The Vice President, Prof. Yemi Osinbajo, yesterday said Nigeria was confronted with unprecedented leakages in tax administration.
He said the situation had threatened fiscal stability in all the tiers of government adding that the revenue leakage is not unconnected with corruption in the tax system.
The vice president spoke at the opening of the 24th Annual Tax Conference of the Chartered Institute of Taxation of Nigeria (CITN), themed, “Global Disruption and Digitisation: Implications for Socio-Economic Development.”
Osinbajo also warned that signing unto the Organisation for Economic Cooperation and Development (OECD) corporate tax treaty would further, “compound the issue of leakages in our tax system”.
In October 2021, Nigeria rejected the tax agreement signed by 136 countries, to enforce a corporate tax rate of at least 15 per cent.
The countries agreed to the pact amid concerns that multinational companies were re-routing their profits through low tax jurisdictions to cut their bills. The measures were also part of efforts to take advantage of the emerging digital economy.
However, justifying the decision of the country not to endorse the deal, Osinbajo said it would worsen leakages in tax administration.
Represented at the conference by the Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami, the VP said the conditions set out in the agreement would further shortchange the country of the needed revenues.
Yet, there had been growing concerns by experts that the country stands to benefit more by signing unto the agreement.
But the VP, while addressing the gathering of tax professional clarified that, “We didn’t sign not because we wanted to do it in our own way but one, you have a requirement that for you to be able to tax any digital player or any multinational enterprises globally, that company of enterprise must have annual turnover of $20 billion. That was the first concern.
“The second concern is the averaging mechanism. This $20 billion turnover is not just for the accounting year but for an average of three years. So that enterprise must make $20 billion for three consecutive years otherwise that enterprise would never pay in any country it operates in except to the country of origin.”
Continuing, he said, “Another key thing that caught our attention is that 20 per cent of this $20 billion must be generated in a country like Nigeria else, whatever business that enterprise does in Nigeria, we cannot subject it to any tax in Nigeria.
“Above all, we should not forget our tax law. The minimum turnover you require as a business in Nigeria to be able to register with the FIRS and pay taxes in Nigeria today is just N25 million.
“And for somebody that makes less than 10 per cent of $20 billion which I believe is about $2 billion in Nigeria and that person will not pay tax in Nigeria.
“I think that injustice is unimaginable, it is wrong and we will stand firm and say we will not accept it, and that’s why we rejected signing the agreement.”
Osinbajo said, “If a company operating in Enugu generated only N25 million ($60,000) is going to open an office in Nigeria, pay for utilities, employ staff , and still pay tax to Nigeria; but somebody who generates maybe $1 billion should walk away with the gross revenue without paying tax to this country, we feel that should not be done.
“Nigeria is the only country that we have and we should not be sensational in discussing these issue, we should not be emotional about it but let’s remain patriotic because if we sign this, then you can name all the multinationals operating in the country, in as much as their global turnover is not up to 10 per cent of what they earn in the country, then they will stop paying taxes in this country.
“That is why we didn’t sign and we are not being arrogant about it, we are not trying not to move the way the world is going but the right thing should be done.”
Nonetheless, Osinbajo pointed out that the lingering issues of insecurity and criminality, inadequate social economic infrastructure among others, could only be addressed if there’s adequate revenue in the hands of government through effective taxation and compliance.
He charged the CITN and Nigerians in general to ensure compliance with extant tax rules, and “encourage others to comply and report those who are not complying”.
He said the CITN remained a critical part of the taxation ecosystem in the country pointing out that tax constituted a key driver of social harmony, political stability and economic development and growth.
The VP said until the present administration took steps to diversify the economy, past administrations had relied almost exclusively on revenue from crude oil.
He said, “We have however, learnt from recent market trends that crude oil like other commodities is not a sustainable source of domestic revenue.
“This is because as you are aware, the world had witnessed uncommon modulation in prices of crude oil since 2015 when this administration started.
And in the long run, this would dove-tail into a global move towards green energy which will further weaken the demand for crude oil. In all these, one message stands out- if we must make progress as a nation, all of us; countrymen and women must surrender an adequate part of our substances for the sake of national development, social harmony and political stability and economic growth.”
Osinbajo said tax professionals must be aware of the costly impact of non-compliance by taxpayers who they hold brief for on government’s revenue adding that the larger society remained crucial and must be given topmost priority in tax administration.
Meanwhile, the National Chairman, Osinbajo Consolidation Organisation, Mr. Oyeniran Oyebamidele has said the vice president would consolidate on all projects and programmes established or initiated by the present administration if elected president next year.
The group disclosed this yesterday, in a statement issued by its National Publicity Secretary, Pastor Godwin Arome.
The group described the vice president as a development icon, who has made his mark on the country’s political history by being resourceful, energetic, politically suave and the epitome of democracy.
The statement quoted Oyebamidele to have said the country would notice the present effort being made by the Buhari’s administration to put in place a solid foundation for the country’s transformation through, laying of development infrastructures, industrialisation, social investment and economic directions, the benefits of which he said were yet to realise, owing to global issues that had created devastating effects on many fronts of development initiatives across the world.
He expressed satisfaction with the vice president’s performance, saying he had demonstrated remarkable tact and maturity in supporting the administration of President Muhammadu Buhari as a worthy deputy, whose loyalty and credible leadership quality have not been in doubt; with unshakable focus.
Also, the Chairman of the Committee, Mr. Jibrin Yusuf, who is also a member of Board Trustees of the group, said most members are grassroots politicians and would work to ensure the success of breeding people that would carry the message of the presidential aspiration of Osinbajo to the nooks and crannies of the country and amongst the APC delegates, who would decide on the party’s presidential flag bearer at the National Convention for Presidential primary.
On his part, the National Secretary and the Chief Strategist of the organisation, Dr. Yakubu Ugwolawo emphasised the need for all hands to be on the deck to work strenuously and harmoniously for the emergence of Osinbajo as the party’s standard bearer.