President Muhammadu Buhari has nominated Muhammad Nami as the new Chairman of the Federal Inland Revenue Service (FIRS), Nigeria. Mr. Nami would take over where the out-gone Chairman Babatunde Fowler stopped. Personally, I see the chairmanship of FIRS as critical as a federal ministerial position because of the impact of the agency on the structure, format and architecture of the nation’s economy, arising from tax policies.
FIRS is going to drive tax revenue that would be needed to fund our national budget. Across all metrics, we have not been very lucky in that domain as Nigeria’s tax collection efficiency is severely underwhelming. From the less than 35 million payers, out of possible 100 million citizens, to recent plans to tax “revenue” instead of profits in digital companies, we have real paralyses to deal with. The new VAT rate coming in 2020 is something that could move some segments of the economy to move informal, in order to reduce tax exposure.
For Mr. Nami once Senate confirms him, his desk would be busy. As he begins to deal with the issues, here are two areas he has to pay attention:
Pursue TAX Policy for Economic Growth: In recent years, Nigeria has focused on tax collection with nothing done on how tax policy can engineer growth in the economy. I have shared some ideas on how a new tax policy can boost investment.
Government should offer new VC (venture capital) firms in Nigeria a ten year tax incentive on profits if they have asset base of at least $50 million and will deploy the capital in Nigerian startups within 10 years. Offer new VC firms in Nigeria the opportunity to repatriate 100% of profit within ten years. That will help the country to attract foreign investors to make Nigeria home. If we have this type of incentive, we will see many VC funds making Nigeria home to explore opportunities in Nigeria and continental Africa. That influx of capital will have many multiples of benefits to our economy, our people, and the Nigerian technology space. Most especially our tech firms will stay home instead of changing jurisdictions to U.S. or Europe..
Push for Tax Reforms to make donations to schools tax-deductible, not treated as expenses. This is one way to bring more funds into the school system, from primary to university levels. Largely, when companies donate money to universities to work on things that matter to them, they could use the donations to reduce their tax exposures. Typically, providing that structure would stimulate more entities to give to schools.
If Company A wants to start a factory in Owerri Nigeria and needs to train 1000 people in the areas it does business. It can ask Federal University of Technology Owerri to do that training, providing the manuals and documents required. It will fund it say with $3 million for three years. FUTO may integrate the program in its curricula (NUC may need to approve). FUTO has received funding, expanded its program and at the same time graduating students that will likely have jobs when they finish. Brilliant!
For Company A, it has moved the non-core training out to focus on its business, knowing that whenever it wants talent, FUTO is preparing them. Then on that $3 million, Nigerian government allows it to deduct it, non taxable. Simply, the revenue where that money has come will not be taxed because it has been used to do good to the society. Just like that, the company has saved money and at the same time assisted FUTO to deepen its programs. That is an incentive which does not exist right now, and Nigeria needs to update our tax system to make it possible.
Today, what is possible is to deduct that $3 million as an expense, meaning that it is recognized in the tax book as pure business. That is not enough as the resulting balance will be taxed accordingly. In U.S. that $3 million is treated differently, offsetting not just its expense but other areas the company might have experienced losses. So magically, you use donation to make-up. That is why giving is financially good, under some circumstances, for both the recipients and the givers.
PRESIDENT BUHARI NAMES NEW FIRS BOARD FOR SENATE CONFIRMATION
President Muhammadu Buhari has approved the composition of a new board for the Federal Inland Revenue Service, FIRS, subject to Senate confirmation.
The President nominated a renowned tax consultant, Muhammad M. Nami as the new chairman.
The board is composed of a member representing each of the six geographical zones and statutory representatives from a select number of ministries and government agencies.
Mr Muhammad, a well-trained Tax, Accounting and Management professional with highly rated qualifications and professional practice and licenses from relevant professional bodies, has almost three decades of practical working experience in Auditing, Tax Management and Advisory and Management services to clients in the banking, manufacturing, services and public sectors as well as non- profit organizations.
He is an expert in rendering advisory support services to investors in respect of new business start-ups and management of existing businesses. He has also continuously rendered outsourced services to clients in trading, service and manufacturing sectors of the nation’s economy.
Muhammad Nami attended Bayero University Kano and Ahmadu Bello University, Zaria where he obtained a Bachelor’s Degree in Sociology (1991) and a Masters of Business degree (2004) respectively. He is a fellow of Chartered Institute of Taxation of Nigeria, Institute of Debt Recovery Practitioners of Nigeria and Associate Member of Nigerian Institute of Management (Chartered) and Association of National Accountants of Nigeria.
He started his career with PFK in 1993 and rose to the position of a senior Consultant in charge of Tax management and advisory services. He is currently the managing consultant of Manam Professional Services (Chartered Tax Practitioners and Business Advisers) based in Kaduna, Abuja, Niger State.
Mr Muhammad has served, and is still serving, on many companies’ Board and Statutory Board Audit Committees. He was appointed as a member, Presidential Committee on Audit of Recovered Stolen Assets in November, 2017 by President Buhari.
He is married with children.
Chairman of FIRS, Babatunde Fowler, whose term of office expired on Monday, 9th December, 2019 is expected to hand over to the most senior director on the board, who will take charge, pending the senate confirmation of the new board.