian government instituted several frameworks and executive orders during 2017 to ensure the revival of the economy. These include the Economic Recovery and Growth Plan (ERGP), National Tax Policy (NTP), Voluntary Asset and Income Declaration Scheme (VAIDS), among others. Also, notable is the will of the current administration in implementing the principles stated in the framework and policies. This article reminisces some of the key events that shaped the 2017 tax sphere and documents expectations for 2018 fiscal year
1. New Tax Forms
The Federal Inland Revenue Service (FIRS) issued new tax forms such as the Value Added Tax form 002, Companies Income Tax self-assessment forms, and the Transfer Pricing Declaration and Disclosure forms. The updated forms were made to enhance disclosure and transparency in taxpayers’ returns as well as to provide more relevant information for FIRS’ risk identification and assessment.
2. E-services and Tax Automation
There were significant improvements in the level of automation of the tax process by the FIRS in 2017, although the Integrated Tax Administration System (ITAS) was initially launched in 2013. The FIRS portal was upgraded with the e-services platform which includes e-registration, e-filing, e-TCC processing and e-stamping. Also, an e-filing mechanism for VAT was launched for taxpayers registered in the Large Tax Offices. A Tax Identification Number verification platform was also activated which has made it easier to remit Withholding Tax with relevant details for all suppliers. In the same vein, the Corporate Affairs Commission launched the Public Search platform where registration details for all businesses can be confirmed.
3. Voluntary Asset and Income Declaration Scheme (VAIDS)
Following the heels of the successful tax amnesty scheme which occurred from October to December 2016, the government implemented the VAIDS scheme in 2017. The aim of the scheme is to provide taxpayers with a time-limited opportunity to regularize their tax compliance status for previous tax periods and pay all taxes due without suffering any penalty or Interest. However, interest will not be waived on declarations made later than 31 December 2017. The scheme which commenced on 1 July 2017, covers all taxes, applies to both individuals and corporations and lasts up till 31March 2018.
4. Revised Interest Rate on Tax Defaults
Section 32(1b) of the Federal Inland Revenue Establishment Act (FIRSEA) empowers the Minister to determine the spread to be added to the Monetary Policy Rate (MPR) issued by the Central Bank of Nigeria (CBN) in determining the interest rate applied on tax defaults. Effective from 1 July 2017, the FIRS adopted the directions of the Minister of Finance to implement a 5% spread on the MPR which was 14% to determine the interest on unpaid taxes – bringing the applicable rate of interest to 19% of unpaid taxes.
5. Overhaul of the Pioneer Status Incentive
After suspending the Pioneer Status Incentive for almost 2 years, the Federal Executive Council (FEC) approved a new list of 27 eligible industries and products for the incentive. There were series of hearings by the National Assembly which invited beneficiaries and stakeholders to evaluate the overall effectiveness and transparency of the incentive scheme. The House of Senate suggested an increase in the incentive period from the current maximum of 5 years to 10 years, but this motion was opposed by the revenue service.
6. International Agreements
Nigeria and Singapore signed a double taxation treaty during 2017 fiscal year. Also, Nigeria partnered with other countries to sign Multilateral Agreements to tackle Base Erosion and Profit Shifting (BEPS)
7. Joint Tax Board Changes Implementation of Voluntary Pension Contribution Scheme
The Joint Tax Board (JTB) recently issued a public notice (the Notice) on the perceived abuse of the voluntary pension contribution (VPC) scheme by employees as a means of avoiding personal income tax.
8. Lagos Internal Revenue Service (LIRS) released several circulars on grey areas under the Personal Income Tax
The technical unit of the LIRS had a busy period in the third and fourth quarters of 2017 with several circulars released mostly to provide clarity on the taxation of Benefit in Kind (BIK) as stipulated under sections 3 and 4 of the Personal Income Tax Act (PITA). The areas covered by the circulars include:
- What Constitutes Reasonable Removal Expenses
- Taxation of Interest Benefit on Loans Granted to Employees
- Conditions for Tax Deductibility of Interest on Property Loan
- Exemption of Compensation of Loss of Employment
- Treatment of Savings Element on Insurance Premium
- Taxation of Employee Share/Stock Options
- Taxation of Employee Share Schemes
- Taxation of Non-Nationals
9. Expectations for 2018
Given the various tax events which occurred in 2017, every tax payer is advised to be aware of their tax obligations and rights. With the high emphasis placed on tax revenue for the funding of the 2018 budget, more effort should be devoted to Tax Advocacy considering the level of ignorance regarding tax matters in the country. There should be increased taxpayer education and public enlightenment campaign.
Also, considering the inefficiency of the Country’s tax collection system, government needs to establish frameworks to reinforce the efficacy of the system. This will in turn improve our Tax to GDP ratio which currently stands at about 6 percent.
In conclusion, government should consider the impact of concessions being granted to some individuals/companies in Nigeria. Emphasis and actions should be placed on recovering taxes due from high net worth individuals and defaulters should be subjected to stiffer penalties. Government also needs to focus on Capital Gains Tax especially with the speedy growth being experienced in Nigeria’s real estate industry.
Meet the Authors: This article was written by Adedapo Adedotun, Ugochukwu Enebuse and Alex Akinwale.