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Nigeria’s Tax System Urgently Needs Sensible Reforms – Taiwo Oyedele, Head of Tax and Regulatory Services, West Africa PwC

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Taiwo Oyedele is the Head, Tax Regulatory Services, at PwC Nigeria (the world’s leading professional services firm with presence in over 150 countries). Taiwo has been in the forefront as a thought leader and prominent speaker on key accounting and tax issues. He is an ardent advocate of tax reforms.

He joined PwC to do his statutory service to nation as a youth corper  in 2001. He was confirmed a full time employee in 2002. By 2009, with a dint of harwork and diligence and in record time, he rose to become a partner in the firm.

Taiwo is a fellow of the Institute of Chartered Accountants of Nigeria (ICAN), fellow and council member, Association of Certified Chartered Accountants of United Kingdom (ACCA), and fellow of the Chartered Institute of Taxation of Nigeria (CITN).  He is a highly sought after speaker in global conferences on taxation and fiscal policy.

In this interview with TheCFO, the amiable and soft spoken President at Impact Africa Foundation and Council Member at ACCA shares on humble beginning, tax reforms, multiple taxation and many more. Excerpts

How does Nigeria compare to the rest of the world in terms of Tax to GDP Ratio?

Nigeria is not doing well in terms of Tax to GDP ratio. At the moment the rate is about 6% while the average for OECD countries is close to 30% and for most African countries it is more than 20%. So this is not even a question of developed countries alone, it’s just the fact that we are not doing well.

Ironically when you talk to people on the street, businesses and individuals alike they will tell you that they are paying a lot of taxes and they are not seeing the tax revenue. It’s either people don’t understand what is tax and the taxes they pay or they are actually not paying, or there are significant leakages, or both. We are one of the lowest in the world, lower than even some war-torn countries like Syria, Afghanistan.

The International Monetary Fund released a report recently and they said for any economy to have meaningful development, you need a minimum of 15% Tax to GDP ratio. And they haven’t seen any country in the world that has been able to develop with less than that. So if we are at 6%, it means a very long journey ahead of us.

Taiwo Oyedele, Head of Tax and Regulatory Services, West Africa, PwC

Do you think enough is being done by the government on tax system reforms? What noticeable changes do we have?

I will say Yes and No. I will like to structure the question in three (3) different ways. There is what we call the Tax Tripod. They are the three legs of the tax system. It’s just like what you use to hold the camera, if one is missing it can’t stand.

So one leg of that is the Tax legislation, the other one is Tax Policy and the third one is Tax Administration. So in terms of the Tax Law, I will give us a failure mark. We are doing terribly on legislation. We are still using some of the laws we inherited from the British before independence. Even the British have forgotten they have those laws because they have reformed and move on.

Many of them are just against common sense. For instance, if you start a business today, there is something called “Commencement Rule”. It makes you pay double tax on your profit within the first 3 years. The most vulnerable time in the lifecycle of a company is when you are just starting. This is because you have a lot of overhead, people don’t even know you, and you don’t have a lot of customers. That is when you need support but in Nigeria that is when you pay double tax.

There is also something they call Minimum Tax. If you are unfortunate not to make profit or your profit is less than expected, then you are made to pay tax out of your capital based on certain parameters contained in your financial statements such as turnover and total assets.

All these laws on tax are anti-investment, and they are also not pro development. These things are not rocket science, we need the law makers to sit down and write sensible laws for Nigeria.

On Tax policy I will give us a pass mark and I am only giving us a pass mark because of the recent effort by the Minister of finance to review the national tax policy and a new national tax policy has been approved by the federal executive council for implementation. We hope and remain  positive that the implementation will at least solve most of our problems.

The third leg of the tripod is the Tax administration, where we also are not doing well. There has been some efforts by the federal Inland Revenue service and the joint tax board which I do acknowledge but it’s still a very long journey and we still have a long way to go. For many tax authorities around the world, if you just google their reports, you will be impressed at the details and the extent of analysis. In Nigeria we don’t even know how many taxpayers we have in the tax net and basic information about them including those who have refunds. Government does not like to pay refund and you also have multiplicity of agencies. Somebody will show up today and say I am from FIRS, they are doing audit, before you finish, another person shows up and say I am from ITF, sometimes if you are not careful, even National Assembly is doing audit.

It’s too much confusion and complication, that’s why on the ease of paying taxes ranking by the World Bank and PwC, we are ranked 181 out of 190 economies in the world.

If you put everything together, I will say we are not doing well because the only bright spot that I see now is tax policy but that still needs implementation.

Taiwo Oyedele, Head of Tax and Regulatory Services, West Africa, PwC

Are there concrete plans to deepen tax net in the Reforms?

Yes. The issue with Nigeria in terms of the tax system has nothing really to do with the tax rates. Our rates are some of the most competitive in the world; for instance our VAT is 5%. In Ghana it is 15%, in Europe we have up to 25% and people are paying.

So look at personal income tax, if you earn even a 100 million naira per month in Nigeria, your personal income tax will never hit 20% of the amount you earn. The maximum anybody can pay is 19.2% effective tax rate of personal income tax. Go to some countries in Europe like Denmark, you pay almost 67%, and about 40% in the United Kingdom.

But where is the problem coming from? The problem is coming significantly from non-compliance. So according to the joint tax board, there are now about 14million people nationwide with all the 36 tax authorities and the Federal Inland Revenue Service or FCT IRS that are registered for personal income tax, it used to be 10million, they manage to move it to about 14million.

Now in the whole of Nigeria, only 943 people pay personal income tax that is 10 million naira or more. All of them are in Lagos except 2 in Ogun state. To pay 10 million naira tax you must earn income annually of around 40-50million. Does it mean that there are no people in Abuja who earn 50million per annum? There are no people in Port Harcourt, Rivers State, no people in Kano, Kaduna and so on who earn 40-50million?. It’s  unbelievable and also an embarrassment to the country that these things are happening and nobody is doing anything about it. According to the finance minister, VAT compliance rate is about 12%. That means 88% of companies and enterprises that are supposed to be charging VAT and remitting it are not even registered. So the level of tax evasion and attitude towards tax is appalling and it is a combination of many factors. So it’s not right to blame only government, I will say government has a bigger role to play but also the people, the tax payers, individuals, institutions, the civil society, the press, we all have a role to play. This is a national crisis that we must address if this country must move forward. The foundation is not solid, but one of the reforms to deepen tax is to use technology,  if the government can make everything automated  and put the data to effective use. There is also the initiative of connecting the FIRS with the Corporate Affairs Commission. It looks somehow that people are registering companies and the tax authorities are not even involved. Tax registration for a new company should be automatic.

What are the intentions of professional bodies to promote positive tax culture?

Actually the tax authorities or government have a general responsibility to educate people. So in law they will say ignorance is not an excuse. But you don’t make laws and keep them in lockers and expect people to comply. There is a lot we can all benefit if people understand what they need to do.

People should know their rights and obligations and also demand accountability.

I think government, professional bodies, the civil society, and the media and individuals must jointly do this work, it’s a national assignment.

As a professional, what do you think should be done on multiple taxation?

That is a billion dollar question. Multiple taxation in Nigeria is a big problem. You have all manners of taxes from local government, to state government, to federal government and to agencies of government also introducing taxes. Many of those taxes are not even supported by law, many of those taxes never get to the pocket of the government.

We have nothing less than 50million people that are unemployed. When these people want to start a small business you need to see the multiplicity of taxes they need to deal with, as a result many of them simply give up.

This is something we have to address and I think the fundamental problems are actually with the constitution itself. Nigeria’s constitution gives powers to federal, state and local governments. Now, that includes the power to impose tax which means constitutionally, they can keep imposing as many taxes as they please.

So we have to go back to the constitution and amend it. If we can amend it for election, why can’t we amend it for a very important issue on how Nigeria will grow?

My recommendation is that the constitution should be amended such that the state, local government and federal government will still have the power to impose tax because it’s a federal system of government. But the number of taxes should be capped at something like 10.

There is one state, they have environmental tax, pollution tax, ozone layer tax, and they don’t even know where the ozone layer is. They just use all manner of things  to collect money from people.

Apart from multiple taxation there is also multiplicity of agencies. You go to the UK and we have HMRC. You go to Ghana and you have Ghana Revenue Authority, in Kenya, you have the Kenya Revenue Authority and South Africa, you have South Africa Revenue Service. Whether it’s custom, whether its personal income tax, whether it’s company income tax, whether it’s VAT and even levies, it is consolidated in one entity. But here you have all manners of people collecting their own taxes. So there is no synergy at all and that also add to the problem of multiple taxation which is killing businesses and it also makes us very inefficient.

Could you please tell us how you got to this career line, and what are the interest?

I always cherish my early years. When I graduated from secondary school, I didn’t know what I wanted to do. In fact, it was my principal who put me in science class when I finished my junior secondary school and the only reason was that I was the best student.

When I finished my secondary school, I still didn’t know what I wanted to do. My mum wanted me to be a doctor but I was not very impressed with the doctors I saw around in the village. So luckily when I was in my confusion, an uncle who visited from Lagos advised me to study accountancy. The rest is history. I was told that if I passed the professional exams, I will be a hot cake. That was the word he used and I like challenges.

Now after I graduated, I wanted to work for a big 4 accounting firm because I like the way people respect them as being very smart and intelligent. When I got into PwC, the senior partner at that time, Ken Igbokwe, insisted that I will be in Tax and not Audit that I wanted.

So I settled down in Tax, and since then it’s been a wonderful experience for me. Now anytime I look back. I say a big thank you to Ken because not only am I able to understand the world around me better, I love the job. Tax helped me to be able to combine even the Audit knowledge I wanted with Consulting, with Tax Law, with the economy. So it’s been a fantastic experience for me.

What do you do when you are not busy with office work?

I have a lot of interests. So what I do when I am not doing office work, it’s not just one. There are so many.  I always look forward to playing with my kids when I get home. Whether I close late or early, they stay awake. So I look forward to that every single day, I am fortunate to have a very good family.

Other than my family, one thing that is very close to my heart is helping people. That is also due to my own background and experience. When I wanted to write my secondary school exams, my immediate family could not raise 500 naira that I needed until this association of my village people who were working in Ajaokuta Steel Company at the time gave me a scholarship as the best student in my village secondary school.

I started a foundation about two years ago to help less privileged children. So we have awarded about Sixty Six (66) scholarships in just one year. We are planning to do Two hundred (200) this year as we get more funds. I have also written a book and the proceeds from the book goes into the foundation. I also have some friends who are supporting the initiative because they know what I stand for.

I also do a lot of mentoring because I have seen that sometimes what young people need is not money. They need words of encouragement. You can tell them how to make the journey smoother than what you experienced. If I spent five years (5) figuring out a problem, a younger person should not have to spend that five years. They should spend less. So I do that, I do a lot of reading; I also like to write a lot. I have a big presence on social media. So I combine technology with tax and the economy.

 

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Safaricom post-IPO investor wealth rises to Sh1.3trn peak

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The Safaricom stock hit a historic peak recently, closing at a high of Sh32.80 per share on Friday, thereby swelling investor wealth eightfold since its listing on June 9, 2008, inclusive of dividends.
Shareholder wealth as measured by market capitalisation has now touched Sh1.314 trillion, representing an increase of a whopping Sh1.114 trillion from the time the company listed 40 billion shares at Sh5 a share 11 and a half years ago.
When the company’s cumulative dividend pay-out totalling Sh301.2 billion over the 12-year period is added, Safaricom investors have enjoyed a return of 708 percent on initial investment of Sh200 billion. The dividend alone has been enough to allow investors to recoup their capital at listing and remain with an additional Sh101.2 billion balance.
The gains last week also pushed the company valuation as a share of the entire market to 50.4 percent and underlined its dominance on the stock market. Crossing the 50 percent threshold means Safaricom’s market worth is now more than the combined valuation of all the other 61 listed companies.
Analysts have attributed the rally in the last one year to sustained foreign demand, with the growth in dividends being a key factor in driving its attractiveness to investors who have few other options to make money in the market.
“The feel-good factor surrounding Safaricom has spilled over into the New Year, on bullish sentiments by foreign investors,” said Standard Investment Bank analysts in a note.
Last year, the stock led the market in net foreign inflows at Sh4.6 billion, which backed a share price gain of 42 percent to Sh31.50 between January and December 2019. During the year, foreign investors accounted for 75.4 percent of total traded volumes on the counter.
Since the beginning of this year, the stock has gained 4.1 percent. The company’s ability to continue to generate record profits — combined with a generous dividend policy that sees it pay out 80 percent of net earnings to shareholders — helped maintain demand through a bear run that gripped the NSE between 2015 and mid last year.
Safaricom has managed to make large capital investments in telecommunications infrastructure, introduce new services and pay incremental dividends with minimal debt and without seeking additional funding from shareholders.
The firm has therefore been able to build up cash reserves quickly, culminating in two special dividend pay-outs in the past four years.
In the year ended March 2019, the company declared a final dividend per share of Sh1.25 and an additional special distribution of Sh0.62 per share, bringing the total to Sh74.92 billion.
M-Pesa
It had also paid a special dividend of Sh0.68 per share during the financial year ending March 2017, on top of an ordinary dividend of Sh0.97 a share.
Driven by growth in M-Pesa revenue, the firm’s net profit for the year ending March 2019 rose by 14.7 percent to Sh63.4 billion.
In the six months to September 2019, its profits recorded a similar margin of growth — 14.4 percent to Sh35.65 billion — again on strong M-Pesa and mobile data revenue performance.
Egyptian investment firm EFG Hermes Holding said in their 2020 yearbook markets report that the rise in profitability and market capitalisation of Safaricom and large banks, while the rest of the market lags behind, will see their dominance become more entrenched at the NSE.
These are the stocks most likely to benefit from an expected return to the equities market by local institutional investors, who have in the past three years tended towards the fixed income segment. “Local institutions remained invested in fixed income for most of 2019, but the impact of the rate cap repeal on local rates and monetary easing could force more local institutional money back into equities in 2020,” said EFG Hermes in the report.
Safaricom’s influence on the market has, however, had the effect of skewing the performance trends of the main indices, depending on whether they are weighted on price or market capitalisation.
The market cap weighted NSE All Share Index is currently at a 16-month high of 171.36 points, reflecting the positive effect of the huge weight that Safaricom has on the index due to its valuation.
On the other hand, the price weighted NSE 20 share index, where blue chips with a high nominal price (such as BAT Kenya, Bamburi, EABL and Standard Chartered) carry more weight, has benefitted less from Safaricom’s gain.
It closed at 2,701 points on Friday, which is below its 2020 high of 2,707 points recorded on January 3.

Source:Business Daily

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Rolls-Royce announces highest annual sales of 5,152 cars in 2019

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Rolls-Royce Motor Cars has achieved the highest annual sales in 2019 with a global performance unequalled in the company’s 116-year history, the luxury car company announced recently.
According to Torsten Müller-Ötvös, Chief Executive Officer, Rolls-Royce Motor Cars, a total of 5,152 cars were delivered last year to customers in over 50 countries, an increase of 25% on the previous high set in 2018.
With these historic results, Rolls-Royce continues to make a meaningful contribution to the overall performance of its shareholder, BMW Group.
Rolls-Royce sells 5,152 cars in 2019, records best-ever sales in 116-year history
“This performance is an altogether different magnitude to any previous year’s sales success. While we celebrate these remarkable results, we are conscious of our key promise to our customers, to keep our brand rare and exclusive.
“We are pleased and proud to have delivered a growth of 25% in 2019. Worldwide demand last year for our Cullinan SUV has driven this success and is expected to stabilise in 2020. It is a ringing testament to the quality and integrity of our products, the faith and passion of our customers and, above all, the skill. The dedication and determination of our exceptional team at the Home of Rolls-Royce at Goodwood and around the world is part of our success,” Müller-Ötvös said.
Meanwhile, the car company disclosed that it recorded growth in sales across all regions during the year, which was driven by strong customer demand for all Rolls Royce models.
However, North America retained top status with one-third of the car maker’s global sales followed by China and Europe.
Rolls-Royce Motor Cars, through a global network of 135 dealerships sold in more than 50 countries, and as part of its long-term commitment to sustainable growth, the company announced two new dealerships Rolls-Royce Motor Cars Brisbane and Rolls-Royce Motor Cars Shanghai Pudong.
Rolls-Royce Motor Cars is expected to launch later in the year a flagship dealership in London, which would double the size of the previous location.

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Hyundai plans to invest $87 billion into producing 44 new electric vehicles

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Hyundai Motor Group is set to invest $87 billion in the production of electric vehicles and autonomous driving. This was announced by the company’s Executive Vice Chairman, Chung Eui-sun.
The $87 billion investment would be put to work over the course of 5 years in future mobility technologies like the planned production of new electric models.
Speaking during the Hyundai new year ceremony held at the company’s head office in Seoul, Eui-sun announced that the company plans to expand its electric line-up to 44 models, including 23 battery EVs and 14 hybrids, and two fuel-cell EVs. He said the first new battery EV would be launched next year.
He further said, “To consolidate our leadership in vehicle electrification, we plan to operate 44 electrified models by 2025, including 11 dedicated battery EV models, by bolstering the development of EV platforms and core components.
“In particular, in our fuel-cell electric vehicle business, where we boast the world’s top technological competitiveness, we will hit our stride by providing fuel-cell systems to customers not only in the automotive industry but also in other sectors”.
Eui-sun further revealed that the company is also big on self-driving commercialisation as it aims to develop an autonomous driving platform by 2022 and to start operating self-driving vehicles in 2023 before commercial production the next year.
As part of its self-driving commercialisation plan, Hyundai invested $2 billion last year into a joint venture with Ireland-based autonomous vehicle startup Aptiv.

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