From Uche Usim, Abuja
The Federal Inland Revenue Service (FIRS) on Tuesday explained why Nigeria was among the four countries missing at the 140-nation deal that sought to increase taxes imposed on multinational companies to 15 per cent and ultimately galvanise the reallocation of more than $125 billion of profits from around 100 of the world’s largest and most profitable multinational enterprises (MNEs).
The deal, held in Paris, France, last October, at the instance of Organisation for Economic Cooperation and Development (OECD), represents more than 90 per cent of global Gross Domestic Product (GDP), ensures that these firms pay a fair share of tax wherever they operate and generate profits.
However, reacting to the development, FIRS, in a statement, noted that Nigeria’s reasons for not agreeing to the two-pillar solution adopted by the OECD G20 stems from concerns on potential negative revenue returns that the rule would have for developing countries; which were totally unaddressed.
Explaining in detail, the statement quoted Mr. Mathew Gbonjubola, the Group Lead Special Tax Operations Group, and Nigeria’s representative at the OECD Inclusive Framework as saying that despite the expected outcome that both pillars will increase global corporate income tax by as much as $150 billion per annum, with attendant favourable environment for investment and economic growth, there were serious concerns that the pillars did not address negative revenue outcome for Nigeria and other developing countries.
“The general issues that developing countries have with the outcome that was published on October 8 is the high cost of implementation. And that speaks to the complexities of the proposal in the inclusive framework statement. In every complex situation or rule, implementation and compliance will always be difficult. When implementation or compliance is difficult, there would be a high cost of implementation.
“Another issue was that the economic impact assessment that was carried out on Pillar 1 and 2 were founded on an unreliable premise. The country-specific impact assessment that was done was top-down. Somebody just looked at the GDP of Nigeria, and said Nigeria’s GDP is this much and then they should be able to buy this number of shoes and things like that. And you and I know, in that kind of postulation, the margin of error is usually very wide. That exactly was what happened with this. Particularly for Nigeria, when we ran the numbers, it was way off the figures that the OECD gave us.
“And the final issue most developing countries had was that the developed world, within the inclusive framework, was very indifferent to the concerns expressed by most developing countries.