A recent PwC Nigeria survey has revealed that 47 per cent of tax functions in Nigeria’s Financial Services (FS) Sector, either do not have a tax strategy, or they are not aware of one.
While speaking on the insights from the survey, Kenneth Erikume, Partner, Tax Reporting & Strategy, PwC Nigeria, noted that: “Organisations are currently operating in highly dynamic local and global tax environments.
“Locally, we are seeing an aggressive drive from tax authorities to shore-up state and federal government’s revenue generation goals.
“This places greater responsibility on the tax function, like never before. It also constrains the tax function, often reducing it to a compliance-focused unit, rather than a potential strategic partner helping to achieve corporate vision, and to execute business strategy.”
The majority of organisations surveyed, especially in the banking sector, either had a fully-fledged tax function, or were in the process of creating one to be staffed with a minimum of five employees.
The report advised organisations going through the journey of creating a fully-fledged tax function, to consider how they can be optimised.
This, according to the report will involve identifying possible processes that could be outsourced or insourced.
“Reorganising the tax function around tasks that refocus the energy of employees towards more strategic processes, would define a successful tax function.
“Tax as a function should have a documented strategy that aligns with the overall business strategy,” it said.
Erikume said: “It isn’t unusual that transaction taxes such as Withholding Tax (WHT) and Value Added Tax (VAT) are high up the list of taxes with a greater probability of leading to additional tax liabilities, or significant exposure to tax audits.
“This is because Nigeria’s Financial Services Industry is characterised by high volume of transactions, multiple locations, and is prone to tax risks with manual tax processes.”
Another notable finding from the survey is that there is low technology adoption for tax compliance in Nigeria’s Financial Services Industry.
“In spite of widespread technology adoption in managing several aspects of operations in the industry, technology is yet to be leveraged in managing taxes.
“Only in managing payroll has technology been widely adopted for tax compliance,” report stated.
The respondents to the survey were senior level executives from various sub-sectors in Nigeria’s FS Industry.
The survey polled the major industry players in financial services, including banking, insurance, and pension fund custodians.
Executive directors and Chief Finance officers combined, made up 60 per cent of the respondents while other respondents included Tax Managers and Financial Controllers at 33 per cent and 7 per cent respectively.
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