PwC Africa Annual Review 2022
Olushola Okunlade Writes
The disruption came in many forms during the last financial year, however, PwC invested in key areas which drove quality and sustained outcomes for the firm and its clients and stakeholders
PwC is pleased to release the first PwC Africa Annual Review 2022 report which tells the story of a remarkable year and focuses on our impact, value creation, strategy, and related performance for the financial year ended 30 June 2022. The report is a reflection of how our network of firms has navigated complexity and responded to change and emerging challenges, and new opportunities across the African continent.
Dion Shango, PwC Africa CEO, says: “Disruption is the new normal. As PwC Africa, we provide solutions to help manage disruption and identify new opportunities. Over the last year, we have focused on delivering quality services that build trust, deliver sustained outcomes and help our clients to manage change. The PwC Africa Annual Review 2022 describes many of the ways that we deliver transformative impact and also where we’re headed as a business.”
Uyi Akpata, PwC Regional Senior Partner for the West Market Area, says: “We’ve set ourselves the goal of helping our clients transform for enduring success. It’s exciting and inspiring work and we’re also leading from the front by digitising our business, investing in our people, focusing on ESG, and driving business transformation. Digital transformation is about more than technology; it’s also about the work environment and embracing a new way of working. ESG transformation is an opportunity to redefine the challenges of today’s business environment as opportunities for long-term and sustainable growth. Similarly, business transformation helps organisations like ours discover how their core business capabilities present such opportunities for growth.”
PwC Africa’s diverse community of solvers has the skills and expertise to support those journeys of transformative change. Our global strategy, The New Equation, is a response to the fundamental changes affecting organisations and society and is designed to solve the challenges of today and tomorrow. Our people focus on delivering human-led, tech-powered services and solutions in line with our societal purpose.
Achieving sustained outcomes requires organisations to remain resilient and adaptable, even during turbulent times. The PwC Africa Annual Review 2022 describes our network’s investment in several key areas that support our clients in their transformation journeys. They are:
As businesses around the world continue to adapt to new and unprecedented challenges, the traditional view of value is due for an overhaul. But in pursuing a holistic transformation to achieve long-term, sustained outcomes, untapped sources of growth need to be explored. The PwC Africa Annual Review 2022 explores how we help our clients to create new approaches to value creation by holistically exploring financial, operational, and more unconventional angles.
Despite significant strides in recent years, Africa continues to face complex development challenges. We are investing in our international development team to ensure we continue to build trust in society by playing a key role in supporting Africa’s growth and strengthening its resilience for the future.
Cybersecurity is viewed as a top ten business risk by CEOs across most industries, both globally and in Africa. PwC Africa’s cybersecurity professionals have deep technical and industry-specific experience in helping clients navigate their most significant cybersecurity risks, and what really sets our team apart is the depth of local and network capabilities.
When it comes to responding to evolving disruptions in the business landscape, technology often drives and enables large-scale transformations. PwC’s business technologists work with organisations to interpret and describe their transformational visions, ensuring that their overall strategy is fit for growth, in line with business objectives, and future-proof.
Environmental Social Governance
At PwC Africa, we believe that internalising ESG considerations holistically will allow organisations to build trust and ensure long-term sustainability, agility, and competitiveness. Our community of solvers — which includes experienced environmental science, economics, energy, engineering, finance, law, assurance, tax, and reporting specialists — have a broad range of skills required to address complex challenges and help clients to integrate ESG into their strategy.
“We welcome you to engage with PwC Africa’s expert teams to begin or expand on your journey of investing in your organisation, as we do in ours,” concludes Shango. “These approaches help to build trust, deliver sustained outcomes and positively impact Africa’s people and communities. By working together, we can build more resilient organisations and contribute positively to Africa’s growth story.”
About PwC: At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 152 countries with over 328,000 people who are committed to delivering quality assurance, advisory, and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
PwC has a presence in 32 African countries, including over 60 office locations. With more than 450 partners and 10,000 professionals across Africa, we serve some of the continent’s largest businesses across all industries.
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
FIRS: Nigeria’s Tax-To-GDP Ratio, 10.86% As At 2021
By Moninuola Sulaiman
Nigeria’s Tax-to-GDP ratio which, in the last 12 years, hovered between 5% to 6% rose to 10.86% by the end of 2021.
The new ratio was communicated to the Federal Inland Revenue Service (FIRS), via a letter signed by the Statistician-General of the Federation, Prince Adeyemi Adeniran, on the 25th of May 2023, following a joint review by the Nigerian Bureau of Statistics (NBS), in collaboration with the Federal Ministry of Finance and the FIRS, using data from 2010 to 2021.
The revision took into account revenue items hitherto not previously included in the computations; particularly, relevant revenue collected by other agencies of government.
Tax-to-GDP ratio is a measure of a nation’s tax revenue relative to the size of its economy as measured by Gross Domestic Product (GDP). The ratio is a useful tool for assessing the “health” of a country’s tax system, and highlighting its tax potential relative to the size of the economy. It is the ultimate measure of the effectiveness of a nation’s tax system compared to other countries.
In a statement announcing the new Tax-to-GDP ratio, the Executive Chairman of FIRS, Mr. Muhammad Nami, explained that sources that previously put the country’s Tax-to-GDP ratio at between 5% and 6% did not consider tax revenue accruing to other government agencies in their computation. Particularly, revenues collected by agencies other than the FIRS, Customs, and States Internal Revenue Service were excluded. This situation was peculiar to Nigeria as most other countries operate harmonised tax systems (all or most tax revenues are collected by one agency of government) with single-point tax revenue reporting. As such, all relevant tax revenues are included in the computation of the Tax-to-GDP ratio.
“In order to correctly state the Tax-to-GDP ratio, the FIRS initiated a review and re-computation of the ratio for 2010 to 2021. In recomputing the ratio, key indicators that were previously left out were taken into account. This resulted in a revised Tax-to-GDP ratio of 10.86% for 2021 as against 6% hitherto reported,” the statement noted.
Mr. Nami further noted that Nigeria’s Tax-to-GDP ratio should ordinarily be higher than 10.86% but for certain economic and fiscal policy factors, including tax waivers and leakages occasioned by the country’s fragmented tax system.
“It is important to note that the Tax-to-GDP ratio for Nigeria should be higher but for the impact of tax waivers contained in our various tax laws (including exemptions to Micro, Small, and Medium Enterprises brought in by Finance Act, 2019), low tax morale, leakages occasioned by the country’s fragmented tax system and the impact of the rebasing of the GDP in 2014”, he explained.
The FIRS boss implored the government to consider reviewing its policies on tax waivers thereby guarantying increased revenue to prosecute its programs and positively moving the needle of the country’s tax-to-GDP ratio.
The Statistician-General of the Federation, Prince Adeyemi Adeniran, in his letter to the Executive Chairman of FIRS, described the revision as a facelift to the Tax-to-GDP ratio for Nigeria in comparison with other countries.
He further noted that the NBS had “carefully and diligently reviewed the methodology used for computing the revised estimates, as well as the various items that have been included in the new computation,” and that the NBS as an outcome of its review and meetings with FIRS has adopted the new Tax-to-GDP computation.
Muhammad Nami, Executive Chairman, FIRS Wins ICAN Merit Award
… Also named winner BusinessDay Newspaper Excellence in Public Service Award 2022
Rashidat Okunlade Writes
The Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami has been named winner of the Institute of Chartered Accountants of Nigeria (ICAN) Merit Award 2023 in its Non-Members Category at the Institute’s 2023 Annual Dinner Awards.
Mr. Nami, who received the Award at the Monarch Event Centre, Lagos, yesterday was described by the President of the Association, Mallam Tijani Musa Isa as an unassuming and humble achiever who has led the FIRS to excel in the international tax circle despite global economic challenges by achieving milestones in revenue collection.
“This Award is in recognition of your positive impact on society. You have made significant contribution to the institute and to Nigeria. The governing board deemed it fit to acknowledge the role you have played and your outstanding achievements,” Mal. Isa noted.
In his Citation, Mr. Muhammad Nami was described as “a go-getter and an ingenious leader.” It further stated that “the reforms he is implementing at FIRS attest to his dexterity, visionary leadership, and patriotism. Under his visionary leadership, the FIRS in 2022 achieved an unprecedented revenue collection of N10.1 trillion, which is the highest tax collection ever made in the history of the country.”
While receiving the award, the Executive Chairman FIRS appreciated the Council Members of the Institute, saying that he has been lucky to work with their members throughout his 32-year career.
“Since I left the university, over 32 years ago, I have had the privilege and luck to be directly and indirectly associated with ICAN members: from the PKF to Manam Professional Services, and now I am working directly with well over 3,000 members of this Institute as the Executive Chairman of the FIRS.
“I feel blessed by this honour and privilege. I am grateful to God, and to all of you who have found me worthy of this recognition. I pray God rewards all of you enormously,” he noted.
Mr. Nami dedicated the award to his alma mater from primary to tertiary levels; his former colleagues at the Presidential Committee on Audit of Stolen Recovered Stolen Assets; members of the Tax Advisory Committee of the FIRS; all taxpayers; the Board Members, Management, and staff of the FIRS, and his family members.
In a similar recognition earlier in the week, on Thursday 4th May 2023, the FIRS boss was named the winner of the BusinessDay Excellence in Public Service Award 2022, at the BusinessDay States Competitiveness And Good Governance Awards 2022.
The country’s influential business newspaper explained that it named him the winner of the award for his “visionary and leadership qualities [that] have brought tremendous change to the FIRS.”
It further noted that: “Under your leadership, you transformed the tax administration and compliance landscape in Nigeria. You deployed the revolutionary TaxPro Max: FIRS’ homegrown digital platform for tax administration which allows taxpayers to register, file returns and pay their taxes easily from any location other than their respective tax offices.
“You have repositioned the operations and staff of the FIRS, and introduced technological tools to institute more transparency, accountability, and effectiveness, which in turn has translated into the increased capacity to deliver on the mandate with results.”
OECD, Nigeria Meet On Maximising Benefits Of Two-Pillar Tax Solution
… Nigeria to continue to participate in rules development in the interest of the country and Africa
A delegation from the Organisation for Economic Co-operation and Development (OECD) met with Nigerian representatives on the 4th and 5th April 2023, at a workshop it jointly organised with the Federal Inland Revenue Service (FIRS), to discuss the maximisation of the benefits of the Two-Pillar Solution for Nigeria.
This is contained in the Workshop’s Outcome Statement released today. The Outcome Statement was signed by the Executive Chairman of the Federal Inland Revenue Service (FIRS), Muhammad Nami and the OECD Representative, Mr. Ben Dickinson.
The Two-Pillar Solution, a proposal by the OECD Inclusive Framework, is a set of proposed rules, endorsed by 138 countries across the world as a uniform solution to the tax challenges of the digitalised economy, as well as Base Erosion and Profit Shifting.
Nigeria, one of the four members of the Inclusive Framework that did not endorse the set of rules, met with the OECD delegation last week to familiarise relevant government officials with the rules, Nigeria’s position, as well as the potential benefits of the Two-Pillar Solution to the country and the world in general.
The workshop was attended by key stakeholders, led by the Executive Chairman of the FIRS, Mr. Muhammad Nami, who was represented by the Coordinating Director, Executive Chairman’s Group, Mr. Muhammad Lawal Abubakar. Also in attendance were the representatives of the Office of the Vice President, the Federal Ministry of Finance, Budget and National Planning, the Federal Ministry of Justice, Federal Ministry of Industry, Trade and Investment, Nigerian Investment Promotion Commission (NIPC), Nigeria Export Processing Zone Authority (NEPZA), Oil and Gas Free Zone Authority (OGFZA), Nigeria Export Promotion Council (NEPC), Joint Tax Board (JTB), and some States’ tax authorities.
After a critical review of the rules and Nigeria’s participation in their development, stakeholders at the meeting resolved that “there is the need for Nigeria’s continued participation in the rule development, as a member of the Inclusive Framework, to ensure that the interest of the country and Africa is factored into the design and development of the rules.”
The Outcome Statement noted that whether or not Nigeria endorsed the statement of October 2021 and the detailed rules to be released later, to address challenges arising from the digitalisation of the economy, the country’s tax base and fiscal policy options will be impacted by the implementation of the Two-Pillar solution, especially the Pillar 2 Global Minimum Tax Rules of 15% effective tax rate (the GloBE rules).
The meeting consequently observed that there was the need for Nigeria to immediately implement fiscal policy measures to address these potential impacts.
“In light of this, there is a need to commence immediate implementation of fiscal policy measures around the Global Minimum Tax Rules, in view of the fact that other jurisdictions around the world have commenced implementation of measures that will enable them reap top-up taxes allowed under the rules, which will be to the detriment of Nigeria from 2024, if no step is taken.
“There is also an urgent need to review and streamline Nigeria’s tax incentives, as the rules will have the impact of allowing other jurisdictions to mop up taxes not collected in Nigeria due to tax incentives,” the statement read.
The Stakeholders also observed that Nigeria could implement and reap the benefits of Pillar 2, even where it does not wish to implement Pillar 1, noting that “Effective implementation of Pillar 2 rules holds significant potential for increased tax revenue to fund government program, boost the economy and keep Nigeria as an attractive investment location.”
As part of its recommendations, the OECD-Nigeria Meeting urged stakeholders within the country to commence internal engagements and “draw up a national strategy for immediate streamlining of its tax incentives, to avoid ceding its tax base to other jurisdictions, owing to the implementation of Pillar 2 rules.”
The Workshop Statement enjoined Nigeria to take immediate steps to respond to Pillar 2 through the implementation of tax policy options, which may include “changing its income tax rule to bring up its effective tax rate to a minimum of 15% or introducing a Qualified Domestic Minimum Top-up Tax (QDMTT)”.
The meeting emphasised the need for Nigeria to continue to participate in the rule development “as a matter of importance to protect the national interest.”
Nigeria is a member of the Inclusive Framework, and has actively participated in the rule development process despite not endorsing the Inclusive Framework October 2021 Statement on the grounds that it was in Nigeria’s best interest not to do so, to ensure that the country does not lose out on potential revenue from the digital economy.
The Executive Chairman of the FIRS had in a statement in May 2022 noted that the country had concerns over the impact the rules could have on Nigeria’s tax system and revenue generation.
“There are serious concerns on how the rules (particularly on Pillar 1) would compound the issues in our tax system. For instance, to be able to tax any digital sale or any multinational enterprise (MNEs), that company or enterprise must have an annual global turnover of €20 billion and a global profitability of 10%. That is a concern. This is because most MNEs that operate in our country do not meet such criteria and we would not be able to tax them,” Mr Nami stated then.
“Secondly, the €20 billion global annual turnover in question is not just for one accounting year, but it is that the enterprise must make €20 billion revenue and 10% profitability in average for four consecutive years, otherwise that enterprise will never pay tax in our country, but in the country where the enterprise comes from, or its country of residence,” the statement read.
Thirdly he noted that for Nigeria to subject a Multinational Enterprise to tax under the rule, the entity must have generated at least €1 million turnover from Nigeria within a year.
Mr. Muhammad Nami stated that this is an unfair position especially to domestic companies which, with a minimum of above N25 million (that is about €57,000) turnover, are subject to companies income tax in Nigeria. He added that this rule will take-off so many Multinational Enterprises from the scope of those that are currently paying taxes to Nigeria. In other words, even the MNEs that are currently paying taxes in Nigeria would cease to pay taxes to us because of this rule.
Fourthly, on the issue of dispute resolutions under the Two-Pillar Solution, the FIRS Executive Chairman explained that the rules were such that in the event of a dispute between Nigeria and a Multinational Enterprise, Nigeria would be subject to an international arbitration panel as against Nigeria’s own justice system.
“It would be subject to international arbitration and not Nigeria’s judicial system and laws—even where the income is directly related to a Nigerian member of an MNE group, which is ordinarily subject to tax in Nigeria on its worldwide income and subject to the laws of Nigeria. We are concerned about getting a fair deal from such process. More so, such a dispute resolution process with a Multinational Enterprise, in an international arbitration panel outside the country, would lead to heavy expenses on legal services, traveling and other incidental costs.
“Nigeria would spend more; even beyond the tax yield from such cases,” the statement had read.
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