Technical Report: Day 3 of CITN Annual Tax Conference

Tax

Adam Smith, in one of his famous treaties, stated that “little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.” In the words of the Chairman of the 23rd Annual Tax Conference Committee, Dr Titilayo Eni-itan Fowokan, FCTI, the 2021 Annual Tax Conference of CITN is discussing the theme: “Taxation for Economic Recovery: A Necessity for Social Engagement and Economic Sustainability” at this time that our national economy is recovering from the impact of COVID-19 pandemic. The theme aligns with the focus of the 2021 federal government budget of over N14 trillion, tagged “Budget of Economic Recovery and Resilience”, hence, this conference is to dissert topical issues around the tax environment both nationally and internationally.

The second paper of the Conference on “Prospects and Challenges of Digital Services Tax in The 21st Century Society” presented by the Executive Secretary of African Tax Administration Forum (ATAF), Mr. Logan Wort, noted the imperative for African governments’ policy to focus on enhancing domestic resource mobilisation to fund the African recovery from the COVID- 19 pandemic and to rebuild economies, health sectors and lift its citizens out of poverty.

The digitalisation of economies has created new challenges for many African countries in the area of taxing highly digitalized businesses. With the rapid digitalisation of African economies which has enabled multinational enterprises ( MNES) to carry out businesses in the African continent with no or very limited physical presence in these countries, there is difficulty for African countries to establish taxing rights over the profits made by the MNE from such business activities. To this effect, ATAF has developed the “Suggested Approach to Drafting Digital Services Tax Legislation” to assist ATAF member-nations in introducing new rules for the taxation of highly digitalised businesses.

The ATAF Suggested Approach provides a set of toolkits to assist African countries in introducing Digital Services Tax (DST) by adopting a framework that is suited for the African content peculiarities. Therefore, it is imperative that Africa must ensure that it is able to tax highly digitalised businesses and that the global tax rules are revised to result in, firstly a fairer allocation of taxing rights between source and residence jurisdictions and secondly new rules that effectively stem illicit financial flows out of Africa due to corporate tax avoidance and profit shifting.

Mr Wort’s paper presentation was further discussed by a set of seasoned tax experts including Chief Akinyele Oladeji, the Managing Consultant of CDSD Consulting Enterprise Solutions, Lagos; Prof. Godwin Oyedokun, the Chief Technical Consultant of OGE Professional Services, Lagos and Dr. Zaid Abubakar, the Executive Chairman of Kaduna State Internal Revenue Service, Kaduna. The discussants agreed that:

a. it is important for African economies while awaiting the OECD’S final position, to develop the framework for taxing the digital economy that will take into account the peculiarities of the African continent.

b. The Section 9 of the Companies Income Tax Act (CITA) as amended, has provided the platform for Nigeria with regards to taxing rights for this important sector. However, there is the need to expand the scope of the fixed base under section 13 of the CITA to ensure that the digital economy is effectively taxed.

c. African Tax Treaties are limited and unbalanced. There is an urgent need to address this imbalance. The African Union (AU) should create a platform to discuss the issue because of the political impact.

d. Governments need to invest in tax administration, human resources and technology otherwise there would be loss of revenue.

e. The need to retool tax professionals to be able to handle this critical aspect is very key now.

The conference which commenced on Tuesday, 18 May 2021 will run to Friday, 21 May 2021.

ACTI Director, Research and Professional Standards Chartered Institute of Taxation of Nigeria

Continues online: www.businessday.ng