Tax Newsletter Dec08

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New National Tax Policy to be Approved in Late December ‘08 December 2008

Vol. 21: Issue 12

The Technical Committee on the Nigerian National Tax Policy has announced that the draft document of the tax policy is to be submitted to the Federal Executive Council for approval before the end of the year 2008. The Technical Committee on Tax Policy is under the Chairmanship of the Minister of Finance, Dr. Shamsudeen Usman.

Currently, there are stakeholder’s sensitization workshops across the country, from which inputs, ideas, and contributions are being generated for inclusion in the draft document. The current work on the draft document is an effort that cuts across all tiers of government (federal, state, and local), and all arms of the government (executive, legislative, and judicial).

The Technical Committee is a subcommittee of the Presidential Committee on National Tax Policy, a committee charged with the responsibility of developing the background policy document on Tax law and administration in Nigeria. The terms of reference handed the Committee include:

A major problem in Nigerian tax regime is the multiplicity of tax-imposing and tax-collecting entities at federal, state, and local government levels. Like the Nigerian federation itself, there is little clarity on jurisdictional competencies and indeed, many observers doubt whether there is genuine fiscal federalism in Nigeria.

• Employing taxation as an instrument of diversifying the economy and improving economic development; • Using taxation to create a system that ensures greater accountability for tax revenue, both on the part of government and revenue authorities; • Limiting the granting of excessive tax incentives, particularly in the oil and gas sector; • Creating a modern tax system which is capable of responding

Some of the most seriously considered suggestions towards improving the country’s tax regime include creating: • • • •

A system which encourages voluntary compliance; Reduction of tax evasion to the barest minimum; Instilling public confidence in the integrity of the tax system; and Fair, uniform, and impartial administration of relevant tax laws.

©Blackfriars LLP 2008. All rights reserved. This document is for general guidance only. Definitive advice should be sought from counsel if required. Blackfriars LLP is a Nigerian law firm with a representative office in Toronto, Canada.

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Clearly, the failure of the current tax regime in Nigeria can be measured by the high rate of tax evasion by both private and corporate entities in the country. For the most part, Nigerians do not have much respect for the tax system. While the chronic failure of government to provide basic amenities may be blamed, the tax system itself is inefficient and ineffective. To strengthen the tax system, it has been suggested that the Federal Inland Revenue Service, the tax collecting agency of the Federal Government should address five key areas, namely; • • • • •

Capacity-building and staff development; Automation of tax administration; Tax compliance and enforcement activities; Enhanced tax collection indicators and parameters; Institutionalizing measures to curb bribery and corruption among tax officials.

Tax collectors in Nigeria have a reputation for corruption. Therefore, institutionalizing automated systems and encouraging tax authorities to reward integrity and transparency would be helpful. Similarly, the citizenry should be encouraged to report fraudulent tax collectors to their superiors or prosecutorial agencies for discipline and prosecution.

The top management of tax agencies in the country should engage in periodic reviews and assessments of the performance of field officers. Given the pace of the present administration, not many tax lawyers and administrators expect a quick resolution of the current tax debacle in Nigeria. For further inquiries, please contact: Ms. Nkeiru Onyeaso Tel: +234 808 718 0833 Email: [email protected] Fax: +234 1 2694781 Dr. Virtus Igbokwe Tel: +234 802 220 4755 Email: [email protected] Fax: +234 1 2694781 Ms. Clara Ndive Email: [email protected] Tel: +234 803 323 1868 Fax: +234 1 2694781

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©Blackfriars LLP 2008. All rights reserved. This document is for general guidance only. Definitive advice should be sought from counsel if required. Blackfriars LLP is a Nigerian law firm with a representative office in Toronto, Canada.