THE TAXAIDER NEWSLETTER VOL 3, ISSUE 8 (AUGUST 2021)

First Thoughts: To Give or Not to give unto Caesar

Sometime last week, I came across a meme on social media. It was basically a screenshot of a WhatsApp conversation where the first person said “Hello, my name is Caesar” and the response of the other person was “Caesar, abeg wetin be your own no dey my hand o!” If you’re a student of the Bible or did some CRK at some point in school, you would remember the part where the Pharisees in a bid to test Jesus Christ asked him if it was right to pay taxes unto Caesar. Jesus responded with the line “Give unto Caesar what is Caesar’s and unto God what is God’s” and that is how that powerful quote came about.

The concept of federalism in Nigeria has been one interesting subject over the years and myriads of conversations have been birthed from it. The clamour for restructuring over the years now is an offshoot of the challenges with the system of federalism practiced in Nigeria. The recent ruling in Rivers State’s E.C Ukala v FIRS case shook the Nigerian table tremendously and until now, the reactions have continued to pour in from all quarters with both kudos and knocks alike.

In a nutshell, Value Added Tax (VAT) according to the VAT Act and subsequent amendments, and even portions of the Finance Act, 2019 have been stipulated to be remitted to the Federal Inland Revenue Service (FIRS) and in turn, all VAT collections from all the states in Nigeria are shared amongst the 36 states and the Federal Capital Territory (FCT). For me, this is a fundamental flaw. The sharing formula has not exactly helped matters and we find out that this is major disincentive for hardworking states, knowing fully well that the wealth they work for would be distributed to some states who do not need to even move a finger. Ironically, the value added taxes collected on alcoholic beverages are also redistributed and some states in Nigeria practicing Sharia Law and banning the sale and consumption of these beverages within their jurisdiction still benefit from this redistribution.

The landmark judgement was music to my ears and while we watch patiently as the relevant consultations continue and most likely a major appeal from the FIRS to the ruling, I believe more Nigerian states would be encouraged to begin to fight for what they believe is rightfully theirs. Hopefully this serves a wakeup call to all and sundry that there is no food for lazy man. Every state should strive for its own autonomy, improve its internally generated revenue (IGR) earning capacities and not continue to depend largely on the federal allocations (FAAC). It is only then that we can achieve the equitable distribution of wealth we all clamour for. The burden on the centre needs to be relieved before things fall apart and the centre can no longer hold.

In this Issue, we discuss:

  1. Capital gains: What you need to know
  2. E.C Ukala v FIRS; The Rivers State VAT Ruling: Implications on Businesses.
  3. 7 things to know about Withholding tax (“WHT”) on Interest Expense
  4. Tax Audit and Tax liability: what you should know
  • The Central Bank of Nigeria (CBN) says the country’s inflation rate may drop to 13 percent this year and single digit by 2022. Hassan Mahmud, Director of Monetary Policy Department, CBN, said this on Friday in Lagos at the virtual mid-year Economic Review and Outlook 2021, organised by the Chartered Institute of Bankers of Nigeria (CIBN)’s Centre for Financial Studies, in collaboration with B. Adedipe Associates. Read more HERE.
  • The Federal Inland Revenue Service (FIRS) says its revenue projections for the year 2022 financial year is N10.1 trillion. This was disclosed by its Chairman, Muhammad Nami while appearing before the House of Representatives Committee on Finance on Wednesday, in Abuja, during a public hearing by the committee on the 2022-2024 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP). Read more HERE.
  • Nigeria will receive $3.35 billion as its share of the International Monetary Fund (IMF) $650bn Special Drawing Rights (SDRs) to help boost the liquidity of member countries. Kristalina Georgieva, managing director of the IMF, announced the deployment in a statement on Monday. SDR is an international reserve asset created by the United Nations specialised agency to supplement its member countries’ official reserves. Read more HERE.
  • The Bankers’ committee announced plans to begin the sale of foreign exchange to customers through the platform of the Nigerian Inter-bank Settlement System Plc (NIBSS). The committee is a forum of chief executives of Nigerian banks and the directors of the different departments of the Central Bank of Nigeria (CBN), with the CBN governor as chairman. Read More HERE

Please stay tuned to our TaxThursday bulletins, our website and of course our mobile application, TBook.

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Till Next Time

GB (g.sile@taxaide.com.ng)