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Presumptive income tax (PIT) By Gregory Kronsten

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A decent case for presumptive tax

 

Luigi Einaudi was the president of the Italian republic shortly after the Second World War and a prominent economist best known for his advocacy of presumptive taxation. He argued that tax should be levied on average, and not actual incomes. One advantage of such a system would be that all taxpayers have the incentive to work hard since above-average income would be free of tax. Another would be administrative simplicity.

Presumptive income tax (PIT) is applied in different forms in many jurisdictions. The authorities could assume that individuals and companies enjoy income equivalent to a set percentage of their net worth. Alternatively, they could assess a company’s tax liability as a set proportion of its gross receipts, making adjustments for the specific industry. In developed economies, the collection agency could assess the PIT due from a large landowner on the basis that he/she made the full productive use of the land. For other taxpayers, the agency could make a demand based upon visible signs of wealth. The permutations are numerous yet they share the advantage for the authorities that the taxpayer has to challenge the assumptions underpinning the demand.

In Nigeria the Federal Inland Revenue Service (FIRS) has expressed an interest in the principle of PIT. It is not difficult to see why.  Federally collected revenue amounted to 7.4 per cent of GDP in 2018 according to provisional data from the CBN. This is less than half the rate achieved in Kenya and about one third of what is posted in South Africa.  Some numbers quoted in January by Zainab Ahmed, the federal finance minister, are revealing. The gross oil revenue/oil GDP ratio stood at 39.0 per cent, and that for the non-oil economy at just 4.2 per cent. We may conclude that the oil industry in Nigeria is undertaxed relative to other jurisdictions and we can see why the FIRS, the largest collection agency in the country, will look at new ways to boost the tax take such as PIT.

It would look above all at small businesses and sole traders if it was to adopt PIT. There are an estimated 77 million such businesses in Nigeria, accounting for 60 million jobs and close to 50 per cent of GDP according to the industry, trade and investment ministry. Rather than assess net worth or search for visible signs of wealth in this case, the FIRS could examine cash book receipts, bank statements and business permits. It could set (presume) benchmarks for the profitability of types of business. In the absence of any other data, the FIRS could make a demand upon the basis of the location of the business and staff numbers.

There is an argument, popular with the audit industry and others, that such an approach is intrusive and restricts the rights of taxpayers. Many thinkers, not to mention those with the thankless task of having to govern a country, would reply that rights cannot be separated from responsibilities. If a business persistently ignores or underpays its tax obligations, there is a compelling case for the authorities to up their game by confiscation or the application of PIT for example. In some cases, the agency may collect more tax than is due: taxpayers who had ducked their obligations would then have to appeal.

The FGN has to take radical steps to boost its revenue generation. Its debt burden is currently sustainable in our view but will not be so in, say, five years. The only way to provide better services for its citizens is through higher tax collection. We can all pick data to highlight the pitiful state of basic services: ours are the recent finding that more Nigerians live in poverty than Indians although its population is one sixth of India’s, and that the housing deficit was 17 million units five years ago according to the Nigeria Mortgage Refinancing Company. Nigeria has a low government spending/GDP ratio because it has a low tax/GDP ratio.

Similarly, if the FGN does not transform its tax collection, it will not have access to the funds for major infrastructure spending. Over 20 years, up to US$3trn is required to make the infrastructure fit for purpose. Nigeria’s traditional external partners, the domestic private sector, the DFIs, the PFAs and others will play a part but the lead role belongs to the FGN. Without large-scale investment, it is very difficult to see the migration of the economy from the rentier to the productive model. Doubters are invited to pay a visit to South Korea or any of the East Asian success stories of the 1990s.

PIT could be one pillar of a broader strategy to push up tax generation sharply within a relatively short period. Others could be the doubling of the standard rate of VAT to 10 per cent; a review of the oil industry’s production sharing contracts; an increase in the staffing and remuneration of the large taxpayers’ office; an expansion of the electronic filing of tax returns; and a draconian review of tax waivers and exemptions.

The urgency of the FGN’s predicament does not allow for a dependence upon efficiency gains to deliver.  The gains were impressive in the early years of democratic South Africa but were possible because a well-run revenue service with a track record already existed. This is not Nigeria’s current lot. A dramatic challenge requires a dramatic response in our view.

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Wild Fusion has been named one of the top digital agencies in the world

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Wild Fusion has been named one of the top digital, creative and marketing agencies in the world by Clutch, the leading B2B rating and review platform.

 

The new report by Clutch highlights the top-performing creative and digital agencies in 14 industries across several countries. The industries are automotive, business services, dental, e-commerce, education, financial services, financial technology, healthcare, hospitality, legal, nonprofit, real estate, and retail.

Nigerian digital marketing agency, Wild Fusion has been named one of the top creative and marketing agencies in the world across 14 industries, according to Clutch, a global rating platform.

About the award, Abasiama Idaresit, CEO, Wild Fusion , said, “We are honoured to be featured on this elite list of world-class agencies. We continue to lead through digital innovation and our expertise in social and digital marketing. This further proves that we are on the right path of prosperity for Nigeria and Africa.”

Click here to read more: Africa’s Wild Fusion Named Top Non-Profit SEO Company by Clutch

 

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Interesting facts about Nestoil Group and EPCC services in Nigeria 

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Nestoil is Nigeria’s largest indigenous Engineering, Procurement, Construction and Commissioning (EPCC) Company in the Oil and Gas sector. Nestoil group is divided into 4 categories:

 

  • Nestoil
  • IMPAC Engineering
  • B&Q Dredging
  • Energy Works Technology (EWT)
  • Hammakopp Consortium

 

Nestoil

Nestoil was incorporated in 1991. Nestoil is Nigeria’s largest indigenous Engineering, Procurement, Construction and Commissioning (EPCC), Oil and Gas Engineering Company

 

IMPAC Engineering

 

IMPAC Engineering  has over 18 years of experience offering a broad range of engineering services and consultancy services, which include, but not limited to: feasibility studies; concept/basic design; Front End Engineering Design (FEED); Detailed Engineering Design (DED) and project and construction management in the energy industry.

 

B&Q Dredging

B & Q Dredging is an indigenous dredging company incorporated in 2005.They provide specialized engineering services in the following areas: Dredging, Flood and Erosion Control, Shore Protection and Consolidation, Sand filling of road embankments, River Crossing, Sweeping of Wellheads Slots and Access Channels

Energy Works Technology (EWT)

 

Energy Works Technology (EWT) is a private company incorporated in Nigeria in 1999. EWT’s capabilities include a full range of fabrication services for certified process packages and steel structures. Energy Works Technology (EWT) is a leading process Equipment Manufacturer, Steel Fabricator and Oil & Gas EPCI (Engineering Procurement Construction and Installation) service provider in Nigeria & West Africa.

 

Hammakopp Consortium

Hammakopp Consortium was incorporated in 1999 and are experts in developing projects.  They are experts in developing projects from the pre-feasibility phase through conceptual design and FEED studies, detailed design, procurement, construction and project management and implementation.It is one-stop-shop for Civil Construction, Maintenance & Fabrication, Environmental & Sewage treatment and other services in Nigeria.

 

Click here to know more about Nestoil

 

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Top 5 fastest African Growing Companies

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Wild Fusion

Wild Fusion is credited with kickstarting Nigeria’s Digital Marketing revolution. Established by Abasiama Idaresit, a Nigerian digital marketing showcasing business visionary and evangelist, Wild Fusion was one of the most punctual completely coordinated digital advertising organizations in sub-Saharan Africa. Wild Fusion, which was established with no outside venture, broadly helped a Nigerian independent company develop its incomes from $1,000 to $100,000 in a few months with imaginative Internet advertising. The organization administrations customers like Visa V +0%, Samsung, Vodafone VOD +0%, Pepsi and Unilever in Nigeria, Kenya and Ghana. Wild Fusion gains imaginative focuses for presenting and advancing digital advertising in Africa and for cand for disrupting traditional marketing across the continent. Numerous Nigerian and African organizations presently devote a greater amount of their spending limit to digital marketing.

TaxTim

Taxtim is a South African online virtual duty partner and assessment arrangement administration that enables you to finish expense forms rapidly and effectively without counseling with a physical duty expert. Tim, the virtual assessment colleague, asks clients basic, plain language questions, and dependent on the appropriate responses, Tim rounds out your arrival accurately, for a most extreme expense discount. Documenting government forms in South Africa can be a long and tiring procedure. TaxTim, with its computerized help gives an advantageous answer for citizens for a yearly expense of $20. Marc Sevitz, a certified Chartered Accountant and charge expert, and Evan Robinson, a designer and programming engineer in 2011, established TaxTim.

Rasello

Rasello, founded by Tanzanian software entrepreneur Natalino Mwenda, is a cloud-based Customer Relationship Management (CRM) tool that lets business owners interact and manage customer records, automate customer retention and communication. 
You add your clients; Rasello automatically identifies customers who need birthday reminders, loyalty programs, service cycle renewals, etc. 

The software can be used via devices such as PCs, tablets, and smartphone

Triggerfish

Triggerfish is Africa’s biggest Computer Generated (CG) movement organization. It was established in 1996 as a boutique stop-outline activity studio and begun by creating TV plugs for South African organizations. In 2001, the organization created liveliness for the principal season of Takalani Sesame Street, the South African rendition of kids’ TV show Sesame Street. Triggerfish has likewise created activity for the U.S Sesame Street. A year ago, the Cape Town-based liveliness studio created its first element film, Adventures of Zambezia, a motion picture that recounts to the tale of a youthful, gullible yet rich hawk who leaves the barren desert where he lives with his dad in quest for activity and experience in the renowned feathered creature city of Zambezia. The motion picture was screened in any event 25 unique nations and pulled in over $22.1 million, as indicated by film industry magic. Triggerfish wins inventive focuses for utilizing innovation to empower imagination in structure the best movement studio in Africa.

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