MDAs reject new VAT rate

Some Ministries, Departments and Agencies (MDAs) have rejected the new Value Added Tax (VAT) to pay on the old contracts awarded by them, saying they were based on the old five percent and, therefore, could not pay the new 7.5 percent.

Federal Inland Revenue Service (FIRS Executive Chairman, Mohammed Nami, who spoke on Monday at a meeting with members of the Finance Committee of the House of Representatives, said some business premises were resisting efforts by the Service to deploy technology in collecting revenue. This entails connecting them to a common server where it can monitor their transaction as is done across the globe.

Nami accused some multi- national companies of not paying the required tax, but fake the issue of pioneer status to get tax exemption for five years instead of the three years allowed by the law.

He said FIRS has sent an executive bill to President Muhammadu Buhari through the Attorney-General of the Federation to allow them deploy technology in generating revenue, saying when the order is applied, the FIRS will generate huge revenue.

Nami said one of the problems in the FIRS was the issue of revenue leakages through tax evasion, tax exemption, among others, adding that even though Nigeria is the number one economy in Africa, it ranked far behind South Africa in terms of tax to Gross Domestic Product (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 put at 27 percent, adding that Nigeria’s tax rate was the lowest in Africa, while the average tax to GDP growth in sub- Saharan Africa stands at 17 per cent.

He said private firms recruited by the FIRS to collect revenue are poorly remunerated as they are entitled only to one percent of the revenue collected, adding that this is not enough to off set their expenses.

Consequently, he said, some of the tax consultants resort to under hand dealings, negotiating with tax payers on reducing their declaration to the government so that they could get more money to off set 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 their factories before applying for another two years tax holiday.