Many Chief Financial Officers (CFOS) are eagerly concerned about their tax cost profiles and are eagerly managing them in order to increase profitability, according to the KPMG annual CFO Outlook Survey for 2019 which provides valuable insight into how CFOS and their organisations view the business environment.
This year’s survey report reveals most prominent areas of concern for CFO with respect to the government’s tax policies. They include: ambiguous tax provisions and lengthy tax dispute resolution process; aggressive tax collection drive; and multiplicity of taxes.
The CFOS views come on the heels of the Nigerian tax authorities estimating about 50 percent increase in tax revenues in 2019 compared with the previous year (2018) record.
The CFOS believe that the various tax and regulatory authorities will also be required to engender a more inclusive engagement model to drive the pro-business agenda of the Government.
They noted critical intervention areas such as: policy of using commission-based consultants; apparent absence of a risk-based approach to audits by the tax authorities, particularly the Federal Inland Revenue Service (FIRS); targeted investigation; prolonged tax audit process; lack of accountability on taxes collected or a lack of tax contribution reporting framework, by the Government; and multiple audits and regulatory
over-reach.
The survey quoted Sharafadeen Muhammed, CFO, Citi Bank saying, “It is commendable that the government is seeking to drive more tax revenues as our tax to GDP ratio of 4percent is very poor compared to other African countries. However, the approach adopted can be improved by shifting the focus on increasing the tax base.”
The survey also quoted Oluseyi Kumapayi, Chief Financial Officer, Access Bank, saying “the amount of inconsistency and lack of clarity on the tax regimes in the different jurisdictions/states makes life difficult for anyone who runs operations nationwide, it makes it hard to prepare”.
“Over the last two years, the growing tax collection drive and evolving tax environment have been major stay awake issues for many CFOS surveyed in the annual KPMG CFO Survey.
“This has been largely because of the growing government focus on tax – evidenced by the multiplicity of taxes, multi-agency tax reviews, among others. Not much of that concern seems to have gone away with the turn of a new year”, KPMG noted in the survey.
“We obtained the views of CFOS on the outlook for their businesses in 2019, what they believe the Government should prioritize to create an enabling environment and the impact of the finance function in achieving organizational goals,” said Tola Adeyemi, Partner and Head, Audit Services, KPMG in Nigeria.
“In comparison to 2018, CFOS are much less optimistic about the prospects for growth in the Nigerian Economy,” Adeyemi said.
He noted that the need to broaden the tax base rather than overburdening existing payers also remains a recurring theme.
“Our study revealed that the critical ‘stay awake’ issues for CFOS for 2019 are: profitability and cost management issues; macroeconomic issues, and tax and regulatory policy. In some respects, these are the traditional stay awake issues one would expect within the context of a fragile economy,” he said.
The Federal Inland Revenue Service (FIRS) re-wrote Nigeria’s revenue collection history in 2018 when it collected a total of N5.320trillion. Tunde Fowler, Executive Chairman (FIRS) said it is targeting N8trillion for 2019.
The ongoing integration of databases will fetch the nation a total of 45million individual and corporate taxpayers, Oseni Elamah, Executive Secretary, Joint Tax Board (JTB) said recently in Abuja.
“Government’s sustained focus on increasing revenue through taxation remains a key issue. This is consistent with our survey outcome from 2018. CFOS remain concerned about ambiguous tax laws, the perceived aggressive tax collection drive by government and multiplicity of taxes”, Adeyemi added.
As increasing tax burden continues to erode profits of many businesses, KPMG believes that the usefulness of tax technology in achieving tax cost optimisation cannot be over emphasised.
It stated that “deliberate adoption of the right tax technology by organisations will significantly help to put the mind of tax managers and CFOS, at rest in terms of their tax compliance and tax planning.”
“In adopting tax technology, CFOS would need to first review their businesses and operational framework to determine which areas would most benefit from a tax technology intervention.
“Thereafter, the company’s Enterprise Resource Planning (ERP) system would need to be assessed to determine compatibility. Where unique specifications are also required, this may be achieved with the help of the tax technology vendors, working closely with the tax team and in-house IT Unit.
“Continuous monitoring and evaluation would also be required to ensure that the technology is fitfor-purpose and effective at meeting its set objectives”, KPMG noted.
