OPS Faults FIRS On Property Valuation

OPS Faults FIRS On Property Valuation
Babatunde Fowler

Members of the Organized Private Sector have faulted the property valuation/assessment being undertaken by the Federal Inland Revenue Service, describing it as double taxation.

The OPS comprises the Manufacturers Association of Nigeria, the Nigerian Association of Small and Medium Enterprises, Nigeria Employers’ Consultative Association, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Nigerian Association of Small Scale Industrialists,

The members during this year’s MAN annual media luncheon voiced out their belief that the exercise was not backed by law and was not within the mandate of the FIRS.

In a communiqué issued at the end of the luncheon, the OPS said, “Section 30 of the Companies Income Tax Act from where the FIRS purportedly derived its power for the exercise is no longer in force, pursuant to its deletion by section 12 of Companies Income Tax (Amendment) Act 2007.

“The FIRS is very much aware that as a fundamental principle of our tax jurisprudence, the power to impose any tax on a citizen must be derived from an enabling legislation.

“There already exists a plethora of property valuation-based taxes in Nigeria. The Land Use Charge payable in Lagos State, which is being replicated across the country, is based on property valuation. The governor’s consent fees payable on alienation of interest in property across the country is based on property valuation. Capital Gains Tax payable on disposal of property is somehow influenced by property valuation. Rent payable on lease of real estate property is subject to withholding tax deduction.”

In addition to these, according to the group, the properties of its member companies were also subjected to valuation pursuant to the provisions of the Companies and Allied Matters Act Cap C20 Laws of the federation for the purposes of companies’ annual accounts leading to payment of tax on their profits.

In the communiqué, the Director-General, MAN, Segun Osidipe, stated that member companies of the association paid huge sums of money to state governments under the above heads of taxation, “which we believe the states are utilising efficiently for the benefit of all.”

He added, “Using the value of the property housing the offices of companies to generate figures that will be charged as Company Income Tax is wrong as some companies are tenants in their   buildings.”

According to the group, the exercise will have dire consequences on firms, households and government, noting, “The FIRS’ intention to value and assess the same property for tax purposes expressly negates the Federal Government’s objective of improving the ease of doing business recently initiated.

“It is capable of discouraging new private investments and will place existing companies in precarious situation, which may lead to their closing down their businesses.

“As companies close down, government’s tax revenue will be adversely affected. Already, the ratio of Nigeria’s tax-to-Gross Domestic Product is abysmally small at six per cent. This will further dip.”

According to the group, households will also be at the receiving end of high commodity prices and unemployment that will accompany company closures.

It stated, “From the foregoing, we therefore see the FIRS’ initiatives as unlawful, impracticable and an economic misadventure, which will not benefit the economy, government, companies and households as the country will be the ultimate loser.”

While noting that the OPS appreciated the current financial position of the government and the need to increase Internally Generated Revenue, it however cautioned that this should not be at the detriment of tax-compliant member organizations and the fragile economy.

“It is important that any measure to increase the IGR of government must be in line with provision of extant tax law and global best practices. The FIRS in this circumstance has no legal right to assess company’s property for tax purpose.

“We would however advise the FIRS to device a legal framework that will bring the numerous non-tax paying organizations into the tax net rather than pursuing a non-justifiable measure that will end up crowding out existing tax-compliant organizations and thereby throwing the country into chaos.”

 The group emphasized the need for dialogue and frequent interaction which according to them will reduce the lag in information and communication in relation to businesses and act as a feedback mechanism.

“We solicit that a mechanism be put in place to ensure the sustenance and effectiveness of a quarterly forum with the Organized Private Sector and request more collaboration in engaging member companies in public enlightenment of tax and related issues.

“In the interest of our country, Nigeria, the leadership of the OPS is willing to engage with the FIRS further on this issue in the spirit of social dialogue, hoping for a progressive resolution in the interest of our nation,” it stated.

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