Olaleye Adebiyi is the Group Managing Partner, Andersen Tax in Nigeria. With over 30 years’ experience in tax planning, advisory, and compliance transactions in Nigeria, he tells KINGSLEY JEREMIAH the way forward for the tax sector as well as plans by Andersen Tax, a global firm to contribute significantly to the growth of the sector in Africa, and Nigeria in particularly. Excerpt:
Why is Andersen Tax making debut in Nigeria and Africa at a time like this when the country is facing economic downturn?
Let me first say Andersen Global, which operates as one Firm, is an international association of member firms with over 2,000 professionals and a presence in more than 66 locations worldwide. We are here in Nigeria to offer the best services to our clients. In a time of recession, you need to go back to the root of the problem. In Nigeria, we went into recession because we operate a mono product economy. We depend so much on crude oil to finance government revenue. So when the price of crude oil fell in the international market we were affected. Government is now concentrating on diversifying its revenue base and not depend solely on oil revenue and one of the ways to do that is to get more tax revenue into the government coffer. So this is the right time for us to work with stakeholders in the economy to ensure this kind of issue does not catch us unaware again. Our focus is to work with clients and regulators to face challenges ahead on how to improve the country’s economy.
There are other organisations that offer similar services being offered by Andersen Tax, what difference is the company bringing on board?
We are unique in our own way, the Andersen Way, because we prioritize quality service delivery at a reasonable price. In the Nigerian and African markets we will provide tax advisory services for multinational and individual clients. Our basic specializations include Tax Advisory & Regulatory Services, Transfer Pricing, Energy & Infrastructure, Consumer & Industrial Markets, Family Wealth and Private Clients, and Tax Adjudication/Litigation. Let me mention that Andersen Tax would not do audit which gives us the independence to serve our clients in the best way possible. This is one key point of differentiation between us and those organizations which are already offering similar services here. Another point of difference is that we are offering services to wealthy individuals as a way of making their wealth endures beyond the second generation whist they continue to pay appropriate taxes.
What is your take on the tax system in Nigeria, considering the new national tax policy? In particular, what is your view of the new Presidential order with regard to taxation & ease of doing business?
The issue with tax in Nigeria is in the area of implementation. The rules on taxation are spelt out but the implementation is weak. Government at various levels have all the information that will enable them collect taxes adequately but these resources are not used. . In the whole world nobody wants to pay tax. It is not only in Nigeria but the enforcement makes the difference from one country to another. How do we make sure that people pay taxes either forcefully or willingly? In other countries people do not joke with taxes. The tax authority in Nigeria needs to do more to make people pay tax. The Presidential Order is on track but it is beyond the Order. What happens after the timeline given in the Order? We must make sure that rules are deployed and enforced to ensure that people comply. Compared to many State Governments,, the Federal Government is actually doing well, particularly in the area of corporate tax. Most States are lagging behind in the collection of personal income taxes, which is the responsibility of the States Government. I had a meeting with a State Tax Authority and when we compared the figure of those who are supposed to pay tax in the State to those who actually pay – the difference was so huge.
So right now, we try to partner with respective State Governments in creating more awareness on the need for citizens to pay taxes. In this regard, we have translated the Personal Income Tax Act into different Nigerian languages, particularly, Hausa, Igbo, Yoruba and Pidgin. The advantage is to sensitize the people to pay their tax. Right now we are working with Benue State and have translated the Act further into local dialects of Igede, Idoma and Tiv. We have also developed a Tax App to enable people pay taxes at the click of a button directly to Government account without having to go to a bank. This will help in collecting taxes from people in the rural areas with no access to banks.
It is one thing to ask citizens to pay taxes and it is another thing for the taxes to be used to the advantage of tax payers, do you think the situation in Nigeria encourages people to pay their taxes?
Those who live in Lagos State for example have seen the impact of tax on their lives. The previous and the present Governors have used tax money to improve the lives of the citizens and those things are noticeable. So in a State like this, it is going to be hard for anybody to say he has not felt the impact. What other States need to do is to copy what Lagos has done so that people can see and be encouraged to pay their taxes. The issue of corruption is not going to be solved in a day. There is no country in the world where you don’t have corruption but we must get to a state where we can hold government accountable and you will see that corruption will be eliminated. If we see that last month government collected N1 billion and out of that money we can’t see what is done with it we have to make them accountable, then gradually corruption will reduce. The money we spend now is not tax money. It is oil money. When you put your own money into government coffer you will want to demand for what has been done with the money. However, we have to pay tax first before we demand accountability of the money.
Nigeria’s tax contribution to GDP is considered the lowest in the world, why is this so, and how would you advice it can be reversed?
It is so because we still have oil money to spend, we don’t care about boosting revenue from other sectors. But this does not happen in other countries. Now there is this drive for diversification because the price of oil is down. Government now wants to collect taxes but when we had the price of oil at 100 to 150 dollar then we didn’t see the need to collect more taxes but when the price became $40 there became a strong drive to collect more taxes. So the moment Nigeria sees the need to diversify the economy, tax contribution to GDP will go higher.
It has been argued that the tax system in Nigeria is skewed in favour of the rich against the poor. How can the rich be made to pay more tax?
The tax law does not discriminate against the rich and the poor. The tax law is based on Pay As You Earn. But has government been going after those who make more money than you and I? That is the key concern, but I don’t see any discrimination in the law but maybe you could say the enforcement discriminates. The poor don’t even have money to eat so you can’t really say the rich and the poor maybe the rich and the middle class. The law doesn’t discriminate; it is the enforcement that focuses on you and me rather than the rich.
Tax remittances are an issue in Nigeria, self-evaluation is also another. How can these become more effective for higher revenue for the government?
It is the money that is being collected that will be remitted. But we don’t even collect enough tax in this country. At the Federal level, the treasury single account has actually helped to curb cases of non-remittance of revenue collected by government agencies. So since there is only one account now the problem is largely solved. Now all money goes into a single account and no one can touch it without approval so the TSA has solved the challenge.
It’s been argued that the Government grants too many tax waivers, tax holidays especially for ‘pioneer’ companies thereby losing the much-needed revenue. Do you think this is so and what would you advice government do in this regard?
In all countries, there is need for incentives to encourage businesses to thrive and all governments grant incentives one way or the other. There is nothing wrong in granting Tax incentive. But it must be limited to what it was granted for. Granting incentives to pioneer companies is good but the problem started when government started granting pioneer incentives to oil companies. The incentive was basically designed for certain manufacturing companies, particularly those producing what we were not producing in the country. The incentive itself is not a bad thing but incentive abuse is the problem. Granting the incentive to oil companies is an abuse because the law that established the incentive is not an oil company law. It is a law meant for non-oil companies so to grant pioneer incentive to oil companies has gone out of what the law is set for.
Statistic shows that Nigeria needs above $2 trillion to address its Infrastructure deficit, what really needs to change if the country must bridge the gap?
We need to put more money into infrastructure. We may have to borrow and find a way to pay back but we need to get infrastructure right. We need to also strengthen the law to make Public Private Partnership work in the country. The system needs to be made stronger for PPP to flourish.
How will you rate tax adjudications and litigations in Nigeria?
Since the tax appeal tribunals was set some years ago, the relationship between taxpayers and the tax authority has actually been very robust. The cases decided by the tribunals and the courts have developed principles which we can rely on in the future and guide tax administration. At Andersen Tax, our focus is to serve our clients in the best way possible under the law.