By Chinwendu Obienyi
In a bid to checkmate rising illicit financial flows out of Africa especially Nigeria, the Federal Government of Nigeria and the African Tax Administration Forum (ATAF) are looking at ways to stop tax waivers and incentives to high-net-worth individuals (HNWIs) and multinationals in African countries.
They made this known during the 7th ATAF General Assembly where tax professionals and stakeholders converged to discuss ‘Rethinking Revenue Strategies: The Human Face of Taxation.’ in Lagos recently.
Whilst stating that tax incentives are responsible for a lot of leakages and a major cause of illicit financial flows out of Africa, the Executive Secretary, African Tax Administration Forum (ATAF), Logan Wort, said that this puts it at 3.5 per cent of GDP that Africa loses in tax incentives.
“There are things on the horizon. Firstly, the discussions on the inclusive framework dealing with a digital economy have proposed a global minimum tax of 15 per cent and should that come into play, all companies will have to pay a minimum of 15 per cent.
So, when an African country gives a tax incentive of zero to a company, that company will have to pay 15 per cent of tax to someone in the world. So, if we give zero per cent tax incentive, that 15 per cent will simply go to another country. So, we are now being discouraged from doing these tax incentives.
“Secondly, we are developing a proposal for an African minimum domestic tax. We are proposing to the African Union (AU) that we introduce on the continent a minimum domestic tax so that nobody pays zero tax. Those are the two ways in which we think the issue of tax incentives will be dealt with”, Wort said.
Corroborating him, the Executive Chairman, FIRS, Muhammed Nami, noted that the global best practice today prevents the continuation of tax waivers to companies.
“When you give this waiver to them here, they go back somewhere else to pay the taxes and we follow those same people to go and collect loans for purposes of funding our budgetary requirements.
So, the best practice today is for us to mobilise these resources from these taxpayers and apply it to build infrastructure where necessary, to grant loans to SMEs where necessary so that we are able to grow the economy instead of taking loans”, Nami said.
He also stated that for a transformation in Nigeria’s tax system to occur, there is a need for the Federal Government to reconsider how projects are reported in the public space and the expected impact it will have on the tax-paying culture.
In his welcome address address, Lagos State Governor Babajide Sanwo- Olu urged participants to ensure that take-aways from their deliberations will prove invaluable towards bridging the revenue gap in a work saddled with both unquenchable taste and diminishing resources.
According to him, “Africa is the continent of the new millennium, and Lagos State is fast gaining a reputation as one of the locations of choice for conferences and events, not only in Nigeria but on the continent as a whole.
It is not for nothing that we have acquired the fond slogan ‘Eko for show!’. Eko is the indigenous name for Lagos. Thus far, we have recorded good success with all the events held here in our state and I am confident that this one will not be any different”.
Represented by the Chairman, Lagos State Internal Revenue Service (LIRS) Ayodele Subair, Sanwo-Olu observed that Lagos as the centre of excellence is experiencing transformational infrastructural projects that will improve the quality of lives of citizens.