The Federal Government may be compelled to increase tax rates or introduce new ones in 2019 as part of strategies to meet its financial obligations under the new minimum wage.
Partner and head of tax reporting and strategy at PwC Nigeria and West Africa Market, Mr. Kenneth Erikume, disclosed this in a report titled: Nigeria tax predictions for 2019, made available in Lagos at the weekend. The tax expert maintained that ongoing negotiations between the Federal Government, Nigeria Labour Congress (NLC) and the Academic Staff Union of Universities (ASUU), would put significant pressure on government to consider the introduction of new taxes and or increase current tax rates.
‘‘A number of States are struggling to pay salaries under the current wage structure and an increase in minimum wage may result in the government considering an increase in personal income tax rate. At the Federal level, the government may explore introduction of taxes on consumption such as luxury tax or excise on other non-essential products,’’ he projected.
According to him, the election introduces an interesting spin as elected officers who are not seeking re-election (as a result of end of political tenure) may be more aggressive in trying to achieve new taxes or increase in rate.
‘‘However, the issue is likely to remain only a concept as the general public and the Organised Private sector (OPS) are expected to fight any such proposal,’’ he alerted.
He further hinted that another impact from the upward review of wages would be increased aggression from State Tax Authorities, stressing that due to capacity gaps, many State Tax Authorities are unlikely to be successful in expanding their tax net to bring in new taxpayers or uncover undeclared income of exisiting taxpayers.
This, he said would result in a lot of aggression on the larger corporate taxpayers who declare the taxes of their staff under PAYE which accounts for up to 80 percent of the revenue of many states until they embrace technology for tax administration and revisit their strategy to tax high net worth individuals and the informal sector.
The PwC tax head, also noted that the reconstitution of the Tax Appeal Tribunal (TAT) will lead to more judgments on tax matters that have been pending and escalation of issues from the TAT to the courts if taxpayers or the Federal Inland Revenue Service (FIRS) are still not satisfied.
He warned that the country may likely witness a new tax issue join the significant rank of Value Added Tax (VAT) on foreign services and excess dividend tax, adding that the excess dividend tax dispute will not be concluded until it gets to the Supreme Court while it is very likely that some of the judgments of the court will come in 2019.
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