The enforcement of Transfer Pricing (TP) regulations in the Nigeria will provide the country the means to reduce fiscal deficits through collection of transfer pricing adjustments and taxes.
TP regulation, which became effective in the country since August 2, 2012, refers to the setting, analysis, documentation, and adjustment of charges made between related parties for goods, services, or use of property (including intangible property).
Partner and Transfer Pricing Leaders, KPMG, Ms. Teresa Quinones, stated this while speaking on ‘Transfer Pricing: Concepts, Issues and Challenges,’ at a TP breakfast seminar organised by KPMG in Lagos.
According to her, in most emerging markets in Africa, a lot of tax authorities have been giving attention to TP since last decade. “This is not surprising if we consider the astronomical growth in the amount of cross-border transactions in the continent. Business expansion into Africa can be seen in the volume of exports out of Africa, surpassed only by those from Asia,” she added.
A report by KPMG also showed that economists had predicted that the pace of growth in Africa would overtake Europe, the Middle East and North America. It further stated already, a lot of African countries have implemented TP rules which allow tax authorities to adjust prices of related-party transactions. It listed some of these African countries to include South Africa, Kenya, Uganda, Egypt, Ghana, Benin and Zambia.
“TP allows government to raise much-needed revenue, especially for infrastructure development and improvement,” it added.
On his part, Director, Large Taxpayers Department, Federal Inland Revenue Service (FIRS), Mr. Ajayi Julius Bamidele, explained that the rules on TP were adopted to support the Federal Government’s Vision 20:2020 targets.
“Out of $100 that goes out of Nigeria, what can be attributed to corruption is less than 30 per cent, TP accounts for close to 50 per cent, which means Nigeria has a lot to do as regards to TP. For FIRS to ensure that there is a level playing field there is a need to make the law very clear,” he explained.