The Chairman and Chief Executive Officer of the Federal Inland Revenue Service (FIRS), Mr Muhammad Nami has since assumption of office, evolved blueprint to mapped out strategies on how to reposition the FIRS for greater service delivery.
Due to concerted efforts of Nami available records revealed that as at November, 30 2021, the Service had collected over N5.03 trillion , being 85;per cent of the National tax target. It projects to meet and even overshoot its target by December 31 2021.
Nami adopted a range of initiatives aimed at the overall strengthening of the tax system. These strategies covered the three core areas of a tax system: tax laws, tax policy and tax administration.
Nami, therefore, drew up a four-point objective as a template for his mission to reposition the Service, for efficient service delivery. Hitherto, the Service had operated without a clear direction thereby dampening the morale of the staff.
” 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.”
He explained that the cardinal objectives of his administration are; rebuilding FIRS institutional framework; collaboration with stakeholders; making FIRS a customer-centric institution and making the service a data-centric institution.
” These objectives indubitably correlate with the three core areas of a tax system, which are, tax laws, tax policy and tax administration. A tax system works better by having a robust rapprochement with critical stakeholders, a properly nurtured and sustained customer-centric sentiment and a bias for data analysis and utilisation.
” All of these can blend well within the framework of a properly positioned and structured corporate institution.
It is out of determination to achieve all these that Mr. Nami applies himself diligently, since he took over the mantle of leadership at FIRS. The range of initiatives and reforms he has implemented thus far bespeak of him as a focused and devoted tax administrator and a team player, who understands how to harness human and financial resources to improve the country’s tax system.
It is an undisputable facts 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.
Due to the concerted efforts by the new Management, the National Assembly passed the Bill on December 11, 2019 and presidential assent was given on January 13, 2020, subsequent, the Finance Act 2019 came into effect, setting the tone for several other reform initiatives by the Nami-led FIRS.
There is no gainsaying the fact that 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.
Similarly, the 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. Some of the companies with an annual turnover of less than 25 million naira (small companies) are exempted from payment of corporate tax.
Also, companies with an annual turnover of between N25 million and N100 million (medium companies) are taxable at 20 per cent of assessable profits. On the other hand companies with an annual turnover of N100 million and above (big companies) remain taxable at the rate of 30 per cent 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.
In addition, within the same year, 13 information Circulars were also developed and released as follows:
Taxation of Non-residents in Nigeria
Taxation of seafarers onshore and offshore platform workers
Taxation of companies involved in shipping, air transport and cable undertakings
Taxation of Real Estate Investment companies
Guidelines for filing income tax returns by foreign companies
Circular on clarification for taxation of insurance companies
Circular on clarification on commencement and cessation of business and business reorganisation
Circular on tax implication of the operation or regulated securities lending transaction
Circular on stamp duties
Circular on value-added tax
Clarification on sundry provisions of the Finance Act 2019 as it relates to CITA
Guidelines on the tax treatment of section 27(C) of Companies Income Tax Act (CITA) on the deductibility of Foreign Tax Framework for the implementation of the country-by-country reporting in Nigeria.
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.
On efforts towards rebuilding the service 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 of six Groups 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.
Also, the Intelligence, Strategic Data Mining and 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.
On Collaboration with the Stakeholders, Nami put measures in place 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.
Analyst believe that Nami’s leadership of the FIRS has also launched Nigeria and the FIRS to international tax spectacle. For the first time in history, Nigeria heads the Commonwealth Association of Tax Administrators (CATA).
Nami was unanimously elected President by the 47-member country organisation on November 12, 2021 during the organisation’s General Assembly which held virtually.
Similarly, Nami becomes the 15th President of CATA and first Nigerian to be so elected and will occupy the office for a three-year tenure.
Nami is taking Nigeria’s ideals on tax administration including digitalisation, tax legislative reforms and his reputation on accountability and focus to the international scene.
According to him, he is determine to expand the character of tax administration and involved Nigeria
Nigeria in other international tax engagements such as the African Tax Administration Forum (ATAF), Organisation for Economic Cooperation and Development (OECD) among others.