09/10/23

AFRICA: African tax forum recovers $1.7b taxes for Nigeria, others

As published on: thenationalonlineng.net, Monday 9 October, 2023.

he African Tax Administration Forum (ATAF) has assisted Nigeria and other African countries to recover $1.7 billion in tax revenue. 

The revenue would have been lost through transfer pricing perpetuated by individuals and foreign businesses.

ATAF stated that since 2016, it has conducted cumulative additional tax assessments valued at $3.8 billion, with $1.7 billion collected from transfer pricing audits.

In the first eight months of this year, ATAF offered audit support missions which resulted in additional tax assessments of $39.2 million, while $17.7 million was collected from transfer pricing audits.

In a statement, ATAF stated that it provided technical assistance to member countries in international tax matters through country programmes.

It said 52 cross-border taxation missions were conducted in key sectors such as agriculture, oil, mining, and telecommunications.

Out of these missions, 73 per cent involved real-time audits, enhancing member countries’ tax compliance mechanisms.

Mr. Taiwo Oyedele explained that the phenomenon of transfer pricing as “when related entities such as a holding company and its subsidiary transact business, they may artificially manipulate the price to avoid tax.”

For instance, company A could sell a plant worth N100 million to company B for N20 million to reduce the Value Added Tax (VAT) they should pay on N100 million.

Oyedele noted that a Bill presented to the National Assembly to amend issues around transfer pricing will allow the Federal Inland Revenue Service (FIRS) to disregard the N20 million agreed between the two companies and charge VAT based on N100 million market value of the plant.

ATAF report indicated it worked with the Organisation for Economic Cooperation and Development (OECD) and World Bank Group to deliver a transfer pricing technical assistance programme to Nigeria from 2016.

ATAF said in the satement: “This programme assisted Nigeria in enacting revised legislation in a number of areas including transfer pricing regulations, transfer pricing documentation, rules and interest deductibility legislation.

“These legislative changes are helping Nigeria to effectively address the loss of tax revenues through artificial profit shifting by some multinational enterprises.”

According to the forum, transfer pricing technical assistance programme is one of the programmes delivered to African countries, adding that those programmes have assisted African countries collect additional tax of over $1.7 billion in the last eight years.

A breakdown of the recovery shows that $1.726 billion was collected by African countries after audit, meaning that the governments or tax authorities have successfully recovered this amount of money from individuals or businesses.

The forum was able to assess $4.384 billion, a figure that  may include estimated taxes owed, penalties and interests. It initiated 675 tax audits within a specific period. These audits were conducted to examine and verify the accuracy of tax returns and compliance with tax laws.

Four hundred and twelve tax audits, with all necessary examinations, assessments and actions were completed for those particular cases.

ATAF also stated its involvement in long-term transfer pricing programmes and real-time tax audit technical assistance by providing continuing support and assistance in ensuring fair and accurate pricing for transactions between related entities.

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Africa Nigeria Tax