Sam Philip
The current tax reform bill undergoing processing at the National Assembly has been described as a good Bill but needs revision to prevent existing lapses in the Bill.
This was the submission of a financial expert, Akindele Omole on Monday while speaking on the tax reform bill.
He, therefore, called on stakeholders, particularly tax professional and business community to make tangible contributions to the tax reform bill before it’s foisted on the people.
Omole asked professionals in the country to study the bill and make contribution that would enhance socio-economic situation in the country rather than giving it political or ethnic colouration.
He said the bill needs amendment to prevent some of the sections of the Bill from undermining some businesses in the federation, the chartered accountant cautioned that the bill should be looked into holistically.
He said: “I have read and listened with keen interest to the flowery and convincing presentations by the proponents of the proposed tax reform bills.
“I have also listened to the antagonists of the bills, which unfortunately are mainly not rich in content and articulation but largely based on brute politics, morbid fear of change, ethnic sentiments, distrust and suspicions.
“And at the very extreme; trying to shut out debates, articulation and presentations by the promoters, by simply saying “we no go gree” without advancing any logical argument derived from the content of the bills except from gossips and half truths being spewed around in no small measure.
“I believe passing the bills as they are, without the revision of certain aspects, will be very unfair, and in some cases, anti-investment and this will defeat the core intent and essence on which the reforms were purportedly anchored.
“On VAT, the issue of the correct attribution of collections to where the economic activities take place, as well as, using derivation as a key determinant in what accrues to each state of the federation, are steps in the right direction.
However, in my view, the oppositions raised by notable voices from Northern Nigeria on this issue are not entirely unfounded, just that they seem to be too heavy on politics and rhetorics than offering credible basis for their opposition.
Take for instance, every part of Nigeria have their areas of comparative advantage in terms of economic activities and contributions to the national economy. The North is predominantly heavy in agriculture and food production which unfortunately, are largely exempted from VAT, for the general benefit of all Nigerians.
“Therefore, increasing derivation to 60%, when you have exempted majority of their economic activities, is clearly placing the North at an unfairly disadvantaged position which the good side of proper attribution would not be able to cure.
“In view of this, I believe increasing derivation from the existing 20% to 35% or 40% could be fairer than the proposed 60% in the reform bill.
On Personal Income Tax, eliminating the erstwhile 20% Consolidated Relief Allowance and limiting rent allowance to N200,000 is very unfair to the middle class and high networth individuals. You cannot punish or penalize hard work and industry. Those who break into those realms in this difficult environment evidently put in extraordinary diligence, discipline and hardwork and these shouldn’t be discouraged.
Those night toils should not be unfairly taxed.
In addition, maintaining the high networth status would evidently require higher costs of living, which arguably sustains the level of income.
Therefore, granting more less same reliefs across all income levels is unfair and a disincentive. Proportional consolidated reliefs should be maintained. The graduated rates and the enhanced income bands, with earnings of N800,000.or less exempted from PIT aren’t bad, but reliefs must be commensurate according to income bands.
”On Incentives, the provisions around incentives for FTZ entities are anti-investments and could be counterproductive. A lot of entities will exit the country with the attendant consequences, if this is not reviewed.
“Most entities operating in the free zones only find Nigeria attractive as a result of the incentives, which is what they use to leverage our inefficiency, poor infrastructure and corruption induced unusually too high cost of business.
“If that leverage is removed, they will leave Nigeria in droves. For those who cannot leave, they will be forced to review their prices and the same masses we claim to protect will pay more for the goods and services of these entities from their meagre resources.
“For instance, for a company like Dangote Refinery, who practically opened up and developed their zone, it is primed to supply to the local market. The bill, as it is, today is asking Dangote to export 75% of its products before qualifying for its erstwhile guaranteed incentives.
“This means we will be back to importing fuel or the company compensates itself for the lost incentives by repricing its products upwards. This runs counter to what we are told is the motive of the reforms.
“In my view, existing FZEs should continue to enjoy their incentives for like 5 years and while an incremental CIT rate should apply at every subsequent 5 year band. Like 5% after year 5, 10% after year 10 on and on until it meets up with customs territory entities. This way, it becomes a win win more or less.
This little contribution of mine is by no way exhaustive. The Tax Reforms Bills is a very voluminous documents that needs to be scrutinized and analyzed by all, not only because of the interests and controversies it has generated, but because it is going to be the bedrock of our economy and public finance with its attendant impact on all of us, in order to ensure that a fair and balanced version is what gets passed at the end of the day.
“I therefore use this opportunity to call on all tax professionals, business community, religious community and indeed, all Nigerians, to get familiar with the issues and lend their voice to this debate before the Act is foisted on all of us, apparently in the next few weeks. The time to act is now.”
