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Why Nigeria Rejected OECD Minimum Corporate Tax Agreement—FIRS

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OECD Minimum Corporate Tax Agreement

By Modupe Gbadeyanka

The Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr Muhammad Nami, on Monday explained why Nigeria did not endorse the Organization for Economic Cooperation and Development (OECD) Minimum Corporate Tax Agreement.

In a statement issued by his Special Assistant on Media and Communication, Johannes Oluwatobi Wojuola, the tax agency boss stated that signing the deal will not be in the interest of the nation.

The OECD Minimum Corporate Tax Agreement was designed to allow multinational enterprises (MNEs) to have a fair payment of taxes in different countries.

But Mr Nami said if Nigeria endorses it, it will lose out on potential revenue from the digital economy as the agreement is unfair to the nation and the developing countries in general.

“There are serious concerns on how the rules would compound the issues in our tax system. For instance, to be able to tax any digital sale or any multinational enterprise (MNEs), that company or enterprise must have an annual global turnover of €20 billion and global profitability of 10 per cent. That is a concern. This is because most MNEs that operate in our country do not meet such criteria and we would not be able to tax them,” he said.

“Secondly, the €20 billion global annual turnover in question is not just for one accounting year, but it is that the enterprise must make €20 billion revenue and 10 per cent profitability on average for four consecutive years, otherwise that enterprise will never pay tax in our country, but in the country where the enterprise comes from, or its country of residence,” he was further quoted as saying in the statement.

The FIRS head noted that for Nigeria to subject a Multinational Enterprise to tax under the rule, the entity must have generated at least €1 million turnover from Nigeria within a year, stressing that this is an unfair position, especially to domestic companies which, with a minimum of above N25 million (that is about €57,000) turnover, are subject to companies income tax in Nigeria.

He added that this rule will take off so many multinational enterprises from the scope of those that are currently paying taxes to Nigeria. In other words, even the MNEs that are currently paying taxes in Nigeria would cease to pay taxes to us because of this rule.

On the issue of dispute resolutions under the Two-Pillar Solution, the FIRS Executive Chairman explained that the rules were such that in the event of a dispute between Nigeria and a Multinational Enterprise, Nigeria would be subject to an international arbitration panel as against Nigeria’s own justice system.

“It would be subject to international arbitration and not Nigeria’s judicial system and laws—even where the income is directly related to a Nigerian member of an MNE group, which is ordinarily subject to tax in Nigeria on its worldwide income and subject to the laws of Nigeria.

“We are concerned about getting a fair deal from such a process. More so, such a dispute resolution process with a Multinational Enterprise, in an international arbitration panel outside the country, would lead to heavy expenses on legal services, travelling and other incidental costs. Nigeria would spend more; even beyond the tax yield from such cases,” he said.

On the issue of Nigeria losing significant revenue if it fails to sign in to the OECD Inclusive Framework rules for the taxation of the digital economy, Mr Nami noted that this was not a problem as the country had already put forward four ongoing solutions to the challenge of taxation of the digital economy.

“One, we have made it a point of practice to annually amend our tax laws to reflect the current global realities, it was courtesy of these reviews that we developed the Significant Economic Presence (SEP) rule, through the Finance Act of 2019 and 2020. The SEP rules set a threshold for multinational enterprises, without a physical presence in Nigeria, for registration and payment of taxes to the country.

“Two, we have deployed technology in order for us to bring digital transactions to the tax net. Coupled with the Significant Economic Presence rule, we have started seeing the impact of the technology we have deployed; companies like Twitter, Facebook, Netflix, and LinkedIn, among others who have no physical presence in Nigeria and that were hitherto not paying taxes, have now registered for tax purposes and are paying taxes accordingly. A positive to this is that we surpassed our target in the year 2021, despite the challenge posed to the global economy, including our own economy, by the Covid-19 pandemic.

“The third initiative is the Data-4-Tax Initiative, a blockchain technology which FIRS is jointly developing with the Internal Revenue Service of the 36 states and that of the FCT, under the auspices of the Joint Tax Board. With this project, we are confident that we are going to have a seamless view and access to all economic activities of individuals and corporate bodies in Nigeria going forward, including money spent on digital commerce.

“The fourth is that we have set up a specialised office, the Non-Resident Persons Tax Office, to manage the taxation of non-resident persons and cross-border transactions, including all tax treaty operational issues and the income derived from Nigeria by non-resident individuals and companies,” he disclosed.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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SERAP Drags Buhari to Court for Missing N11trn Electricity Funds

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SERAP

By Adedapo Adesanya

Socio-Economic Rights and Accountability Project (SERAP) has filed a lawsuit against President Muhammadu Buhari for his refusal to probe allegations that over N11 trillion earmarked for the provision of regular electricity supply since 1999 which it believes “may have been stolen, mismanaged or diverted into private pockets.”

According to the body in a statement, Nigerian cities have repeatedly been plunged into darkness as the electricity grid has reportedly collapsed at least three times in 5 months, and 130 times in 7 years.

According to the World Bank, epileptic power supply costs businesses in Nigeria about $29 billion yearly.

In the suit number FHC/L/CS/1119/2022 filed last week at the Federal High Court, Lagos, SERAP is seeking “an order of mandamus to direct and compel President Buhari to investigate how over N11 trillion meant to provide regular electricity supply has been allegedly squandered by governments since 1999.”

SERAP is also seeking “an order of mandamus to compel President Buhari to ensure the prosecution of anyone suspected to be responsible for the missing electricity fund, as appropriate, and to ensure the tracing and full recovery of any missing public funds.”

It is arguing that, “It is in the public interest to ensure justice and accountability for alleged corruption and mismanagement in the electricity sector, which has resulted in the failure of governments to solve Nigeria’s perennial power problem,” noting that “The staggering amounts of public funds alleged to have been stolen over the years in the sector have had catastrophic effects on the lives of millions of Nigerians, akin to crimes against humanity against the Nigerian people.”

The group noted that, “The failure to trace, find and recover the missing electricity fund is antithetical to the public interest, the requirements of the Nigerian Constitution 1999 [as amended], and the country’s international obligations,” arguing that, “Nigerians have for far too long been denied justice and the opportunity to get to the bottom of why they continue to pay the price for corruption in the electricity sector–staying in darkness, but still made to pay crazy electricity bills.”

SERAP is also arguing that, “Investigating the allegations of missing N11 trillion electricity funds, prosecuting suspected perpetrators and recovering any missing public funds would end a culture of impunity. It would also address persistent collapse of the electricity grid, and improve access to and affordability of electricity in the country.”

It stated that, “Corruption in the electricity sector and the lack of transparency and accountability in the use of public funds to support the operations of DISCOS have resulted in regular blackouts, electricity grid collapse, and unlawful hike in electricity tariffs.”

SERAP is also seeking “an order of mandamus to direct and compel President Buhari to refer to the International Criminal Court all unimplemented reports of corruption in the electricity sector gathering dust on the shelves, and to arrest and surrender those named in the reports to the court for prosecution.”

Joined in the suit as Respondent is Mr Abubakar Malami, SAN, Attorney General of the Federation and Minister of Justice, while the suit was filed on behalf of SERAP by its lawyers, Mr Kolawole Oluwadare and Ms Adelanke Aremo.

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SweepSouth to Battle Fichaya, Others for Market Share in Nigeria

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SweepSouth

By Adedapo Adesanya

Johannesburg-based SweepSouth, the home cleaning service startup that was launched in 2014, is looking to hijack some customers from its competitors in Nigeria by offering quality services.

SweepSouth allows people to book home cleaning services at affordable prices and connects them with cleaners they call SweepStars, who are carefully vetted and are professionals with extensive experience in home cleaning.

Traditional domestic service agencies in Nigeria are mostly informal, and people who use these cleaners often have to find them by asking around their neighbourhood but the problem with this approach is that it is difficult to know if the cleaner is experienced.

Things are about to change as SweepSouth’s value proposition will help its customers find a cleaner in minutes and will deliver the best services.

The startup’s expansion in Nigeria is led by its new country manager, Ms Awazi Angbalaga, an operator who has worked across industries in the past eight years.

Ms Angbalaga noted that SweepSouth has been test-running its services in Nigeria for the last two months and that the uptake has been exciting.

“Although we’ve largely been testing out our service here, we have already had our first 300 bookings, and the feedback we’ve received backs our belief that our proposition is compelling to Nigerians. While we’re growing our bookings every week, our focus continues to be providing the best service to our customers,” she said.

At the moment, SweepSouth charges a base fee of N3,400 ($8) for cleaning a one-bedroom apartment and around N7,500 ($18) for cleaning a 3-bedroom apartment. The pricing is at par with what is obtainable with traditional domestic service agencies, which is important for a service which is aiming for mass-market adoption.

But SweepSouth will face competition from those traditional domestic service agencies and newer startups such as Fichaya which are now targeting Nigeria’s young working-class population.

Remote work and a growing class of young tech workers, who are willing to pay gig workers for services that make their lives easier, are powering the home services industry. Other startups in this space even offer home-cooked meals and laundry.

To break into the market, SweepSouth may also look to provide additional services such as its SweepSouth Connect, which links people with a wide range of professional artisans. SweepSouth Connect is already available in Kenya and South Africa.

The startup did not confirm if it will launch its Connect service in Nigeria but it stressed that for now, the focus is to reach mass adoption and provide exceptional service to customers.

At the moment, customers can only make bookings from the SweepSouth Nigeria website, but the startup shared that it will launch its app this month. The app will improve customer experience across the entire process from booking to leaving reviews for the SweepStars they’re matched with.

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Buhari Loses Suit to Challenge Electoral Act at Supreme Court

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Electoral Act 2022

By Adedapo Adesanya

The Supreme Court has struck out a suit filed by President Muhammadu Buhari and the Attorney General of the Federation (AGF), Mr Abubakar Malami, challenging Section 84(12) of the Electoral Act.

On Friday, the case was expunged on the grounds that it lacks the jurisdiction to entertain it and is an abuse of the court process.

A notice for the judgment delivery was served on President Buhari and the National Assembly on Thursday, inviting them to appear before the court today for the judgment.

The President and the Minister of Justice had filed a suit at the Supreme Court, seeking an interpretation of the controversial clause in the Electoral Amendment Act 2022.

In the suit filed on April 29, President Buhari and Mr Malami, who are the plaintiffs, listed the National Assembly as the sole defendant.

There have been several debates regarding Section 84 (12) of the amended Electoral Act 2022 which was assented to in February.

Upon assenting to the act, President Buhari had asked the National Assembly to delete the contended clause, however, the parliament declined the president’s request.

Section 84 (12) of the legislation holds that “no political appointee at any level shall be a voting delegate or be voted for at the convention or congress of any political party for the purpose of the nomination of candidates for any election.”

In their suit marked SC/CV/504/2022 and filed on April 29, 2022, President Buhari and Mr Malami sought an order of the apex court to strike out the section of the Electoral Act, which they argue was inconsistent with the nation’s constitution.

According to the court document, the plaintiffs contend that the Section 84(12) of the Electoral (Amendment) Act, 2022 is inconsistent with the provisions of sections 42, 65, 66, 106, 107, 131, 137, 147, 151, 177, 182, 192 and 196 of the Constitution of Federal Republic of Nigeria, 1999, (as amended), as well Article 2 of the African Charter on Human and People and Peoples Rights.

The plaintiffs further contended that the constitution already makes provisions for qualification and disqualification for the offices of the President and Vice President, Governor and Deputy Governor, Senate and House of Representatives, House of Assembly, Ministers, Commissioners, and Special Advisers.

They urged the Supreme Court to make: “A declaration that the joint and or combined reading of section 65, 66, 106, 107, 131, 137, 147, 151, 177, 182, 192 and 196 of the constitution of the Federal Republic of Nigeria, 1999, (as amended), the provision of Section 84 (12) of the Electoral Act, 2022 which also ignores Section 84(3) of the same Act, is an additional qualifying and/or disqualifying factors for the National Assembly, House of Assembly, Gubernatorial and Presidential elections as enshrined in the said constitution, hence unconstitutional, unlawful, null and void”.

However, in its decision on Friday, the Supreme Court held that President Buhari, having assented to the bill on February 25 2022, cannot turn around to challenge the same act.

In a unanimous judgement delivered by Justice Emmanuel Agim, the court said allowing the suit to have its way will amount to approbating and reprobating at the same time and no court of law shall allow that.

The apex court unanimously agreed that President Buhari lacked the jurisdiction to bring the suit before it because of the nature of the reliefs sought.

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