Why FG Must Be More Proactive With The Country’s Economy – Fashina

Ajibade Fashina is the Managing Partner of Pedabo, a Lagos-based independent member company of Morison KSi, which specializes in audit assurance, tax consulting and advisory to sectors of the Nigerian economy. Insisting that the Federal Government could be proactive in addressing the country’s economic challenges, Fashina, in this interview with KINGSLEY JEREMIAH, discusses germane national issues, especially the country’s growing population, accounting system, tax administration as well as implications of some government policies.
Nigeria is expected to increase Value Added Tax (VAT) from five per cent in 2020. It equally plans to implement VAT on online transactions. What are the possible implications of the developments?
The comment on increasing the VAT rate has been attributed to the need to create a means of funding the new minimum wage, which was recently reviewed from N18,000 to N30,000. The government however, needs to be mindful of the holistic implications of such an action, beyond revenue generation.VAT is a consumption tax, which is borne by the final consumer of goods and services. Therefore, any increase in VAT will be passed to the final consumer of such goods and services. This will naturally increase the cost of doing business in Nigeria, especially for small and medium scale businesses, which have been cringing under the weight of unbearable business costs, including labour cost.
Further increase in cost may lead to the collapse of some of these businesses, thereby resulting to redundancy, increase in unemployment rate and the rate of corruption in our economy, causing more hardship for the citizenry. It would have been more encouraging if such increase will directly impact the living conditions of an average Nigerian and also create a business-friendly environment, where social amenities and infrastructure e.g. power, good roads, education and good health facilities are readily available.
More can be done to increase the tax base to include tax evaders and promote a simple, convenient and fair tax system in Nigeria. This would encourage voluntary tax compliance, discourage tax evasion, boost tax revenue and the confidence of taxpayers in the Nigerian tax system.
It is quite obvious that there are a number of inappropriately taxed entities in the country, and one of the reasons for this is inadequate reporting. There have been instances where audit reports presented to the tax authorities is different from the one presented to the bank and for other purposes. This probably happened because of lack of adequate oversight. However, with recent developments, this is going out of fashion because of the kind of oversight provided by the Financial Reporting Council.
As regards the recent discussion on introduction of VAT on online transactions, taxpayers need to be aware that this is not exactly an introduction but more of reinforcing compliance with the provisions of the VAT Act on digital transactions. Asides from VAT exempted and zero-rated transactions which include basic food items, baby products, medical and pharmaceutical products and services amongst a few others, merely carrying on a business online does not exempt such transactions from VAT even though tracking such transactions becomes complicated. However, in administering the VAT on online transactions, the tax authority needs to ensure due care to avoid a case where the users of such products/services suffer VAT on the same transaction more than once.
Some of these issues are coming up at a point when government said it will no longer give forex for food importation. What is your take?
I think government is being reactive rather than proactive. I think government needs to take a sit back approach and fully assess the situation. On the long run, if we take forex away from importation of food items, it may be good for our local industry, but I don’t think we are there yet. We rely a lot on imported items. The processing of some of our food items still rely on those imports. So, government waking up one day and then say that they’re going to ban forex for food importation may not be the thing to do without a planned measure. I’m not sure they even have the statistics as to the impact that it will have on inflation, prices of commodities and things in the market. If we go to our harvest stores today, over 60 per cent of what you will see are imported. With the ban, the items will still find their way to the market but at a higher price to the consumer.On another hand, imported items are expected to ensure that our local manufacturers also step up their game in terms of standards. Where they don’t have anything to compete with, they will continue to struggle.
How can government deal with these challenges of increasing rate of poverty, infrastructure gap and unemployment in the face of volatile revenue from commodities?
I believe unemployment is one of the greatest challenges we have in our country today and I can see its impact on all other social issues that abound now such as security. My view is that Government needs to intensify its drive to look inward to the development of our Agricultural sector and all related value chain. If we as a nation are able to conveniently feed ourselves, a number of our basic problems will be half solved. Also key is the establishment of an enabling environment for businesses to thrive; every nation of the world has had its economy primarily driven by private sector investment. However, business owners need the requisite infrastructure support to better manage their cost of doing business and require the security of stable policy to enable adequate planning.
What is the operational profile of Pedabo?
Pedabo as a group has evolved over the past two decades into four entities- Pedabo Professional Services, Pedabo Audit Services, Pedabo Associates Limited and PAL Nominees. Our offerings include audit and assurance services, tax services, tax advisory, financial advisory, accounting and payroll services and secretarial services. Pedabo is led by six partners and has over 100 professional staff, with offices in Lagos and Abuja and Ghana. It is an independent member of a global network of over 154 companies operating in 82 countries of the world with over 1,200 partners and 9,239 staff, under Morison KSi,.
What sets us apart from most mid-size companies is the very high standard we have set for ourselves. From our yearly recruitment of highly qualified graduates to the intensive and impactful continuous training we give ourselves to ensure we continue to give our clients the very best quality advice they can get in the market. In addition, our firm has been subjected to annual peer reviews by our international affiliate for the last 10 years. This has ensured we kept the standard of our firm at its peak.
What are the impacts of the changes to tax administration in the country, especially to accounting profession?
As a result of the global recession and the shrinking of government revenue from oil, focus shifted to internally generated revenue for both state and federal. This has led to the Revenue agencies becoming more aggressive in their revenue drive. A direct result of this is the requirement for a higher compliance by all taxable entities leading to the need for a higher level of reporting by accountants. Further to this is the introduction of IFRS, which creates a uniformity in the reporting by accountants in all adopting countries. This has again impacted positively on the accounting profession in Nigeria.
Tax administrations are critical to any country as it is usually a fundamental source of revenue generation for the country or the States in the country. The impact of changes in tax administration can vary depending on the approach of a tax administration to ensuring or building a sustainable tax system in the long-term as against short-term objectives of revenue generation.These may include: Harmonizing tax collection to reduce the burden and cost of tax compliance in the country; introduce incentives to reward voluntary tax compliance, and; our tax system should be seen to promote certainty, convenience, fairness and equity. A good tax administration would impact positively on the accounting profession, as record keeping is fundamental to taxation.
Do you foresee any significant development in the Nigerian accounting market in the near future?
Yes, I do and like I mentioned earlier, the adoption of IFRS by Nigeria in 2012 has further increased the need by all accountants giving Assurance services to abide by the same rule in reporting the financial activities of the entities being audited. Furthermore, the Institute of Chartered Accountants of Nigeria is in the process of introducing a peer review mechanism for all practicing firms. This I believe will remove what I will call suitcase Auditors from our system, which will improve the standard of delivery and confidence in the profession.
What is your take for the current administration, particularly on the state of the economy?
Not to sound like a broken record listing the issues and areas requiring real professional input, but I think what is key is that the government should endeavor to focus on the right things. I believe we are generally on the right path, and in their defense, real reforms in any climate take time. However, there must be commitment to their continuity. We will not make progress if everyone wants to abandon existing effective reforms and start a new reform just for the sake of building a personal legacy. We have to look at the bigger picture and appreciate the merits of other people’s initiative and see them to logical conclusions where applicable, and more importantly, we need to look inwards. The likelihood is the economy will get tighter before it gets better but in the long run, in my opinion, things are looking up.

Courtesy: The Guardian

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