Tuesday, 23 May 2017

FG to impose 5% charge on tax defaulters

From Uche Usim, Abuja
As part of measures to sanction tax defaulters and enhance voluntary compliance on tax obligation, the Federal Government yesterday announced it would from July 1, 2017, impose additional 5 per cent charge on firms that fail to honour their tax obligations as and when due.
Minister of Finance, Mrs. Kemi Adeosun, who announced the new interest rate spread on unpaid taxes for the year 2017, said such defaulters would pay about 19 per cent on their obligation which is 5 per cent above the Central Bank of Nigeria (CBN) 14 per cent policy rate.
The new interest rate, she noted, shall be 5 per cent over the Central Bank of Nigeria’s Minimum Re-Discount Rate (MRR) for 2017. She explained that Section 32(1b) of the Federal Inland Revenue Service (Establishment) Act 2007 empowers her to approve the new interest rate.
The Minister said the review of the interest rates on unpaid taxes was one of the necessary measures adopted by the Federal Government to enhance tax compliance, minimise tax evasion and deter late payments.
“Majority of Nigerian tax payers (PAYE) have taxes deducted automatically. However, those who do not and are required to file their taxes like companies and business enterprises, must understand that there are financial consequences for late payments. We believe that this will support our efforts to ensure that people pay their taxes promptly, thus providing a sustainable source of revenue to the government to finance infrastructure and other projects,” the Minister said.  
Recall that Mrs. Adeosun had, during the Finance Ministers’ meeting convened by the G24 Group at the 2017 IMF/World Bank Spring meetings in Washington, DC USA, stressed the need for Nigeria to embark on aggressive tax revenue generation in order to drive economic growth.
She had emphasised that with a tax to GDP ratio of only 6 per cent, one of the lowest levels in the world, the country had to intensify effort at tax collection in order to build a sustainable revenue base that will deliver inclusive growth. She stated that the focus of the Federal Government in 2017 was to improve tax revenue through ensuring voluntary compliance with tax laws.
The Minister has accordingly directed the Executive Chairman of the Federal Inland Revenue Service (FIRS) to commence the implementation of the new interest rate on all unpaid taxes from July 1, 2017.
Meanwhile, in line with its drive to ensure foreign exchange liquidity, the Central Bank of Nigeria (CBN), yesterday, injected additional $205 million into various categories of markets. With only 13 million out of 178 million Nigerians paying tax, government said it intends to raise its tax collection GDP to about 15 per cent by 2020 from the current 6 per cent to enable it deliver inclusive governance.
The Nigerian government is also seeking to improve tax revenue to N350 billion ($1.5 billion) per year through measures that would include 15 per cent tax on luxury goods


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