Monthly Archives: February 2014

Corruption costs EU $162 billion yearly, report says

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The European Commission on Monday in Brussels unveiled the first anti-corruption report of the European Union, EU, saying corruption costs the European economy $162 billion (about N25.9 trillion) annually.

According to the report, corruption is still a challenge which affects all EU member-states despite initiatives taken against it in recent years. The results of the initiatives, however, are uneven.

The report showed that public procurement was particularly prone to corruption in the member-states, owing to deficient control mechanisms and risk management. It said some sectors, including urban development and construction, healthcare and tax administration, also seemed particularly vulnerable to corruption.

The EU Commissioner for Home Affairs, Cecilia Malmstrom, said in her reaction that corruption undermined citizens’ confidence in democratic institutions and the rule of law.

“It hurts the European economy and deprives states from much-needed tax revenue,” she said.

The commissioner said member-states had done a lot in recent years to fight corruption, but lamented that the report shows that it was far from enough. Ms. Malmstrom therefore urged EU member-states to follow proposals on counter-corruption listed in the report.

A Eurobarometer survey on the attitude of Europeans towards corruption published on Monday showed that 76 per cent of Europeans think that corruption is widespread; 56 per cent think that the level of corruption in their country had increased over the past three years; and eight per cent said they had experienced or witnessed a case of corruption in the past year.

SOURCE OF REPORT: http://premiumtimesng.com/news/foreign/154508-corruption-costs-eu-162-billion-yearly-report-says.html

GTBank expands into East African market with acquisition of 70 per cent stake in Fina Bank Group

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The Guaranty Trust Bank, GTBank, on Wednesday announced the acquisition of 70 per cent stake in one of Africa’s financial conglomerates, the Fina Bank Group.

The bank said that the acquisition, which would extend its investment frontiers beyond Kenya, Rwanda, Uganda and Nigeria, followed its successful securing of the regulatory approvals in the East African countries and Nigeria.

GTBank stated that the acquisition of shares in Fina Bank Group was through a combination of capital injection and equity acquisition worth 8.6 billion Kenya Shillings, a development that would result in the fusion of two organisations with expertise in banking.

The GTBank Group has a vast business outlay in Africa and the United Kingdom, with combined staff strength of more than 12,000 workers in Nigeria, Cote d’Ivoire, Gambia, Ghana, Liberia, Sierra Leone and the U.K.

The bank’s managing director, Segun Agbaje, said that the acquisition was a strategic investment for customers and shareholders. He said with Fina Bank’s enviable banking record in East Africa, their combined strengths with GTBank would help build an attractive portfolio of leading products, services and marketing capabilities.

“We can now deepen existing and future customer relationships with differentiated capabilities to exceed customer expectations and grow market share,” Mr. Agbaje said, pointing out that the merger would also provide the partners with an attractive foothold in Kenya, Rwanda, and Uganda.

Mr. Agbaje also said that the bank would, over the coming months, integrate the operations of the Fina Bank Group into the GTBank system, while assuring the customers that the partnership would not affect its operations and level of service delivery to them.

The Chairman of Fina Bank Group, Dhanu Chandariam, said that the bank was delighted to partner with GTBank, noting that the business combination was consummated because they shared a common philosophy on integrity, governance, and transparency.

Stamp Duties Tax in Nigeria

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The Stamp Duties Act requires that all written instruments, including instances where any property or interest in property is or are transferred or leased to any person, must be stamped.

Generally, Stamp Duties is charged at the rate of 75 kobo for every N200 of the consideration of certain real estate transactions like mortgages, while for conveyances or the transfer or sale of real property, the stamp duties rate is 75kobo for every N50. The Stamp Duties rate for lease and rental agreements is 16kobo for every N200 of the consideration of the lease or rental agreement.

Any written document that is not stamped is not allowed to be received in any judicial proceeding in Nigeria until the stamp duty and the resulting penalty for the non-payment of the stamp duty is paid.

The complex nature of collecting stamp duties as it relates to contract notes was once confused in the stock market with stockbrokers claiming that they are being threatened by the Federal Inland Revenue Service (FIRS) and Nigerian Postal Service (NIPOST). However, the controversial issues had since been resolved. For the purpose of clarification, the provisions in the Stamp Duty Act which prescribe that stamp duties on certain categories of documents such as agreements, contract notes among others, could be denoted by adhesive stamps is a demonstration of government concern for cost efficiency achievable through lower compliance cost and minimal cost of administration. This arrangement of convenience does not in itself imply the ceding of FIRS stamp duties collection responsibility to any agency. The responsibility for stamp duty collection is solely vested on FIRS. With specific reference to the collection of duties on contract notes, FIRS is to collect all stamp duties payable through the Commissioner of Stamp Duties, while NIPOST engages in the supplies of adhesive stamps where the duty payer excises the option to do so.

There are fines and other penalties for any failure to pay stamp duties on any written instrument that is not exempted from the payment of stamp duty.

Again in Lagos State, the flat Stamp Duty rate of 2% of the consideration of the property transaction is charged when applying for Governor’s consent to the transfer of any interest in a landed property.

 

MINIMUM TAX AND DORMANT COMPANIES

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According to the Federal Inland Revenue Service, Minimum Tax is justifiable on the premise that every asset generates income. The Minimum Tax regulations is therefore a anti- tax avoidance measure which is charged whether or not the affected company declares a profit, or the company was dormant during the relevant year of tax assessment.

Where a company is dormant, Minimum Tax is usually charged on the company’s net asset or on its share capital, whichever is higher of the two.

Many companies have closed businesses without liquidation or winding up and there are also companies that were registered and have remained dormant without the owners been aware that the dormancy of their companies attracts minimum tax and minimum corporate affairs commission compliance requirements.

The Companies Income Tax Act (as amended) provides that where in a year of assessment, the ascertainable profits of a company, from all sources, results in a loss or where the company’s ascertainable profits results in no tax been liable for payment, or where the tax payable is less than the statutory minimum tax allowable, such a company shall be liable to be charged and to pay a statutory minimum tax, which amount will be dependent on whether the company has a annual turnover of less than N500,000, or more than N500,000.

A company with an annual turnover of N500,000 or less, that has been carrying on business for at least four (4) years, is liable to charge to a Minimum Tax of any of the higher of the following sums:

(i)     0.50 per cent of the company’s gross profit; or
(ii)    0.50 per cent of the company’s net assets; or
(iii)   0.25 per cent of the company’s paid up share capital; or
(iv)   0.25 per cent of the turnover of the company for the relevant year of tax assessment.

Where however, the turnover of the company is more than N500,000, the minimum corporation tax payable shall be the higher of the above rates that is charged for companies with an annual turnover of N500,000 or less, plus 0.125 (or fifty per cent) on the excess of the turnover that is above
N500,000 will be charged as Minimum Tax.

Exemption from Minimum Tax Regulations

Companies that are involved in agricultural production or businesses, with companies that have not carried on business during the first four years of their incorporation, or companies that have at least twenty-five per cent imported equity capital fully paid for by a foreign company, are among the
exempted corporations to whom the minimum tax provisions stated above do not apply.

Capital Allowances and Minimum Tax

For each year of tax assessment in which Minimum Tax is payable, the capital allowance for that year shall be computed together with any unabsorbed allowances brought forward from the previous years, and these shall be deducted as far as possible from the assessable profits for therelevant financial year, and carried forward to the next financial year.

Dormant Companies and Minimum Tax

The general perception that dormant companies are not liable to pay any tax at all as they are not engaged in any trade or business is not correct. As a tax-avoidance measure, Minimum Tax is charged on the higher amounts of such a dormant company’s gross profit, or on its net assets, or
on its paid-up share capital, or on its turnover, at the rates stated above. The only exemptions to this rule are as also stated above.

To avoid penalties for non-compliance, owners of companies that are dormant for any reason, or are not making any profits, will do well to contact their Tax Advisers for compliance in order to avoid tax penalties that could compound the financial obligation of the company.