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Published On: Tue, Mar 10th, 2020

MDAs awarded contracts based on old 5% VAT rate – FIRS tells Reps

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By Christiana Ekpa

The Federal Inland Revenue Service (FIRS) yesterday disclosed that some Government Ministries, Departments and Agencies have insisted that the contracts awarded by them was based on the old 5 percent VAT rate and therefore cannot pay 7.5 percent at the point of consumption.
Executive Chairman of the FIRS, Mohammed Mamman Nami who revealed this at a meeting with members of the Finance Committee of the House of Representatives equally disclosed that some business premises in the country were also resisting efforts by the Service to deploy technology in the collection of government revenue by connecting them to a common server where it can monitor their transaction as is done across the globe.
Nami also accused some multi-national companies operating in the country of not paying the required tax to government, but fake the issue of pioneer status to get tax exemption for a period of five years instead of the three years contained in the laws.
The FIRS is also seeking the support of the National Assembly to amend the laws dealing with pioneer status for companies, insisting that several companies in the country were abusing the law and getting tax waivers they don’t deserve.
He said FIRS has sent an executive bill to President Muhammadu Buhari through the office of the Attorney General of the Federation to allow them deploy technology in generating revenue, saying when the order is applied, the FIRS will be able to generate huge revenue for the government.
Nami said one of the problems in the FIRS was the issue of revenue leakages, adding that even though Nigeria is the number one economy in Africa, it ranked far behind South Africa in terms of tax to GDP growth as a result of leakages in the system.
He said while tax to GDP growth in Nigeria stands at about 6.3 percent, tax to GDP in South Africa is 27 percent, adding that Nigeria’s tax rate stands as the lowest in Africa, while the average tax to GDP growth in sub Saharan Africa stands at 17 percent.
As a result of the leakages, he said, the service is was not able to generate revenue for government to fund the budget, adding that several Nigerians who are supposed to pay tax in the country were avoiding payment of tax.
He said private companies recruited by the FIRS to help collect revenue on its behalf were poorly remunerated as they are entitled only to 1 percent they collect which he said may not enough to off set their expenses.
As a result of this, he said, some of the tax consultants resort to under hand dealings, negotiating with tax payers on reducing their declaration so that they can get more money to off et their expenses.
The FIRS boss also spoke of under payment of revenue in the oil and gas sector and some multi nationals who hide under the pioneer status clause in the laws to evade paying taxes, adding that while the law allowed for a three year tax holiday based on the pioneer status, these companies now resort to retooling the factories and apply for another two years tax holiday.
He alleged that some companies have been operating in Nigeria for several years without paying a single kobo as tax as they were granted tax incentives they don’t deserve.
He said these multinationals have not been paying tax in Nigeria, adding that the FIRS is deploying technology to get the e-commerce sector to be involved in the payment of tax.
He also disclosed that since the Finance Act has given the FIRS the express power to collect stamp duty, it intends to deploy technology in carrying out the function, adding that it is seeking to connect the money deposit banks, the Central Bank of Nigeria with technology so that the 50 kobo stamp duty will drop immediately into government account.
“When you make a transfer of money above N10,000 to somebody, the 50 kobo stamp duty is deducted. But this money does not drop into government account as it ought to. These monies are being kept by the bank. What we are working on right now is to ensure that the stamp duty drops into government account immediately. That is the practice across the world.
Nami said on assumption of duty, he discovered that about 1139 staff were recruited and posted to tax offices across the country to administer tax matters without adequate training, adding that “some of these people are graduate of Engineering, law and other discipline.
“They are not graduate of taxation. But they were posted to administer tax for government. We have begin the process of training these people in tax administration as a way of improving our operations.
He said that as a result of the clause in the Finance Act which exempt companies below the threshold from paying Value Added Tax, some companies have started devising means of evading payment of VAT, by claiming that their capital base is less than N25 million.

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