Folu Adekunle
The Vice President, Prof. Yemi Osinbajo, has said the Federal Government will soon invoke the provisions of Finance Act 2019 to collect taxes from global digital and technology firms with significant economic presence in Nigeria.
Osinbajo, a Senior Advocate of Nigeria, disclosed this 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, Abuja last Friday.
The Vice President noted that based on the Finance Act 2019, the Federal Government is already empowered to widen the tax net, including by collecting taxes on the Nigerian income of global tech giants with significant economic presence in the country, even if they have not established a permanent office locally and are not currently paying taxes.
He said though the Federal Government will not be raising tax rates at this time, the country is only out to utilize its legal provisions to collect taxes on profits made by foreign technology and digital firms.
He said: “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.”
Osinbajo added: “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.”
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.”
A statement from the office of the Vice President signed by the Senior Special Assistant to the President on Media and Publicity, Laolu Akande, indicated that international talks are currently ongoing in Paris, France on global standard rules for governments to receive taxes from such digital and technology firms with significant economic presence in foreign countries.
Speaking further, Osinbajo noted that while the Federal Government has no plans to raise taxes now, there are those who have argued 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,” he added.
Actually, under the Finance Act 2019, the statement said, the President Muhammadu Buhari-led 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 million and N100 million (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 N25 million 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 1, 2020 and December 31, 2021.
Welcoming the delegation, the Vice President emphasized the need for regular interaction between the council and government to address issues bordering 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.”
Earlier in his remarks, the CITN President, Mr. Adesina Adedayo, commended the leadership of the Vice President in the implementation of key government interventions in the nation’s economy.
“We acknowledge your great zeal and commitment to Nigeria project,” he told Osinbajo.
Other members of the delegation included the Vice President of the Institute, Barr. 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 while Mr. Adefisayo Awogbade, CITN Registrar/Chief Executive, was also in attendance.
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