By Tony Obiechina, Abuja
Secretary to the Government of the Federation (SGF), Boss Mustapha, Minister of Finance, Budget and National Planning, Mrs Zainab Shamsuna Ahmed, Executive Chairman, Federal Inland Revenue Service (FIRS), Muhammad Nami, and tax experts have advocated a paradigm shift on tax administration to overcome challenges of taxation in a digitalised economy.
Speaking Monday in Abuja, during the opening ceremony of the 42nd Technical Conference of the Commonwealth Association of Tax Administrators (CATA), the Minister of Finance, Budget and Planning, Mrs Zainab Shamsuna Ahmed, said that, since businesses are evolving from physical presence to virtual place, tax administrations must also shift gear unto the virtual realm.
She said: “Over the past few years, our government committed huge monetary and human resources to champion the cause of developing countries. It is important for CATA and similar organisations to blend their voices with ours to insist that skewed international tax rules be straightened for the good of all.
“The theme of this year’s conference, “Tax Administration in a Digital Era”, is very apt and timely considering that the business world had moved away from the “brick and mortal” model unto the fast-paced, globalised and digitalised model. Certainly, tax administrative processes must keep pace with changes in the business world. An African adage says “where the hunter has learnt to shoot without missing, the birds that would avoid the hunter’s soup-pot must learn to fly without perching”.
“Since businesses are evolving from physical presence to virtual place, tax administrations must also shift gear unto the virtual realm. I am hoping that this conference will discuss and recommend solutions to some issues, such as digitalisation of tax administration. It is a fact that the tax administrations of most developing countries are based on manual processes. In these tax administrations, ICT function is limited to provision of hardware and basic software in support capacity. Whereas, automation, large data, artificial intelligence and machine learning capabilities is central to effective tax administration. Such capabilities will enable tax authorities to do e-invoicing, pre-populate tax returns, carry out automated tax risk profiling, etc.”
“There are many new things emerging in the field of taxation; particularly, taxation of multinationals. Tax administrations must continually upscale the skills of their employees so that they can effectively and efficiently handle emerging tax issues. As such, tax officers must be trained and retrained on tax technicalities (including the new international tax rules) and the social effects of taxation.
“An emerging trend occasioned by the digital era is remote-working (an individual resident in one country working remotely for an entity resident in another country). The fire of remote-working was given vent to by the lockdowns of COVID-19. This is raising many questions such as tax residency, employment tax, tax nexus for the company and possibility of other local taxes.
“The digital era is quite exciting considering the possibilities – exotic products, efficiency, remote-working, etc. However, in them are embedded the tax challenges e.g. problems associated with identifying, tracking and accessing taxable transactions, income or persons. Extant rules are based on physical presence, which render them inapplicable in the digital era.”
Also speaking, the president of CATA, Mr Muhammad Nami, who is also the Executive Chairman of FIRS, said that the conference brought together tax administrators, practitioners and the whole of global tax fraternity to proffer solutions to contemporary tax issues.
He said that, in order to assist members in engaging actively in the ongoing discourse around digital economy taxation, CATA partnered with a number of regional tax organisations to organise consultative meetings/workshops facilitated by the Organization for Economic Cooperation and Development (OECD).
He said: “In recent times, there has been an upsurge of disruptive technological innovations in the business environment. These have triggered peculiar issues that tax authorities are grappling with. The business world is in a state of flux; while the character of data and its management keeps changing. Consequently, tax administrators are under compulsion to align their mandates with the changes arising from technological advancements.
“In matching the pace of advancement in technology, tax administrators must remain bound by the laws, regulations and codes that safeguard the sourcing, storage, processing and management of data. In diverse ways, all members of CATA have to deal with the challenges that transformational technology has brought to the commercial space and stay ahead of the conversation.”