Chairman of ELAN, Mr. Kehinde Lawanson
The Equipment Leasing Association of Nigeria (ELAN) has concluded arrangements for a one-day business forum for the discussion of pertinent issues on taxation as they affect the business of leasing in the country.
The forum, scheduled to hold Tuesday in Lagos, is expected to have the Executive Chairman of Federal Inland Revenue Services (FIRS) as the lead Guest Speaker.
Speaking on the forum for stakeholders in the industry, the Chairman of ELAN, Mr. Kehinde Lawanson, told journalists in Lagos that despite the emerging nature of leasing, it had impacted positively on the nation’s economy.
“Today, the effects of leasing is becoming glaring in major sectors of the economy, ranging from oil and gas, manufacturing, telecommunications to transportation. The sophistication of the lease market has greatly increased together with the number of players,” Lawanson said.
Notwithstanding the usefulness of leasing as an efficient tool for capital formation, Lawanson noted that the sector was still struggling for relevance among competing financing options in the country.
According to him, the current state of the leasing industry cannot effectively support the provision of the capital assets envisaged for enhancing the productive capacity of the economy.
“This development can be traced mainly to the regulatory environment. The present regulatory structure is inadequate to cater for the full realisation of the potential of the leasing industry,” he said.
Lawanson pointed out that one of the major issues currently at stake was in the area of taxation, where government polices appear not to be favourable to the development of leasing. He explained that some of these policies were impacting negatively on the business of leasing.
For instance, the reversal of the right to claim capital allowance in favour of the lessees in finance leases hitherto claimed by the lessors has remained a source of disincentive to the industry.
He said that in some countries like Denmark, France, Italy, Kenya, Uganda and Egypt, have clearly distinguished between accounting and taxation in the bid to develop leasing. “In these countries tax calculations are based on prescribed rules and not on accounting standards, thus allowing the Lessor to claim tax benefits in both finance and operating leases.
“In effect the Lessor can pass on some of these benefits to the lessee through reduced rental and attract more players into the leasing market, leading to more investment in revenue- producing equipment, thus increasing the GDP, employment and even the tax base,” he said.
Speaking on Value Added Tax (VAT) on leases, Lawanson said it amounted to double taxation as VAT had been paid at the time of purchase, thus making lease transaction to be more expensive than it would ordinary be.
He noted the significant role leasing can play in capital formation and asset acquisition, especially in the development of micro, small and medium scale enterprises considered to be the engine of growth for any economy, creating favourable tax regime for the industry will invariably lead to increase in collectible taxes through the consequential rise in business activities.
ELAN was established in 1983 with the primary objective of promoting the business of equipment leasing in Nigeria. And membership of the association consists of banks, finance houses, independent leasing companies as well as professional firms and individuals.
It is today the chief promoter of leasing in the country with its functional lease education and training scheme, awareness programmes and liaison with all relevant government authorities. The Association remains committed to the development of a proactive and enhanced leasing industry that would provide integral support to national economic growth.