Stakeholders identify defects, advocate reform of Companies Income Tax Act

Stakeholders in the legal, judicial and taxation sectors have met to dissect the Companies Income Tax Act (CITA) with the aim of reforming the tax laws in the country. The event, a workshop on the reform of tax laws in Nigeria, with focus on the CITA, which was organised by the Nigerian Law Reform Commission […]

Stakeholders in the legal, judicial and taxation sectors have met to dissect the Companies Income Tax Act (CITA) with the aim of reforming the tax laws in the country.

The event, a workshop on the reform of tax laws in Nigeria, with focus on the CITA, which was organised by the Nigerian Law Reform Commission (NLRC), was with the aim of correcting the problems identified with the Act and bring its provisions in conformity with global practices.

While declaring the workshop open, the Attorney General of the Federation (AGF) and Minister of Justice, Abubakar Malami (SAN), noted that as things stand, the country’s legislative framework lacked the required efficacy to address the challenges resulting from the implementation of CITA, hence the need to review and reform the Act.

In his speech, which was read by the Special Adviser to the President on Financial Crimes and Contract Implementation, Abiodun Aikhomu, the AGF said the current policy of the federal government was to encourage a diversification of revenue generation through the encouragement of alternatives to oil revenue.

“One of such credible and reliable alternative sources of revenue for most countries is, and in our peculiar circumstances, one that can reduce over dependence on oil. The reform of the extant law will greatly boost the country’s revenue base and build a solid economic structure,” he said.

Earlier, the acting Chairman of NLRC, Professor Jummai Audi, while giving insight to the extant law, explained that, “The Companies Income Tax 1979 originally promulgated as Decree No. 28 of 1979 repealed the Companies Income Tax Act 1961 and all the amendments thereto and is the current law providing legal framework for the taxation of companies income in Nigeria.”

She added that in 2007, CITA, 1979 was further amended by the Companies Income Tax (Amendment) Act, No. 11 2007 to reflect some of the recommendations of the 2002 Study Group set up by the Minister of Finance to review the Nigerian tax system.

She said, “Although the CITA, 2007 has made some remarkable improvement to the tax system in the recent past by instituting modern day reforms which has resulted in remarkable improvements in the FIRS’ operational activities, there is still the need to review the Act to enable the Service (FIRS) effectively carry out its responsibilities of companies income tax collection.

“If taxes are to be collected effectively and fairly both in monetary and equitable terms for the benefit of all Nigerians, our proposed or intending reforms should be key and must warrant serious consideration, as there seems to be an obvious shortcomings or lacuna noticed in the operation of the entire Act.”

The President of the Court of Appeal, Justice Zainab Bulkachuwa, who was represented by Justice Mohammed L. Shuaibu, said the judiciary remained a critical stakeholder in the reform of the Act because, “at the end of it all, the matter comes back to us”.

She said the judiciary was ready to work to ensure the successful passage of the bill for the amendment of CITA and see to the working of the Act.

Also from the judiciary, Justice Adebukola Banjoko of the FCT High Court called for the expansion of the terminologies in Act to take care of future trends. She added that there should be more regular review of the Act due to dynamism of globalisation.

The National Assembly, through their committees on judiciary and legal matters, promised speedy passage of Bills to be generated, at the end of the workshop, for amendments to aspects of the tax laws.

The Chairman, Senate Committee on Judiciary, Human Rights and Legal Matters, Senator Michael Bamidele, and his counterpart in the House of Representatives, Ozurigbo Ugonna, Chairman, House Committee on Justice and Legal Matters, gave the assurance in their respective goodwill messages. Ugonna was represented by Barrister Dike Uche.

Some defects, reform suggestions for CITA

Some of the shortcomings in the extant CITA as identified in the working paper shared at the workshop by the NLRC include the powers of the president to exempt any company or class of companies from the payment of tax, which was said to be very wide.

Also, the NLRC said, “The provision that sensitive information on the assessments/notices such as wrong amount of tax charged, wrong description of profits, mistake in the name of company should not affect or render the document void or voidable or make it liable to be impeached is absurd.”

It also noted that some of the fines in the Act are inadequate and as such cannot afford effective deterrence. “The commission proposed increase in the punishment provided in some sections of the Act, e.g. Section 64(7) from N10,000 to N50,000 and six months imprisonment to two years; Section 55(3)(a) from N25,000 to N50,000 and Section 55(3)(b) from N25,000 to N50,000;  Section 94 from N1 000 to N100,000.”

“Some of the provisions of the existing Act proposed for amendment include section 10 of the Act, where the commission proposed that every company shall after registration with the Corporate Affairs Commission (CAC) register with the Federal Inland Revenue Service (FIRS) and obtain a Tax Identification Number (TIN), which shall be used in all tax and other transactions.

“This implies that aside the Incorporation Number obtained from CAC, a company shall also have a TIN after registration with FIRS which shall be used for tax and other purposes.

“In reforming Section 13 of the Act, the commission is proposing an amendment by expanding the section to bring within the tax net companies with significant economic presence in Nigeria and to define the phrase ‘significant economic presence’ and to amend the section to provide for a new provision to impose six per cent tax on all online advertising,” the NLRC said.