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FIRS to impose VAT on online transactions, says Fowler

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The Federal Inland Revenue Service (FIRS) says it will soon begin collection of Value Added Tax (VAT) on online transactions.

The Chairman of the agency, Mr Babatunde Fowler, made the disclosure in an interview with the News Agency of Nigeria (NAN) in New York on Saturday.

Fowler said: “soon, we will ask banks to impose VAT on online transactions for purchases of goods and services.

“Not that it is something new; it actually should be in existence.

“We will certainly follow up to make sure that every VAT that is due to be collected is collected.”

He explained that the move was part of measures by FIRS to meet its N8 trillion revenue target for 2019.

Fowler said the agency had started taking action against companies and businesses that refused to embrace the Federal Government’s tax amnesty programme.

According to him, FIRS hopes to generate between N750 billion and N1 trillion from the clampdown, which includes closure of defaulters’ bank accounts.

“We are going after everybody. I am sure you have heard that we have placed lien on some accounts of defaulters that have a billion naira turnover annually.

“So certainly, we are not leaving anyone out of the tax net,” he said.

Officially known as the Voluntary Asset and Income Declaration Scheme, the tax amnesty programme was launched in 2017.

It gave tax defaulters a one-year period of grace to declare and settle their unpaid taxes.

There have been complaints by some taxpayers of being wrongly targeted by FIRS in the clampdown.

Asked to comment on that, Fowler admitted, blaming it on “administrative error,” arising from the huge number of accounts involved.

“Well, there is certainly one or two instances where we made administrative error, but when you are looking at over 50,000 accounts, there is a tendency that sometimes an error might be made.

“For those that we made errors on, I wrote them personally apologising and of course we lifted the lien on their accounts.”

On plans by the Joint Tax Board to raise the country’s tax population to 45 million, Fowler said the agency was relying on multiple information sources.

These, according to him, include the country’s Bank Verification Number database and sister agencies with relevant information.

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Sanwo-Olu urges institute to deepen taxation practice

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Gov. Babajide Sanwo-Olu of Lagos State has tasked the Chartered Institute of Taxation of Nigeria (CITN) to be proactive on deepening taxation practice in Nigeria.

The governor gave the advice at the Investiture of the 14th President of CITN, Dame Olajumoke Simplice, on Saturday in Lagos.
Represented by Mrs Balogun Olufunmilayo, Permanent Secretary, Ministry of Finance, he said that deepening taxation practice would enhance revenue generation of the state and country.

He said that his administration would partner the Institute to strengthen and encourage taxation system for enhanced economic development of the country.

“CITN has immensely contributed to the growth of taxation in Nigeria, but the reward for hard work is more work.

“The Institute should not relent on efforts to have an efficient taxation practice as is obtainable in other countries.

“Tax is a civic responsibility of every citizen of a country and remains a major medium through which the government can generate funds to fulfill its electoral promises,” he said.

The Chairman of the Federal Inland Revenue Service (FIRS), Mr Babatunde Fowler, said that the issue of deepening taxation was a global issue that Nigeria should key into.

Fowler, who was a special guest of honour at the Investiture, said taxation was a social contract that enables citizens to play significant roles in raising revenue for government.

“By paying taxes, government will similarly have a strong motivation to account for revenues collected and the utilisation of such revenues.

“Voluntary compliance by the taxpayers will ensure that revenue is made available for improving on the provision of social amenities and services,” the FIRS boss said.

Fowler affirmed that the CITN had advanced to an enviable stage when considered from the level it started operation in Lagos State.

In her acceptance speech, Simplice promised to widen the corporate horizon of the Institute through the review of its vision and mission statement.

She said the institute would develop and deepen the use of technology by ensuring a full-fledged ICT department as the backbone of its operations.

“Our vision to be the leading Institute in training world class Tax Professionals has been driven over the years through various capacity building programmes.

“Going forward, it is intended that the Tax Academy will be developed to project this fundamental driving force of our vision.

“The Tax Academy will be repositioned in terms of capacity for a technically driven alternative route to membership through intensive training for revenue services staff,” Simplice said.

She congratulated all the newly elected members and encouraged them to take up challenges that would take the Institute to a greater level.

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Rainfall the reason for failed power distribution –TCN

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Power distribution networks in various parts of Nigeria have been collapsing as a result of the rainfall being experienced across the country, the Transmission Company of Nigeria has declared.

According to the TCN and other stakeholders in the power sector, this and more were reasons why it has become vital for the Federal Government and investors in power distribution companies to recapitalise the firms in order to invest adequately in the networks of Discos.

TCN’s Managing Director, Usman Mohammed, disclosed this recently in Abuja while addressing interested parties who submitted tenders for the design, supply and installation of Optical Ground Wire across some transmission lines and Universal Transport Network Equipment at some substations for monitoring, control and maintenance of system operation facilities.

He said, “Another new dimension that speaks to why the distribution arm must be recapitalised is the fact that when it now rains anywhere across the country, the distribution network collapses like toilet paper. Even Abuja that was built as a modern city, three times it rained in Abuja for not more than 10 minutes, I drove round Abuja city centre and more than 90 per cent of Abuja has no electricity.

“Why? Because even the network that was built by FCDA (Federal Capital Development Authority), which is a public company, cannot be maintained by the private sector operator. They (private operator) have mismanaged and they could not manage it, to the extent that when it rains, Abuja network, which is supposed to be a modern network, collapses like toilet paper.”

Mohammed added, “This is how all over the country, their (Discos) networks are collapsing because of rain. I will give you another example, on May 21, the whole country had this problem of overvoltage. To the extent that we had a system collapse, we tried to bring the system back, but because of the dropping of load by the Discos, we could not secure anything but to force the system to collapse again.

“This was because if we had left the system for another five or 10 minutes, we would have had fire explosions across the country. And even with that, after we collapsed the system, we had explosions in various places like in Jebba, Shiroro and Jos. So that is how pathetic it is.”

The TCN boss argued that the over $1bn investments in the transmission had not been adequately felt by power users because of the poor networks in the country’s electricity distribution arm.

He said, “The Nigerien people are not connected to our network. They are connected to the distribution network. So the Nigerien people in a way do not feel what we are doing. But the fact is that even our equipment is not guaranteed because there is no investment in the distribution network.

“You may ask how? We have 737 interfaces between us and the distribution companies. Out of these 737 interfaces, only 421 are protected on the distribution side. The remaining 316 are not protected or not fully protected. So you will see a 33kV breaker that will trip for about 30 times in a month.

“But in Europe or America, you will find a 33kV breaker that has been installed for like 10 years and it had not tripped for once. At the end of the day, we are having a lot of challenges in managing our network and our transformers are getting damaged. So the Discos must have the required investments in order to have the right protection on their side.”

Mohammed explained that managers of modern grids across the world focused more on frequency and spinning reserve management, not on distribution, but stressed that this was not the case in Nigeria.

“Now, if you go to a modern grid across the world, when you are managing frequency or spinning reserve, you are not supposed to be managing Discos. Rather, you are supposed to manage the tripping of lines or tripping from generators. But in Nigeria, management of Discos is now the problem. So we must have investments in the distribution network,” he stated.

Also, the National Secretary, National Electricity Consumers Advocacy Network, Mr Obong Eko, stated that NECAN had always called for increased investments in Nigeria’s distribution network.

He told our correspondent in Abuja that “the power distribution arm is the closest part of the sector to the final consumer.”

Eko added, “So if this arm of the sector does not have the required investment, then all the impact or positive strides recorded in other arms of the sector may not be felt as much by the final consumer.

“Therefore, you will agree with me that this, of course, is a good reason why the Discos must increase their investments, whether it is through recapitalisation or by whatever means that will ensure that the investment is done.”

But power distributors recently argued that the capital expenditure allowance provided for Discos by the Nigerian Electricity Regulatory Commission, as contained in the 2015 Multi-Year Tariff Order, was inconsistent with the present day realities in the sector.

The Discos’ submissions were further captured in a recent report on the challenges of Nigeria’s power sector that was put together by the French Agency for Development.

The AFD, however, observed that the Discos needed to carry out the massive investment.

It stated that the power firms needed to invest massively in Average Technical Commercial and Collection loss reduction plans including the roll-out of meters, increasing network reliability and network expansion, modernisation and new technologies, customer service improvement plans, internal transformation programmes, capacity building and training, etc.

The French agency encouraged power distributors to increase their transformation capacity at injection substations, redistribute loads connecting substations, get feeders and new transformers, and carry out metering and new connections.

On the concerns by the Discos as regards CAPEX issues, the report noted that there was inconsistency in the capital expenditure allowance provided for the firms in the regulations of the NERC.

The AFD stated that after assessing two projects for metering roll-out in two Discos, it was discovered that the average price for a single phase prepaid meter installed was between N32,700 and N55,000.

Also, the average price for a three-phase prepaid meter installed was between N74,600 and N83,600.

“The capital expenditure allowance limits one Disco to install only around 60,000 to 70,000 meters per year and nothing else in network rehabilitation/expansion, reliability and modernisation.

“Just to close the metering gap in Nigeria, the investment required would be close to $1bn, whereas the CAPEX allowance for all Discos per year is $120m,” the study stated.

It added, “On the other hand, the CAPEX allowed to TCN is over five times more than the one allowed to all Discos together.

“This is not consistent with having an overall perspective. In the meantime, Discos must draft their performance improvement plans to seize the total investment required by the distribution sector.”

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Failed gas project: British firm seeks seizure of $9bn Nigerian assets

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A firm incorporated in the British Virgin Islands, Process and Industrial Developments Limited, will ask a British court on Friday (today) for the right to seize up to $9bn of Nigerian government assets over an aborted gas project.

The request is part of a long-running saga over a 2010 deal in which the Nigerian government agreed to supply gas to a processing plant in Calabar that P&ID – a little-known firm founded by two Irish businessmen specifically for the project – would build and run, Reuters reported on Thursday.

When the deal failed, P&ID won a $6.6bn award at arbitration, based on what it could have earned during the 20-year agreement.

The company said the total owed had ballooned to $9bn because of interest accrued since 2013.

Nigeria has tried to nullify the award, saying it was not subject to international arbitration but British courts rejected the argument.

P&ID is now asking the Commercial Court in London to convert the arbitration into a judgement, which would allow them to try to seize international assets, according to Reuters.

A source close to President Muhammadu Buhari was quoted by Reuters as saying that the government was fully aware of the matter and the government “is not sleeping”, adding they were optimistic the matter could be resolved in the courts.

There are also proceedings pending at a US District Court in Washington, D.C.

“This is a problem that the Nigerians are not facing up to in any serious way,” said Andrew Stafford, Q.C. of Kobre & Kim LLP, which is representing P&ID.

Experts said it would be difficult for Nigeria to fully extricate itself.

“Under UK legislation, state immunity does not operate to protect a sovereign state where it has entered into an arbitration agreement,” said Simon Sloane, a partner with UK law firm Fieldfisher.

He added that going after state assets following arbitration had become a well-trodden path over the past 15 years and it would be difficult for Nigeria to avoid paying compensation.

While assets that are used for diplomatic purposes – such as the Nigerian High Commission building in central London – were off the table, commercial assets were up for grabs.

In 2008, a UK court ruled that proceeds of oil sales from Chad held in an international account intended to repay World Bank loans were fair game for seizure.

Experts also said that the involvement of a hedge fund, VR Group, which has a stake in P&ID, signaled that it was unlikely to let the issue drop.

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