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African Tax Experts and VAT

African Tax Experts VAT


No fewer than 30 delegates were among African tax experts charting ways to collect Value Added Tax (VAT) of more than a trillion dollars infrastructure investment in the continent for the next 10 years.
The delegates, under the auspices of the African Tax Administration Forum (ATAF), are holding ATAF Technical Workshop on Value Added Tax (VAT), in the Nigeria capital, Abuja.
Participants at the workshop are expected to share ideas on the ATAF VAT Technical Committee report that noted the infrastructural developments and worked on guidance on VAT issues arising from the construction sector.
Speaking at the event, the Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Tunde Fowler, noted that VAT remains a key indirect tax that has emerged as the highest source of tax revenue for most governments and countries that have implemented it.
“I have been briefed that the excellent turn-out at this technical workshop on VAT is representative of the different regions of the African continent. This underscores the focus revenue administrations and other interested parties are placing on VAT as a high revenue-yielding tax on the continent.
“Despite some challenges that may be identified, it is important for us during this workshop to apply our minds to how best we can effectively administer the tax, especially in ways that are equitable to the taxpayer.
“VAT as a key indirect tax has also emerged as the highest source of tax revenue for almost all governments that have implemented it. It is important to emphasize that the African Tax Outlook (2017) places VAT as the highest tax revenue earner, followed by PIT (Personal Income Tax) with CIT (Companies Income Tax) taking the 3rd position! This is mainly due to the nature of this tax which is paid by us all when buying goods or services.
“The tax is also simple to administer and furnishes governments with large amounts of income with relatively low collection costs based on its system of self-assessment.
The role of a national government therefore remains to monitor the VAT process and enforce where there are weaknesses,” he said.
Fowler added “In Nigeria, for example, where VAT is critical to development projects at all levels of government and where VAT revenue is shared 15 per cent to the federal government, 50 per cent to state governments and 35 per cent to local governments, FIRS wrote to all commercial banks in May 2018, requesting a list of Companies, Partnerships & Enterprises with a banking turnover of N1 billion and above.
This activity is aimed at ascertaining those companies that are compliant with the Tax Laws and those that are not compliant.”
The FIRS boss also stressed the need for the continent to improve on Domestic Resource Mobilisation (DRM) as a vital instrument to meet their development agendas and succeed in their poverty reduction programmes.
He said effective and efficient revenue policy and administration in countries continue to be one of the most consistent ways of achieving the developmental agenda of the Africa nations.
“As such, the concentration and drive to consistently refine the way countries assess and collect their domestic resources cannot be overemphasized. VAT in particular has been singled out owing to its nature as a tax that would not only bring in the much-needed resources but also lay the ground for gathering data that enables other taxes such as profit tax to be determined.
“It is in this regard that I wish to encourage this meeting to take time to identify the key pressure points and gaps in levying this tax that needs to be addressed. In particular, I wish to congratulate the VAT Technical Committee and to appreciate the hard work put into the analysis of the construction sector,” Fowler said.
Earlier, the Executive Secretary of ATAF, Mr. Logan Wort, noted that the digital economy presents new opportunities for revenue administration to feature innovation in system design for the collection, adding “Additionally, an opportunity is presented for tax policy to leapfrog current discussions and move towards regimes that collect revenue through the use of technology.
“Mr Chairman, you are aware of the growth of African economies and the massive investments our governments have made into infrastructure. Over a $trillion dollars is slated for investment towards infrastructure development over the next 10 years.
“I mention this because the continent is filled with new developments, high rise buildings and construction projects. The ATAF VAT Technical Committee has noted these developments and commenced work on guidance on VAT issues arising from the construction sector.
“The 2018 edition of Deloitte’s Africa Construction Trends report indicated that as of June 2018, Africa had 482 projects, each valued at 50 million US dollars or above. In total these construction projects were valued at 471 billion US dollars.
“This was an increase of 53 per cent of the total value of 307 billion US dollars recorded in 2017. In 2018, the top three countries in terms of construction projects were Egypt, South Africa and Nigeria.
“Egypt had the highest recorded number of projects, totaling 46 and accounting for 9.5 per cent of African projects. In terms of value, Egypt also topped Africa, recording projects worth 79.2 billion US dollars. This accounted for 17 per cent of the continent’s value of projects.
“This illustrates the practical nature under which the membership of ATAF will benefit from collection minds of Africans to deal with issues arising in industries on the continent. While construction is that of tangibility, the rise on the intangibles is common across the globe and indeed in Africa.
“Beset against the 4th industrial revolution, more and more, we realise that the ‘old way’ of going to a shop to buy a product may not be the most effective way when the same product is available online, and at times, cheaper.”
Wort also noted that e-commerce changed the distribution of taxable activities, poses challenges to the jurisdiction to tax income and alters the balance of taxing authority as well as resulting in the erosion of countries’ tax bases. 
He said that the e-Commerce created difficulties in the identification and location of taxpayers, the identification and verification of taxable transactions and the ability to establish a link between taxpayers and their taxable transactions, thus creating opportunities for tax avoidance.
Wort said there was the need to develop rules to address the tax challenges of the digital economy, identification of the main challenges of the digital economy, a holistic approach to cover both direct and indirect taxation among others.



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