OECD Tax Agreement Portends Danger For Nigeria – FIRS

Chairman of the Federal Inland Revenue Service (FIRS), Muhammad Nami has said Nigeria refused to sign the Organisation for Economic Cooperation and Development (OECD) proposed solution to the issues affecting the digital economy because of its potential danger to Nigeria and other developing countries’ revenue.

“Our concerns on potential negative revenue returns that the rule designs would have for developing countries were unaddressed, Nigeria abstained from committing to the rules at this time,” Mr Nami said in a virtual session hosted by the FIRS last week.

Four member countries of the Inclusive Framework (Nigeria inclusive), out of 140, have not agreed to the Two-Pillar solution.

Represented by the group lead, executive chairman’s group, Mr M. L. Abubakar said taxation of the digital economy has become a topical issue that many economies and developmental blocs are working to solve, including the OECD and the United Nations tax committee who have commissioned projects to produce a common front for countries to adopt.

Nami said Nigeria has been involved in various work-streams under the OECD project and had articulated its position on the technical work towards the goal of producing a common front for countries.

The webinar which was a special edition of the FIRS taxpayer engagement series was hosted by Technical Assistant (Tax Policy) to the FIRS chairman, Mr Olufemi Olarinde, while technical papers were delivered by Mr Mathew Gbonjubola and Mr Temitayo Orebajo among others.

Gbonjubola, who is Nigeria’s representative at the OECD inclusive framework stated that despite the expected outcome that both Pillars will increase Global Corporate Income Tax by as much as $150 billion per annum, with attendant favourable environment for investment and economic growth, there were serious concerns that the pillars did not address negative revenue outcome for Nigeria and other developing countries.

 

According to Gbonjubola, the general issues that developing countries have with the outcome that was published on October 8th is the high cost of implementation. “And that speaks to the complexities of the proposal in the inclusive framework statement. In every complex situation or rule, implementation and compliance will always be difficult. When implementation or compliance is difficult, there would be high cost of implementation,” he said.

Gbonjubola said the country-specific impact assessment was done was top-down, saying in such postulation, the margin of error is usually very wide. “That exactly was what happened with this.Particularly for Nigeria, when we ran the numbers, it was way off the figures that the OECD gave us.”

On the specific concerns raised by Nigeria, Mr Gbonjubola, explained that while the whole project started out to find solutions to the challenges of a digitalised economy the outcome was completely different.

 

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