The Federal Inland Revenue Service (FIRS) yesterday outlined measures to check circumvention of tax rules by companies practicing Base Erosion and Profit Shifting (BEPS) in Nigeria.
BEPS refers to tax avoidance strategies that exploit gaps and mismatches in tax rules across countries to artificially shift profits to low or no-tax countries.
According to the tax regulator, there must be global tax standards for digital economy, removal of mismatches in tax rules, elimination of harmful tax practices in all jurisdictions, increased transparency both from the tax authority and the taxpayer and a very effective, efficient, reliable dispute resolution to able to eliminate BEPS.
FIRS disclosed this during a Tax Breakfast Seminar titled: “Transfer Pricing: Impact of BEPS and other Reforms”, and organized by KPMG, audit, tax and advisory firm, in Lagos.
Giving the keynote address, Head, International Tax Department, FIRS, M.O. Gbonjubola, said that the menace of BEPS prompted Nigeria to join the BEPS inclusive framework in 2015, whose main objective is to ensure that profits are taxed where economic activities that generate the profits are performed.
He stated: “If we are able to remove mismatches in our tax rules such that the way Nigeria treat an item of income, is the same way other countries will treat it then it becomes a lot easier for us to prevent BEPS and that is one of the tools on how do we address the issue of mismatches in our tax rules.
If each countries together can draft rules to tackle those eroding payments which will improve things like interest, royalty and some inter-company fees that are charged then we will be able to combat BEPS.
“If we are able to eliminate harmful tax practice in all Jurisdictions, we will be able to combat BEPS very well.
If we have increased transparency both from the tax authority and the taxpayer we will be able to combat BEPS and importantly if we have a very effective, efficient, reliable dispute resolution such that tax payers will have confidence in their taxes and even the tax authority would have confidence in the populace then we will be able to eliminate BEPS.”
On his part, Partner and Head Transfer Pricing and Consumer Industrial Markets (Tax), KPMG, Tayo Ogunbenro, noted that BEPS alongside other tax reforms by the government are affecting the generation of revenue in the country and transfer pricing in multinational and trans-national companies.
However, Gbonjubola noted that amendments have been done in some of the tax reforms and in few months the government press would come out with a new gazetting on the amended reforms.