*VP explains enabling provisions in Finance Act
*Interacting with Chartered Institute of Taxation members, Osinbajo
says no tax increases contemplated for now
*CITN to VP: We acknowledge your great zeal
![image](/2020/10/lawreport.jpg")
![image](/2021/06/Legal-Research-On-The-Go2.jpg")
Nigeria is set to utilize its legal provisions that empower the
Federal Government to collect taxes on profits made in the country
by global technology and digital firms not based in the country,
but with significant economic presence here.
![image](/2021/05/NBASBL2021.jpg")
While the Federal Government will not be raising tax rates at
this time, based on the Finance Act 2019, it is already empowered
to widen the tax net, including by collecting taxes on the Nigerian
income of global tech giants with significant economic presence
here, even if they have not established an office or permanent
establishment and are currently not paying taxes in Nigeria.
In this regard, Section 4 of the Finance Act 2019, provides that
“the Minister (Finance) may by order (of the President) determine
what constitutes the significant economic presence of a company
other than a Nigerian company.”
Vice President Yemi Osinbajo, SAN, hinted at these issues and
others while interacting with a delegation of the Chartered
Institute of Taxation of Nigeria, CITN, led by its President, Mr
Adesina Adedayo who visited him at the Presidential Villa on
Friday.
According to Prof. Osinbajo, “we have had severe economic
downturns which of course implies that we may not be able to
collect taxes with the aggressiveness that would ordinarily be
expected.
“I think the most important thing is that we must widen our tax net
so that more people who are eligible to pay tax are paying. Several
efforts have been made, and I am sure you are aware of the
initiatives including the Voluntary Assets and Income Declaration
Scheme (VAIDS) which was also an attempt to bring more people into
the tax net, including those who have foreign assets.”
Continuing, the VP said “we have also recently taken a step with
respect to a lot of the technology companies that are not
represented here but who do huge volumes of business here.
“The Finance Act has shown that we are very prepared to ensure
that these big technology companies do not escape without paying
their fair share of taxation in Nigeria. Many of them do incredible
volumes here in Nigeria and in several other parts of the
region.
“We have drawn up the regulations and we are prepared to go, and
I think that we are at least in a good place to tap into some of
the tax resources we can get from some of these companies.”
Indeed, besides the FG, a recent Bloomberg news article reported
that “Governments around the world are grappling with how to
modernize their legal frameworks to account for the global reach of
the digital economy, reshaping how policymakers think about issues
as varied as monopoly power, taxation and workers’ rights.”
Also, international talks are currently ongoing in Paris on
global standard rules for governments to receive taxes from such
digital and technology firms with significant economic presence in
foreign countries.
In Nigeria, according to the Finance Act 2019, a company will
pay taxes if it “transmits, emits or receives signals, sounds,
messages, images or data of any kind by cable, radio,
electromagnetic systems, or any other electronic or wireless
apparatus to Nigeria in respect of any activity, including
electronic commerce, application store, high-frequency trading,
electronic data storage, online adverts, participative network
platform, online payments and so on, to the extent that the company
has significant economic presence in Nigeria and profit can be
attributable to such activity.
“If the trade or business comprises the furnishing of technical,
management, consultancy or professional services outside of Nigeria
to a person resident in Nigeria to the extent that the company has
significant economic presence in Nigeria”
Speaking further, Prof. Osinbajo noted that while the Federal
Government has no plans to raise taxes now, there are those who
argue that “our tax rates are too low, comparing us to other places
in the region where the rates are much higher.”
“So we have had to balance all of these issues because clearly,
higher tax rates can be a disincentive to businesses and
investments. In terms of domestic resource mobilization, we are
trying to do the best we can given the present circumstances and I
believe that there is room for improvement.”
Actually, under the Finance Act 2019, the Buhari administration
has reduced taxes for small companies – companies with less than
N25 million in annual turnover are charged Zero Company Income Tax,
CIT. Also CIT for Companies with revenues between N25 and N100m
(described in the Act as “medium-sized” companies) has been reduced
from 30% to 20%. Besides, Nigerians making minimum wage income are
not to pay tax at all.
Under the 2020 Finance Act there is also an exemption of small
companies from payment of education tax under the Tertiary
Education Trust fund (TETFUND)-meaning companies with less than
N25m turnover are eligible
Similarly, there is a 50% per cent reduction in minimum tax;
from 0.5 per cent to 0.25 per cent for gross turnover for financial
years ending between January 1st, 2020 and December 31st, 2021
INTERACTION ON OTHER ISSUES
Welcoming the delegation, the Vice President emphasized the need
for regular interaction between the council and government to
address issues bothering on tax legislation, noting that “there is
need for continuous engagement with the National Assembly because
engagement with government cannot be a one-off thing.”
Prof. Osinbajo added that the Federal Government has over the
past few years, initiated programmes aimed at improving the growth
of small businesses including the formalization of many of them.
Under the Economic Sustainability Plan (ESP), there is a
formalization of 250,000 businesses.
He said the ongoing MSME Week has encouraged many businesses to
register with regulatory authorities in order for them to benefit
from the numerous programmes earmarked by the government for their
growth.
Earlier in his remarks, the President of CITN, Mr Adesina
Adedayo, commended the leadership of the Vice President in the
implementation of key government interventions in the economy,
stating that “we acknowledge your great zeal and commitment to
Nigeria project.”
He said the visit became necessary given the enormous work the
Buhari administration has done towards addressing the huge fiscal
challenges in the polity, public financing reforms, and sustained
efforts towards addressing infrastructural deficit across the
country.
His words: “the Nigerian Economic Sustainability Plan (NESP) and
other measures implemented was a right response to the challenges
posed by COVID-19 pandemic and were largely instrumental to
creating buffers for the government at all levels in withstanding
the pressures and waves created during the peak period and the
aftermath of COVID-19.
“It is important that we sustain measures already being
implemented to improve tax collection at all levels.”
Other members of the delegation included the Vice President of
the Institute, Barrister Samuel Olushola Agbeluyi, past Presidents
of the institute, Dame Gladys Simplice, and Dr. James Naiyeju, and
Council members Prof. Muhammad Mainoma and Hon. Babangida Ibrahim.
Mr. Adefisayo Awogbade, CITN Registrar/Chief Executive as also in
attendance.
*VP explains enabling provisions in Finance Act
*Interacting with Chartered Institute of Taxation members, Osinbajo
says no tax increases contemplated for now
*CITN to VP: We acknowledge your great zeal
Nigeria is set to utilize its legal provisions that empower the
Federal Government to collect taxes on profits made in the country
by global technology and digital firms not based in the country,
but with significant economic presence here.
While the Federal Government will not be raising tax rates at
this time, based on the Finance Act 2019, it is already empowered
to widen the tax net, including by collecting taxes on the Nigerian
income of global tech giants with significant economic presence
here, even if they have not established an office or permanent
establishment and are currently not paying taxes in Nigeria.
In this regard, Section 4 of the Finance Act 2019, provides that
“the Minister (Finance) may by order (of the President) determine
what constitutes the significant economic presence of a company
other than a Nigerian company.”
Vice President Yemi Osinbajo, SAN, hinted at these issues and
others while interacting with a delegation of the Chartered
Institute of Taxation of Nigeria, CITN, led by its President, Mr
Adesina Adedayo who visited him at the Presidential Villa on
Friday.
According to Prof. Osinbajo, “we have had severe economic
downturns which of course implies that we may not be able to
collect taxes with the aggressiveness that would ordinarily be
expected.
“I think the most important thing is that we must widen our tax net
so that more people who are eligible to pay tax are paying. Several
efforts have been made, and I am sure you are aware of the
initiatives including the Voluntary Assets and Income Declaration
Scheme (VAIDS) which was also an attempt to bring more people into
the tax net, including those who have foreign assets.”
Continuing, the VP said “we have also recently taken a step with
respect to a lot of the technology companies that are not
represented here but who do huge volumes of business here.
“The Finance Act has shown that we are very prepared to ensure
that these big technology companies do not escape without paying
their fair share of taxation in Nigeria. Many of them do incredible
volumes here in Nigeria and in several other parts of the
region.
“We have drawn up the regulations and we are prepared to go, and
I think that we are at least in a good place to tap into some of
the tax resources we can get from some of these companies.”
Indeed, besides the FG, a recent Bloomberg news article reported
that “Governments around the world are grappling with how to
modernize their legal frameworks to account for the global reach of
the digital economy, reshaping how policymakers think about issues
as varied as monopoly power, taxation and workers’ rights.”
Also, international talks are currently ongoing in Paris on
global standard rules for governments to receive taxes from such
digital and technology firms with significant economic presence in
foreign countries.
In Nigeria, according to the Finance Act 2019, a company will
pay taxes if it “transmits, emits or receives signals, sounds,
messages, images or data of any kind by cable, radio,
electromagnetic systems, or any other electronic or wireless
apparatus to Nigeria in respect of any activity, including
electronic commerce, application store, high-frequency trading,
electronic data storage, online adverts, participative network
platform, online payments and so on, to the extent that the company
has significant economic presence in Nigeria and profit can be
attributable to such activity.
“If the trade or business comprises the furnishing of technical,
management, consultancy or professional services outside of Nigeria
to a person resident in Nigeria to the extent that the company has
significant economic presence in Nigeria”
Speaking further, Prof. Osinbajo noted that while the Federal
Government has no plans to raise taxes now, there are those who
argue that “our tax rates are too low, comparing us to other places
in the region where the rates are much higher.”
“So we have had to balance all of these issues because clearly,
higher tax rates can be a disincentive to businesses and
investments. In terms of domestic resource mobilization, we are
trying to do the best we can given the present circumstances and I
believe that there is room for improvement.”
Actually, under the Finance Act 2019, the Buhari administration
has reduced taxes for small companies – companies with less than
N25 million in annual turnover are charged Zero Company Income Tax,
CIT. Also CIT for Companies with revenues between N25 and N100m
(described in the Act as “medium-sized” companies) has been reduced
from 30% to 20%. Besides, Nigerians making minimum wage income are
not to pay tax at all.
Under the 2020 Finance Act there is also an exemption of small
companies from payment of education tax under the Tertiary
Education Trust fund (TETFUND)-meaning companies with less than
N25m turnover are eligible
Similarly, there is a 50% per cent reduction in minimum tax;
from 0.5 per cent to 0.25 per cent for gross turnover for financial
years ending between January 1st, 2020 and December 31st, 2021
INTERACTION ON OTHER ISSUES
Welcoming the delegation, the Vice President emphasized the need
for regular interaction between the council and government to
address issues bothering on tax legislation, noting that “there is
need for continuous engagement with the National Assembly because
engagement with government cannot be a one-off thing.”
Prof. Osinbajo added that the Federal Government has over the
past few years, initiated programmes aimed at improving the growth
of small businesses including the formalization of many of them.
Under the Economic Sustainability Plan (ESP), there is a
formalization of 250,000 businesses.
He said the ongoing MSME Week has encouraged many businesses to
register with regulatory authorities in order for them to benefit
from the numerous programmes earmarked by the government for their
growth.
Earlier in his remarks, the President of CITN, Mr Adesina
Adedayo, commended the leadership of the Vice President in the
implementation of key government interventions in the economy,
stating that “we acknowledge your great zeal and commitment to
Nigeria project.”
He said the visit became necessary given the enormous work the
Buhari administration has done towards addressing the huge fiscal
challenges in the polity, public financing reforms, and sustained
efforts towards addressing infrastructural deficit across the
country.
His words: “the Nigerian Economic Sustainability Plan (NESP) and
other measures implemented was a right response to the challenges
posed by COVID-19 pandemic and were largely instrumental to
creating buffers for the government at all levels in withstanding
the pressures and waves created during the peak period and the
aftermath of COVID-19.
“It is important that we sustain measures already being
implemented to improve tax collection at all levels.”
Other members of the delegation included the Vice President of
the Institute, Barrister Samuel Olushola Agbeluyi, past Presidents
of the institute, Dame Gladys Simplice, and Dr. James Naiyeju, and
Council members Prof. Muhammad Mainoma and Hon. Babangida Ibrahim.
Mr. Adefisayo Awogbade, CITN Registrar/Chief Executive as also in
attendance.