By Chimezie Godfrey
The Minister of Finance, Budget and Planning, Mrs Zainab Ahmed has advocated for fair international tax rules that would be for the good of all.
Zainab Ahmed said this Monday in Abuja, during the opening ceremony of the 42nd Annual Technical Conference of the Commonwealth Association of Tax Administrators (CATA), with the theme,”Tax Administration in the Digital Era”.
She said it is noteworthy that the conference came on the heels of the very successful 7th General Assembly of the African Tax Administration Forum (ATAF) held in Lagos a few weeks ago, adding that the choice of Nigeria, as a destination for these important international tax events, is not by accident.
The Minister noted that Nigeria has remained in the forefront of the global efforts at finding equitable and lasting solutions to international tax issues, including: the long-standing issue of imbalance in the allocation of taxing rights between source and resident jurisdictions;information asymmetric between multinational enterprises and tax authorities in developing countries;the issue of base erosion and profit shifting (BEPS); and tax challenges of the digitalised economy.
She therefore expressed the hope that the conference would discuss and recommend solutions to some issues, such as:”Digitalisation of Tax Administration, among other challenges.
She said,”Over the past few years, our government committed huge monetary and human resources to champion the cause of developing countries. It is important for CATA and similar organisations to blend their voices with ours to insist that skewed international tax rules be straightened for the good of all.
“The theme of this year’s conference, I am told, is “Tax Administration in a Digital Era”. This is very apt and timely considering that the business world had moved away from the “brick and mortar” model unto the fast-paced, globalised and digitalised model. Certainly, tax administrative processes must keep pace with changes in the business world.
“An African adage says where the hunter has learnt to shoot without missing, the birds that would avoid the hunter’s soup-pot must learn to fly without perching”. Since businesses are evolving from physical presence to virtual place, tax administrations must also shift gear unto the virtual realm.”
“It is a fact that the tax administrations of most developing countries are based on manual processes. In these tax administrations, ICT function is limited to provision of hardware and basic software in support capacity. Whereas, automation, large data, artificial intelligence and machine learning capabilities is central to effective tax administration. Such capabilities will enable tax authorities to do e-invoicing, pre-populate tax returns, carry out automated tax risk profiling, etc.
“Fair International Tax Rules. The current international tax rules are skewed against source countries; particularly, developing countries.
“Painfully, the skewness in the current international tax rules is again influencing the two-pillar solution of the Inclusive Framework. We have observed, for instance, that “Amount A” profit meant for market jurisdictions is progressively being chipped away in favour of jurisdictions where the multinationals are resident.
“Another example of skewness of the “Amount A” rules is the requirement for jurisdictions to surrender domestic tax disputes to mandatory and binding ruling of an arbitration panel composed and sitting outside the legal system of the respective jurisdictions. President of CATA, it is a common knowledge that taxation is a matter of domestic law; disputes arising from the interpretation of domestic legislation should only be resolved within those domestic legislations and by people properly schooled to interpret them.
“The discussion to change the rules must start now; the world must rework the profit allocation rules used for transfer pricing and the sharing of taxing rights by tax treaty partners. Nigeria is of the view that CATA is that organisation that is best placed to start this dialogue.
“Capacity Development; There are many new things emerging in the field of taxation; particularly, taxation of multinationals. Tax administrations must continually upscale the skills of their employees so that they can effectively and efficiently handle emerging tax issues. As such, tax officers must be trained and retrained on tax technicalities (including the new international tax rules) and the social effects of taxation.
“Nomad Workers; An emerging trend occasioned by the digital era is remote-working (an individual resident in one country working remotely for an entity resident in another country). The fire of remote-working was given vent to by the lockdowns of COVID-19. This is raising many questions such as tax residency, employment tax, tax nexus for the company and possibility of other local taxes.”
She pointed out that the digital era is quite exciting considering the possibilities – exotic products, efficiency, remote-working, among others.
“However, in them are embedded the tax challenges e.g. problems associated with identifying, tracking and accessing taxable transactions, income or persons. Extant rules are based on physical presence which render them inapplicable in the digital era.
“Countries must cast aside their differences or individual self-interest to jointly develop workable, simple and fair solution. Nigeria is committed to working with other jurisdictions and international bodies to achieve a win-win solution.
“The “Amount A” proposal being developed by the Inclusive Framework is not achieving consensus because it is founded on win-lose principles. Only rules that promote a win-win situation can achieve the support of all,” she said.
The Minister urged delegates and experts to use the opportunities presented by the conference to speak frankly on the issues I have highlighted that would move the government in formulating appropriate policies.
Delivering the welcome address, the Executive Chairman FIRS, and President CATA, Muhammad Nami expressed pleasure that the conference brought together tax administrators, practitioners and the whole of global tax fraternity to proffer solutions to contemporary tax issues.
Nami recalled that in recent times, there has been an upsurge of disruptive technological innovations in the business environment.
According to him, these have triggered peculiar issues that tax authorities are grappling with, pointing that the business world is in a state of flux; while the character of data and its management keeps changing.
“Consequently, tax administrators are under compulsion to align their mandates with the changes arising from technological advancements.
“In matching the pace of advancement in technology, tax administrators must remain bound by the laws, regulations and codes that safeguard the sourcing, storage, processing and management of data. In diverse ways, all members of CATA have to deal with the challenges that transformational technology has brought to the commercial space and stay ahead of the conversation.
As revenue authorities with common political history, the questions, then are: How are we faring? What lessons can we learn from each other?
“It is for this reason that this year’s conference has the theme: “Tax Administration in the Digital Era.” The theme has five (5) sub-themes to enrich the discussions and lay the foundation for stimulating constructive dialogue.
“This 42nd CATA Technical Conference promises to be a platform that produces a potpourri of ideas and solutions in a fast-changing world that requires sophisticated strategies for problem-solving. Although these issues are emerging, many of our jurisdictions already have several innovative solutions to addressing them. The Conference is the right platform to cross-breed ideas and share experiences we can all learn from.
“Furthermore, harmonisation of tax systems is on the front burner of the fiscal conversations in many jurisdictions. It is a reform that must happen for the governments to plug leakages and shore up revenue. Some jurisdictions have achieved this, and they testify to its advantage over the fragmented system. Others need to learn how, why and what jurisdictions that have harmonised their tax systems have to share.”
Nami added,”While the COVID-19 pandemic imposed several limitations on the Association’s ability to deliver on its objectives in 2020 and 2021, significant progress was made in 2022 on a number of fronts.
“At the Secretariat: The Strategic Plan for 2022/25 was developed and approved by the Management Committee; and work-plan was also developed. At the centre is the core objective of forging stronger and more beneficial partnerships with critical stakeholders across the world.
“At the political level: The Commonwealth Heads of Government Meeting (CHOGM) was held in Rwanda during which Togo and Gabon were admitted as new members of the Commonwealth. Consequently, the President will be sending invitations to the tax administrations of those countries to join CATA. Which means that new members are to be admitted soon. I believe that the strength of our Association will be further reinforced with the addition of these two countries.”
On International Partnerships, hesaid realising that “we have come this far through partnership, collaboration and engagement, and in line with one of the major objectives I set out for my tenure, which is, to expand the scope of our collaborations for improved tax administration, I am glad to inform you that:
“i. CATA has been admitted as a partner to the African Tax Transparency Initiative and the Asia-Pacific Tax Transparency Initiative. We believe that these programmes would further assist our member-countries in the implementation of global tax transparency and reporting requirements that facilitates the exchange of information between jurisdictions.
“ii. CATA also joined the Asia-Pacific Tax Hub. This Hub, supported by the Asia Development Bank, has been crucial in strengthening Domestic Revenue Mobilisation and International Tax Cooperation for its members. With this membership, we believe that we would experience more capacity development for the countries of that region and ultimately improve revenue mobilisation for those countries.
“iii. The African Tax Administration Forum (ATAF) has been a friend of CATA. Over the years, the two organisations have worked together, albeit, on ad-hoc basis. In order to forge a stronger and more strategic partnership, CATA and ATAF will sign a Memorandum of Understanding (MoU) at the margins of this Conference. The MoU will seek to provide more opportunities for capacity-building programmes for CATA members on the African continent.
“On-going Base Erosion and Profit Shifting (BEPS) Reforms: In order to assist members in engaging actively in the ongoing discourse around digital economy taxation, CATA partnered with a number of regional tax organisations to organise consultative meetings/workshops facilitated by the Organization for Economic Cooperation and Development (OECD). Such meetings were held in collaboration with the Pacific Island Tax Administration Association (PITAA), Inter-European Association of Tax Administrations (IOTA), Association of Tax Administrations in Islamic Countries (ATAIC), Caribbean Organisation of Tax Administrators (COTA) and the Study Group on Asia Tax and Research (SGATAR). Other partnership initiatives were undertaken with ATAF, WATAF and CIAT under the umbrella of the Network of Tax Organizations (NTO).
“We must understand that the road ahead is still long, steep and daunting. Our challenges only get tougher as we forge ahead because technology is transforming daily, and the trends are novel and uncharted.
“As tax administrators of the Commonwealth heritage, it is fair to assume that our challenges, in this regard, would have similar identities and similar solutions. It is imperative that we take advantage of the occasion of this Conference to share and discuss with one another the challenges we face and the solutions we are proffering. This conference will be an avenue to improve our individual capacities as Tax Authorities, as well as our collective strength as a body.”
Secretary to the Government of the Federation, Boss Mustapha noted that the federal government has taken some strategic steps by creating conducive environment for business activities to thrive and encouraging foreign direct investment, assured heads of delegations of the 47 corporate member states of CATA, among others at the conference, that the country is a conducive and safe place for doing business.
Mustapha expressed delight that Nigeria had the privilege of hosting the conference comprising of tax administration from 47 corporate member states, tax organisations, tax authorities, tax institutes , policy makers, and other special guests of honour.
He noted that earlier in the month of November, Nigeria hosted the 7th General Assembly of African Tax Administration Forum in Lagos. It is not coincidental that all these events are happening here in Nigeria, rather we are passing the message that beyond participating in the global discourse around issues of illicit financial flows, domestic resource mobilization, environmental taxes and taxations, digital economy among others, Nigeria is eager to provide a platform for frank and forthright discussions for issues that critical implications for all and inevitably the impact of the global economy.
“In addition, facilitating these discussions and being a home for beneficial interaction of nations afford us the opportunity to emphasize that Nigeria is safe and conducive destination for doing business and that Nigeria has potential for investment opportunities.
“In the face of evolving global and domestic socio-economic challenges, the administration of President Muhammadu Buhari has deliberately taken some strategic steps by creating conducive environment for business activities to thrive and encouraging foreign direct investment. These measures includes, the provision of trade and investment incentives, review of tax policies, and legislative regulations to improve on tax certainty and fairness, and implementation of our ease of doing business proper, which monitors all indices of doing business in Nigeria with the view to remove bottle-necks that are potentially a clog in the wheel of economic progress and prosperity.
“While Nigeria like most countries of the world is not without the challenges, my message to you is – come and do business in Nigeria, I am sure those who have already avail themselves of the vast opportunities will testify that the benefits far outweighs the challenges.
“The theme of the conference which is “Tax Administration in the Digital Era” is a welcome one because considering the emergence of destructive technologies, it is no longer news that rapid advancement in science and technology have led to the provision of communication channels that have reduced pre-existing barriers to trade to bare minimum. These innovations are tearing out the restraints of traditional trading methods and process thereby making the specter for world market a real thriving proposition.
“Permit me to mention that the digitalization of businesses coupled with increased purchasing power meant that the provision of remote access to goods and services has grown in leaps and bounds and will only continue to grow exponentially.”
The SGF stressed that the challenges with the tax authorities was to seize the moment and ensure that the opportunities presented by technology will not serve as the basis for loss of revenue due to “our inability to keep up with the times”.
