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Nigeria needs to address tax payment issues – PwC

By on December 13, 2014

Nigeria needs to urgently address issues relating to the number of tax payments and the time it takes companies to comply, PricewaterhouseCoopers has said.

Paying taxes has become easier over the past year for medium-sized companies around the world, a new report from the World Bank Group and PwC finds.

According to the Paying Taxes 2015 report, the time it takes an average company to meet its tax obligations dropped by four hours last year.

The report also revealed that the total amount the average company paid in taxes and the number of payments it made had declined in the past year. This is a trend seen every year over the 10-year period covered by the publication.

The report finds that on the average, a standard company studied has a total tax rate of 40.9 per cent of commercial profits. It makes 26 tax payments per year and takes 264 hours to comply with its tax requirements.

The report shows that the case study company for Nigeria has a total tax rate of 33 per cent, makes 47 payments and spends 909 hours annually to comply with tax obligations.

Partner and Head of Tax and Regulatory Services, PwC Nigeria, Mr. Taiwo Oyedele, said, “The implication of the report is that while Nigeria continues to be globally and regionally competitive in terms of tax rates, it needs to urgently address issues relating to the number of tax payments and time it takes companies to comply.

“These two indicators are responsible for the very low overall ranking of 179 for Nigeria, out of the 189 economies surveyed worldwide. This indicates a nine point drop from last year’s position of 170.”

He further said, “It is exciting to note that the Nigerian tax authorities are currently implementing an electronic tax payment and filing system. This will significantly reduce the time required for tax compliance and ultimately improves Nigeria’s ranking and tax competitiveness.”

He said the latest results from the Paying Taxes study showed that many economies were continuing to make progress in tax reforms, but there was still a lot of scope to streamline and simplify tax systems.

“Tax reform is set to remain an important topic for governments around the world for some years to come, and this will include the need to take on board the proposals from the Organisation for Economic Cooperation and Development to modernise the international tax system to cater for today’s globalised business,” he added.

Across Africa the report finds that averagely, companies in the region have a total tax rate of 47 per cent, make 36 tax payments per year which takes 256 hours to comply.

Over the 10 years of the study, 78 per cent of the 189 economies covered in the report have made significant changes to their tax regimes, at least once.

The time and the number of payments required to comply with tax obligations have fallen over the 10-year period, as has the average total tax rate. The fastest rate of decline for the total tax rate occurred during the financial crisis from 2008-2010, with an average decline of 1.8 percentage points per year during that period. The rate of decline then started slowing in 2011.