Why we opted out of global tax rule –Osinbajo

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From Isaac Anumihe, Abuja

Federal Government, yesterday, clarified the reason it opted out of the  global tax rule, also known as the  Global Corporate Minimum Tax Agreement, signed by almost all the Organisation for Economic Co-operation and   Development (OECD) members.

Making the clarification at the 24th Annual Tax Conference of  Chartered Institute  of Taxation of Nigeria (CITN) in Abuja, the Vice President, Professor  Yemi Osinbajo, said that Nigeria opted out of the agreement because of the highly contentious portions of the agreement.

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According to Osinbajo, who was represented by the Executive Chairman of Federal Inland Revenue Service (FIRS), Mohammed Mamman Nami, Nigeria was already facing tax leakage and this was impacting heavily on the revenue of the country. To this effect, if foreign enterprises stop paying taxes to Nigeria because of the conditions in the agreement that favours them, Nigeria’s tax revenue would dip.

“The leakage is unprecedented. The OECD agreement by the position of FIRS  and the Joint Tax Board (JTB)  is going to further  compound the issue of leakage in our tax system.

“So, we didn’t sign (the agreement) not because we wanted to do it in our own way. We  have an requirement that for you to be able to tax any digital player or any multinational enterprise, globally, that company  or enterprise must have an annual turnover of $20 billion.

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“That was the first concern. The second concern was the averaging mechanism. This $20 billion is going to be for one tax year. It has to be $20 billion for an average of three years. So,  that enterprise  must make $20 billion for three consecutive years otherwise that enterprise  will never pay tax to any country that it operates in the world except the country  which the enterprise  comes from or the country of origin.


“Another thing that caught our attention is that 10 per cent of the tax of the $20 billion turnover must be generated in a country like Nigeria or else whatever business it  does, we cannot reduce it to any tax in Nigeria. Above all, we should not forget our tax law.  The minimum turnover you require as a business in Nigeria to be able to register with FIRS and pay taxes in Nigeria is just N25 million.

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And for somebody that makes less than 10 per cent of $20 billion which I believe is about $2 billion in Nigeria,  that person will not pay tax in Nigeria. I think that injustice is unimaginable. It’s wrong. We spent time to consider it and that’s why we rejected signing  the agreement.”

“If a company operating in Enugu generated only N25 million ($60,000),  it  is going to open an office in Nigeria, pay for utilities, employ staff, and still  pay tax in Nigeria.  But somebody who earns a  billion dollars works away  with tax. We say that that should not be done. We are not saying that it is not the correct thing.