The Senior Manager, Tax Services and Transfer Pricing, Ernst & Young (EY), Temitope Oni, has described the country- by- country reporting (CbCR) introduced in the Nigerian tax system as a game changer for the Federal Inland Revenue Service (FIRS).
Oni said this during a knowledge sharing session organised by EY in Lagos on Wednesday.
The CbCR regulations took effect from January 1, 2018, and forms part of the enhanced tax disclosure requirements set out by Action 13 of the Base Erosion and Profit Shifting (BEPS) project. The regulations aim at providing tax authorities with improved information to enable them better assess international tax avoidance risks.
Under the CbCR regulations, where the Ultimate Parent Entity (UPE) or a Constituent Entity (CE) of a Multinational Enterprise Group (MNE Group) is tax resident in Nigeria, such Nigerian resident entity will be required to file a Country-by-Country Report with FIRS for an accounting year where the Group has a total consolidated revenue of N160 billion or more in the immediate preceding accounting year.
Oni, while commenting on the reason behind the knowledge sharing session said: “We saw the need to have our clients come together and have a knowledge sharing session to share the best practise as to how this can be done. CbCR reporting is actually a development that came from BEPS action plan.
“BEPS is tax avoidance strategy that exploits gaps and mismatches in tax rules to artificially shift profits to low or no tax locations where there is little economic activity resulting in little or no overall corporate tax being paid.”
Speaking further, Oni said: “We have discovered that multinationals over the years have been shifting profit from high tax jurisdiction, to low tax jurisdiction and the reason is because they want to reduce their overall corporate tax rate and they have been relying on the tax laws to do that. There are loopholes in the tax laws, so what they have been doing was to exploit the gaps in the international tax laws to shift profit here and there.
“It’s a good thing and we are celebrating it. Taxpayers are also happy to get to know what is required of them because if you look at the penalty provisions in the regulations, they are quite huge.
“What they have done is to come together and address these loopholes once and for all, so that multinational enterprises would not shift profit from high tax jurisdiction to low tax jurisdiction anymore.”