ABUJA – Alhaji Kabir Mashi, Acting Executive Chairman, Federal Inland Revenue Service (FIRS), said it was technically difficult to measure Value Added Tax (VAT) in the financial service sector.
Mashi made the assertion at a seminar on VAT in Financial Service Sector, organised by the African Tax Administration Forum (ATAF) in Abuja.
Mashi, represented by Mr. Osy Chike, Coordinating Director, Modernisation Group, FIRS, said that tax treatment of financial services was the most debated both in economic theory and in applied tax policy.
According to him, it is not surprising that most countries exempt financial services from VAT due to the fact that it is technically difficult to measure the value added in financial services transactions.
Mashi said that the reason for the debate was the characteristics of financial services, which tended to allow the object of a financial transaction to undergo rapid changes over time.
Another reason, according to Mashi, is the strategic role that financial instruments play in facilitating the process of value delivery by counter parties in daily transactions.
“It is noteworthy to mention that the financial sector in most African countries is expanding rapidly and undergoing significant reforms.
“The reforms are improving service delivery and bringing on new financial products, services and intermediation architecture,” Mashi said.
He also expressed the hope that the seminar would discuss and share country experiences as well as making mutually helpful recommendations on the application of VAT in financial services in Africa.
He identified lending, deposit-taking, electronic banking, agency services, advisory and consultancy services, trading in shares, bonds and foreign exchange as areas of concern of ATAF.
Contributing, Mr Kennedy Onyonyi, Director, Institutional Development, ATAF, said that VAT was a very important aspect of tax.
He added that ATAF would give it due attention owing to its revenue generating potential.
Onyonyi said that was most problematic to measure VAT in international trade owing to its potential for double taxation.
He said that the forum would ensure some element of uniformity among African countries on VAT to enable them align their statutes with global standards.
Onyonyi said that the seminar was organised based on needs assessment on areas to address the needs of members of VAT in financial services.
He said that ATAF was committed to capacity building through various activities such as seminar as well as technical events on tax treaties and excise duties in the continent.
“We are facilitating capacity building to help our members carry out tax administrative reforms that would be beneficial to them,” he said.
Source: Nigerian Observer News