KPMG Professional Services has stressed the need for companies operating in Nigeria to always pay their tax as required by law in order to improve business performance and create shareholder value.
The professional services firm made this call at a press conference to announce the launch of its survey report on Tax Risk Management (TRM) practices by companies in Nigeria slated for this Thursday in Lagos. The event would host the present Chairman, Federal Inland Revenue Service, FIRS, Mr. Tunde Fowler and Head of Europe Middle East and Africa tax practice KPMG, Mrs. Jane McCormick.
Speaking at the conference, Partner and Head Tax, Regulatory and People Sevices of the firm, Mr. Victor Onyenkpa, explained that unexpected spike in tax costs which arise from tax audits carried out by tax authorities significantly affect cash flows and business performance. This, according to him, often threatens the sustainability of businesses.
Onyenkpa argued that organisations needed to understand and manage tax risks, just as all other aspects of enterprise and business risks facing their business so that proper budgeting and planning can be made for these costs.
With the fall in revenues, he maintained that tax had become a key subject matter, even as government struggles to meet its increasing obligations through internally generated revenue lines and review its strategies for increased revenue drive. He added that management, on the other hand, needed to consciously put in place strategies to make tax become a boardroom agenda.
He said: “KPMG conducted the TRM survey of the Nigerian market for two major reasons: getting tax right and developing ‘Fit-for-Purpose’ tax departments. Globally, tax authorities are beginning to give greater attention to how organisations manage their tax affairs and are demanding greater transparency in the tax compliance processes.”
“In Nigeria, for instance, the tax authorities have implemented regulations that require greater disclosure and reporting of related-party transactions with the aim of reducing perceived profit-shifting and reduction in Nigerian tax revenues. In addition, Internally Generated Revenue (IGR) has been given greater attention by the government with the aim of ramping up tax revenues and reducing fiscal deficits. Efforts at achieving this often come with aggressive tax drive by tax authorities, which often disrupts business operations and puts organisations at disadvantage,” he added.
Onyenkpa also stressed that it is important for organisations to determine whether their tax departments are fit-for-purpose and can help minimise the risk of unknowingly under-paying taxes, which has attendant consequences; and at the same time help avoid over-payment of taxes.
The Partner, Tax, Regulatory and People Services, KPMG, Nike James said: “We sought to evaluate the extent to which companies appreciate the need to design strategies for managing and controlling taxes within their businesses. We equally appraised the impact of having strategies, which align with overall business objectives and how tax department’s activities support businesses in attaining their overall objective of increasing shareholder’s value.
“We noted that only 30per cent of respondents reported Tax as being strategic enough and noteworthy of discussion at board room level. Sample size is 60 per cent, which up the length and breadth of industries and companies both conglomerates, indigenous and multinationals. The information is a representative of real findings that happens in the industry.”
She explained that the survey was conducted by 60 companies which spread across financial services, consumer markets, energy, telecommunications, SMEs, multinationals conglomerate indigenous companies.
Source: Thisday Nigeria