Nigeria To Tackle Profit Shifting By Multinationals

19/02/2020

Nigeria's Federal Inland Revenue Service is to comprehensively reform its operations to tackle "illicit profit shifting" by multinational companies operating in Nigeria.

Speaking ahead of FIRS's 2020 Management Retreat on February 7, 2020, the service's Executive Chairman, Muhammad Nami, said that Nigeria is foregoing around USD10bn in tax revenue as a result of profit shifting activities.

To tackle tax avoidance by multinationals, tax administration will be reformed in four areas, including: "rebuilding FIRS's institutional framework; robust collaboration with stakeholders; building a customer or taxpayer-centric Institution; and making the FIRS a data-centric institution," Nami said.

FIRS has set itself the target of raising tax collection by USD5m per staff member as a minimum over the next four years and increasing Nigeria's tax-to-GDP ratio to 10 percent.

According to Nami, FIRS's total revenue target for 2020 is NGN8.5 trillion, which includes oil tax revenues of NGN3.7 trillion (USD23.3bn) and non-oil revenues of NGN4.8 trillion.

With one of the smallest tax-to-GDP ratios in Africa, the International Monetary Fund said last year that Nigeria should broaden its tax base by reforming the VAT system, overhauling the current range of tax exemptions, and improving tax administration.

The IMF welcomed what it said was a "move towards a VAT with full crediting of input tax, increased compliance monitoring of tax incentives, and broad-based use of excises." However, it said that Nigeria could also consider a comprehensive reform of the VAT system, an "aggressive" removal of tax exemptions and incentives – which should instead be rules-based. It also argued against the introduction of new tax exemptions, warning that these narrow the tax base.

Source: Pride Partners International