the Federal Internal Revenue Service (FIRS) called for better collaboration between countries to explore alternative rules that will enable market jurisdictions, especially African countries, to effectively tax digital businesses.
This was stated during a presentation by FIRS Executive Chairman Muhammad Nami last Friday during a technical assistance program organized by the African Tax Administrators Forum (ATAF) on the topic “ Members’ Needs and How to Expand Collaboration”, held in Lomé. , To go.
Mr. Nami noted that although some African countries have endorsed the comprehensive solution of the Organization for Economic Co-operation and Development (OECD) Inclusive Framework on the tax challenges of the digital economy, Nigeria continues to maintain its position according to which the outcome will not be favorable to Africans. countries.
According to him, “Nigeria continues to believe that the outcome will produce very minimal income comfort for African countries. This is instructive given the implementation challenges that developing jurisdictions will face due to the complexity of the Pilar 1 and 2 rules.”
The new OECD tax agreement defined in 2021 is based on two pillars. The first pillar says that if a company has an overall turnover of more than 20 billion euros and a profit margin of more than 10%, then 20 to 30% of the profits exceeding 10% of the revenues will be allocated to the jurisdictions of the market using a distribution key based on income.
The second pillar sets an overall minimum tax rate of (at least) 15%.
“Our analysis continues to show that the possible cost of administering and implementing the complex rules will far exceed the expected revenue from its implementation,” Nami said.
“I therefore urge the African Tax Administrators Forum to join the discussion of the United Nations Committee of Tax Experts, South Centre, as well as to collaborate with all other well-meaning stakeholders to explore alternative rules that will allow African countries to effectively subjugate digital businesses and base the erosion of payments on tax in our jurisdictions.
“These collaborations should extend to other internationally developed and implemented rules for the taxation of multinational enterprises, such as tax treaty, exchange of information and transfer pricing rules.” Mr. Nami said.
He further called on the African Tax Administrators Forum to collaborate with the United Nations Development Program (UNDP) to explore opportunities for Africa under the programme’s Tax for Sustainable Development Goals initiative, to ensure that African countries are able to generate significant revenues to finance sustainable development. Development goals.
While discussing the needs of the West Africa region that require technical assistance from ATAF, the FIRS President noted that there is a need to build the capacity of the members with regard to the base erosion and profit shifting actions by multinational corporations, as well as on taxation of the digital economy.
“It is crucial for ATAF’s technical assistance to seek to improve the tax administration capacity of member countries, through the digitization of operations. In addition, tax authorities in the West African region have a critical need to develop expertise in data analysis and use of research tools necessary for taxation in a modern economy. “, he underlined.
Mr. Nami further urged the African Tax Administrators Forum to organize peer-to-peer knowledge sharing sessions among beneficiaries of technical assistance programs, while stepping up its technical assistance on international tax rules, particularly in the areas tax treaties, transfer pricing, and exchange of information.
The Technical Assistance Program of the African Tax Administrators Forum (ATAF-TA) aims to assist members in building sustainable and effective tax systems while achieving its strategic plans to increase domestic resource mobilization, target the development of African expertise and support Africa’s effective voice in the international tax environment. .
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