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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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Dependence On Govt Killing States’ Chambers Of Commerce- RUWASE

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Mr Babatunde Ruwase is the President of Lagos Chamber of Commerce and Industry (LCCI), a Fellow of the Institute of Chartered Accountants of Nigeria, also an astute boardroom guru. In this interview with Akin Naphtal, he speaks on the various advocacies of the chamber and the need to revamp the economy for growth, among others. Excerpt:


The chamber has been leading in the era advocating for best business policy and practice. Can you share with us, your challenges and achievements over the Years sir?
The business started as the Lagos Chamber of Commerce 130 years ago, in 1888, which actually pre-dated the land space which God has given us today, which we call Nigeria. One can say the Lagos Chamber of Commerce had been an institution in this space even before 1914, when Nigeria was put together and most of the corporates that were there then are members. The one that can readily come to mind is UAC. First Bank that also celebrated 125 years are members. Our member also happens to be the first to finance the first port of UAC, we called it harbor then. Bringing of electricity to Lagos was also financed by our members in the 18th century. We were on ground when Nigeria came into being, with Lagos being the center of commerce and governance.
We’ve been doing a lot of advocacy – although when the petrol dollar came in, government became very rich. In those good old days, government would wait for commerce to be able to do their budgets because it was seen that the prosperity of business dictates how far you would go and what was government for then? It was to protect the environment and people – they were not doing business, but then, over time, money came in and government was in charge of petrol dollar. They looked beyond waiting for taxes and duties, they now had a source of wealth on their own.
How healthy an economy is depends on the political environment because when you do your projections, the government is not going at the same pace with you, you could be working at cross-purpose. That also gives us a big challenge at our own time when we now have to see how we will navigate through this difficult terrain. I would also say that in recent times, we have a government that recognizes business – at least we can talk to them, they listen to us, they see it as positive criticism. They don’t see it as them and us.
We talked to the government about ease of doing business and they listened to us. It is now being chaired by the VP. We have access to them and we tell them the problem that we have they also have a sub-unit in that office that deals with different session of business and we are doing well. The only thing is that at the early stage we were not able to reach out; people don’t really know much about what we are doing; and people don’t know that those things are there but we are getting there and hope it will continue to get better.
You know we have various chambers in Nigeria but the LCCI has been the leading factor. What are the unique things that make LCCI unique among all chambers?
The secret is that most of the chambers we have in Nigeria are promoted by government. State governments, for instance, and they have this government involvement in putting together such chambers. So, when you have government putting a chamber together, it is very difficult to be independent which is not so in our own case. It is difficult to start a chamber taking into consideration the mentality of our people.
Can you shed more light on the national body that was put together and what was the motive behind it?
NACCIMA was created and founded by the Lagos chamber, we worked with them and act as mentors to those who come around and encourage them and I think some of them are doing very well but then, the factor of not knowing that you must put your money where your mouth is comes to play and the problem of looking out for immediate value in something are things they need to get out of, and I always tell some of them to be independent of government as much as possible. Being tied to the apron string of a ministry of commerce somewhere before they can do anything is not good and should be avoided.
Looking at the current view on Nigeria economy towards economy diversification, what are your views looking at the current situations?
One will say we are making some progress but then they are low side of it. We have this problem of infrastructural decay which is making us to spend money on everything we have to do. In your private life you have to provide your own water, security; you have to think how to get from point A to B. Those are to be in the realms of social service. For a business man, you also have to contend with high cost of funding, if you have to go and borrow to do business, you are talking of two digits and that’s not the fault of anyone it’s just the economy where we have found ourselves but as a people we have not managed our resources very well and the level of inflation too determines the cost of funding.
So if government is doing double digit borrowing by the way of Nigeria Treasury bill, there is no way there will be a single digit. With double digits, borrowing is very difficult for you; you can only do things that are short term and then be profitable, if not you will find things difficult. We have corruption that has even gotten us to where we are. But the good thing about it is that we are at the peak of it, people are talking about it, people are making attempt to solve those problems. We look at what is happening in power, the problem of power is not even the generation because we generate actually what we can’t distribute. There’s lack of capacity to distribute because of the ageing infrastructure. These are the factors that are identified and things are being done; we are talking of mass transportation, agric.
Also we have to be sincere government should have to be at the vanguard of patronising made in Nigeria goods. And as Nigerians we should be patriotic enough to patronise made in Nigeria goods.
We create jobs by producing what we use locally, unfortunately, what we can boast of currently is crude oil. Crude oil does not create more employment as you get from manufacturing, even in Agric. So we need to patronise what we have, interestingly, for instance in Ghana, Nigeria goods are cheaper in Ghana. We don’t realise what God has given us as people, we are always looking beyond this land we don’t have confidence in it. The Asians are doing what we don’t want to do; they are into farming in large scale. Even this manufacturing we are talking of we have them there. So there is something they are doing right that we are not, it also has to do with the way we organise our lives, approach to business. We have a CEO riding expensive vehicles; they don’t even have vehicles for operation. You have factory outside Lagos and you want to live in Lekki but if it is an Asian, he will live there. So we have attitude problem to business. So we don’t realise what God has done for us, we keep on complaining. People are coming in to take over our economy because we have what they need as a country which we don’t see or value.
We should have maximum orientation to take advantage of it. We have a good economy and we need to fight corruption in every sector. The country is potentially great and we need to face some facts. You can’t subsidise consumption and get growth, you can only subsidise production. It is even more vulnerable to exploitation and corruption. When I look at our budget, we have 305 billion naira for fuel subsidy, that’s money that should be directed to some other things like production that can create employment. People buy fuel but the poor are not affected directly because the vehicles that they use, use diesel (AGO) and is deregulated. We need to take hard decision and also spend money on human capital development training in skills, because we go outside the country to bring in vocational skills worker. We need to focus on human capital development. The problem we also have is we do more of politicking, because politics has influence on our business terrain. That’s why we say government has no business in business. They should just set standard and regulate, they shouldn’t be in business. There’s a bureaucracy that take a big chunk of what is meant for business. Running cost takes a big chunk in business. These things affect the economy and also affect us as a people and its pull business down.

On area of gender equality, how is the chamber faring?

Yes, we are very mindful of that, my past president is a lady and my deputy is also a lady. We are very gender sensitive. Of course, we operate in international space and that is something that comes up when you are doing peer review. They want to know what position you have for women. In the real sense we are in business and business does not talk about gender. We have a very strong women group, which is one of the focused groups and they are doing fantastic well. And then we also mentor young ones too.


What are you doing to revive the moribund textile sector?
What is affecting textile basically is not an isolated thing from what is affecting our industry. The textile companies went moribund because of the harsh economic environment. Let’s take power for instance, they don’t have power. They could not replace their engine equipment due to funding challenge that we talked about earlier. There was a time when those who are cultivating cotton realised it was no longer profitable; they moved to other areas. Some were rearing bees at a particular time and I am sure now they will be doing rice.
It is imperative for Government to go back and do backward development, and let us rejuvenates these textiles factories and let us see how we can produce what we need, and of course Government also needs to patronize the textile industry. We all need to be sincere about this because we all know the reason why they went moribund, it was because they never had good patronage and they could not compete with imported items. Even though it is not possible to solve all the problems of textile industry in isolation, if we solve the problem of manufacturers we have solved half.
And how do you balance your personal and professional life?
I always believe that what is worth doing at all is worth doing well, i am not different from anybody of my own generation. My own type of growing up, we were not pampered; some of the indulgence that people kept now, can only be done if you are a rascal. I came from a very disciplined background, the type of training had as an audit training also folded me, and it prepares you for life.
I solidly believe in hard work, and i also try to be quiet, i do not impress people rather i always want to be myself, balancing the two has been easy i mean coping with this modern days is not very tasky, you could feel bored if you do not have things to do, you know a lot of activities that you are subject to.
If you were to make three wishes, what would they be?
I wish for Nigeria to be a better place for us, and also for Nigeria to attain its potentials. But you know we cannot achieve this unless we take money out of politics.
I wish we can get it right as a people. Nigeria is my problem, and also our problem because I know we can do better than where we are today, God has blessed Nigeria, He just need to help Nigeria.

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Google to Buy Looker Data Sciences for $2.6B Cash

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Google has announced decision to buy Looker Data Sciences in a bid to expand its offerings to help customers manage data in the cloud.

The acquisition recently announced, gives Google a new tool in its campaign to sell more cloud storage and software. Google plans to buy Looker for $2.6 billion in cash.

The deal will blend Google’s in-house analysis tools such as BigQuery with those built by the Santa Cruz, California-based Looker. It also sets up a new competitive front with Microsoft and its Power Platform/Dynamics.

This marks Google Cloud CEO Thomas Kurian’s first major acquisition in his tenure. The former longtime Oracle executive replaced Diane Greene in November 2018.

“For any business that is looking for a partner to help drive digital transformation, the combination of Google Cloud and Looker will offer an incredible data management and analytics platform,” Kurian said in a Google blog post announcing the deal.

According to him,  Google intends to use Looker’s tools alongside its BigQuery database to offer “customers a more complete analytics solution from ingesting data to visualizing results and integrating data and insights into their daily workflows.”

Since taking control of Google’s Cloud computing division, Kurian has unveiled plans to double down on enterprise sales and will now extend Google’s overall enterprise software pitch with Looker.

Earlier this year, Kurian said he intend to invest and expand the business significantly, adding, “You will see us accelerate the growth even faster than we have to date.”

Google parent company Alphabet has already invested in Looker through its venture fund, Capital G. This purchase will be Google’s biggest acquisition since it bought smart home company Nest, another Alphabet-funded company, for $3.2 billion in 2014.

Google has been trying to gain market share from industry leader Amazon Web Services, which reported $7.7 billion in revenue for the last quarter.

“When Thomas Kurian approached us to become a cornerstone of his new path forward, a light bulb immediately went off for Lloyd (Tabb, founder, chairman, and CTO) and me,” Looker CEO Frank Bien wrote in a blog post about the deal.

Google held 7.6% of cloud market share at the end of 2018 compared with 13.7% for Microsoft and 32% for Amazon, according to a report from Canalys.

Analysts commended the sale and credited it for providing “a unified platform for business intelligence, data applications, and embedded analytics.”

Subject to regulatory approval, the acquisition is expected to be completed later this year.

Google shares were down less than 1% to $1,037.83 Thursday morning in New York.

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Azuri Tech To Invest $26m on Business Growth in Africa

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Azuri Technologies, a leader in pay-as-you-go solar technology, has announced its decision to invest a sum of $26 million to expand its business growth in the continent and accelerate Africa’s transition to clean and affordable energy.

Being financed in partnership with Japanese Fortune Global 500 Company, Marubeni Corporation, with additional participation of existing shareholders including FTSE 250 Company IP Group Plc, the strategic investment would ultimately accelerate Azuri’s market growth plans in both East and West Africa and open up new opportunities for the business.

Azuri Technologies provides solar home systems to off-grid consumers in sub-Saharan Africa on a pay-as-you-go basis. These systems enable households without access to the grid to benefit from modern conveniences, from electric light to satellite TV and Internet access via Smart phones.

On the other hand, Marubeni Corporation has global interests in energy and substantial experience in Africa.

The capital infusion would enable Azuri to accelerate expansion in existing sub-Saharan Africa markets and roll out its solar lighting, TV and additional services into new markets, with focus on enhancing the lives of millions living without access to the grid.

Commenting on the investment, The Chief Executive Officer of Azuri Technologies, Simon Bransfield-Garth, was quoted in a statement to have said during the signing ceremony in the United Kingdom recently. “We are delighted today to announce the equity investment by Marubeni Corporation and existing shareholders. The entry of a leading player in the international energy market into this sector demonstrates the increasing maturity of off-grid power and its role in serving the 600 million people in Africa that still lack access to electricity,”

According to the statement, the Chief Operating Officer, Power Business Division, Marubeni Corporation, Mr. Yoshiaki Yokota, also said: “We believe that Azuri’s unique business model will have a profound impact on the growing off-grid energy market in Africa.

He further stated that, “The global energy market is evolving rapidly, with the introduction of new renewable technologies and energy-efficient devices. We are delighted to be a strategic partner of Azuri as a market leader and see their solar home solutions and services as catalysts for change in the African energy sector and beyond.”

Also Speaking, Partner at IP Group Plc, Mr. Jamie Vollbracht added: “As an early investor in Azuri, we are pleased with its growth to date, with over 150,000 systems sold, positively impacting off-grid households in Africa. Today we are delighted to welcome Marubeni to the business to help power the next exciting phase of growth for Azuri.

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