Cablegate: Nigeria to Honor Historical Tax Waivers

DE RUEHOS #0743 3190758
R 150758Z NOV 07



Sensitive But Unclassified--Handle Accordingly; SIPDIS

E.O. 12958: N/A

1. (U) Summary: The tax reforms begun under the previous
administration will be continued, according to the head of Nigeria's
Federal Inland Revenue Service (FIRS). The government will stand by
its commitments on historical tax waivers but will not grant new
ones. The increase from 5 to 10 percent Value Added Tax will be
accompanied by a reduction in income taxes. End summary.

2. (U) Ms. Ifueko Omoigui, Chairman of Nigeria's Federal Inland
Revenue Service (FIRS), told executives of U.S. companies at an
American Business Council (ABC) meeting on October 31 that tax
reforms begun by the previous administration would be sustained. The
reforms, created with private sector input, seek to streamline
taxes, diversify the country's revenue base, and reduce the tax
burden on the people. Indirect, rather than direct, forms of
taxation would ease tax administration, she said. Omoigui said FIRS
collects only about 50-60 percent of the amount of tax owed by
corporations, but even less, only about five percent, of the amount
owed by individuals.

3. (U) Omoigui said the GON would not grant new tax waivers, but
historical tax waivers would remain in force. This, she said, was to
assure investors of the GON's resolve not to renege arbitrarily on
its previous agreements. ABC members noted Nigerian Customs
officials at the ports have failed to abide by the provisions of
historical waivers, suggesting they were not properly briefed.
Omoigui responded that FIRS would address this issue.

4. (U) However, Omoigui admitted Nigerians misunderstand the reforms
and see them as a burden, particularly the proposed Value Added Tax
(VAT) increase from 5 percent to 10 percent. The local press has
misinformed the public, she said, by omitting the fact that the
proposal to increase the VAT also proposes to reduce personal and
company income taxes. The FIRS also proposed a revised zero-VAT
items schedule and correction of all VAT ambiguities, but this has
also been downplayed by the press and gone unnoticed by the public.
The omission, she said, has reduced people's willingness to consider
indirect taxation and the VAT increase on the merits. However, the
FIRS is committed to going ahead with the reform by sensitizing
stakeholders in all six geopolitical zones and the business
community, particularly in Lagos. Omoigui urged the ABC to present
to FIRS all tax-related issues encountered in their sectors so that
they could be addressed.

5. (U) On the ills of multiple taxation, Omoigui said the FIRS can
only advise the states and local governments through the Joint Tax
Board (JTB). Omoigui, who is also the JTB chair, said federal level
efforts to reduce multiple-taxation are ongoing. She also said four
banks had been appointed to receive all of the FIRS's daily
collections from 20 other banks, which will make reconciling
accounts easier.

6. (SBU) Comment: The new government's commitment to tax reform, its
pledge to honor prior tax waivers, and the suspension of new waivers
are commendable steps towards rationalizing Nigeria's tax system.
However, the GON will face a huge public relations task in
convincing the public to accept tax reform. The local press has not
made this any easier, and the glaring evidence of misappropriation
of public funds at every level of government mitigate the average
Nigerian's desire to pay any, let alone more, tax. End comment.


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