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Financial Literacy

FIRS could seal your office if you get these two notices

FIRS has made it clear to businesses in Nigeria that it is serious about tackling tax evasion.

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FIRS could seal your office if you get these two notices

The Federal Inland Revenue Service (FIRS) has made it clear to businesses in Nigeria that it is serious about tackling tax evasion. Once the Chairman of the FIRS, Tunde Fowler, took over at the helm of the agency, he promised to increase tax collection as a percentage of Gross Domestic Product.

Mr. Fowler was notably successful in increasing tax collection in Lagos state throughout the period that he headed the Lagos State Internal Revenue Service (LIRS). For those who do not know how he operates, his foot soldiers are very aggressive with tax collection and do not hesitate to seal off companies that do not pay tax.

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Some of his methods are said to be high-handed and often detrimental to small businesses but they have largely worked, as Lagos state leads other states in terms of internally generated revenue. The state’s IGR has grown from about N149 billion in 2010 to about N268 billion in 2015. Mr. Fowler obviously set out to replicate some of the methods he used in driving IGR collection in Lagos state at the federal level.

Relying on some of the news reports we have gathered and experiences of some of the affected companies, we now fairly understand what they do before they seal off any organization.

  1. They give you an assessment of what you owe: Before the tax authorities seal off your premises, they first send you a tax assessment of what you owe. Tax assessments can be done in two ways. It’s either they assess your tax liabilities after obtaining your financial records, or they pass a Best of Judgement Assessment (BOJ). A BOJ is an assessment done without relying or partly relying on your financial records. Once an assessment is done, they send a letter to your registered address or the most visible location of your offices. The FIRS often gives a period of two weeks or less for response.
  2. They send you a demand notice: If after sending you a notice of assessment for how much tax you likely owe, you do not respond, they send you a demand notice. A demand notice can also be sent if negotiations break down between you and the tax authority. A demand notice is basically a letter of demand that you pay tax to the FIRS. The demand notice will include the estimated tax liabilities computed against your company, as well as any penalty or charges that may have accrued due to your inability to pay your tax within the required period. A demand notice, in some cases, has a one-month period for the tax payer to respond to it.
  3. Seal off offices: After the stipulated period in demand notice has elapsed and no agreement has been reached, the tax authority will get their enforcement unit to seal off your office premises. We have seen instances where the enforcement unit actually sealed off offices even when negotiations were ongoing. The order to seal off offices often comes from the FIRS HQ, which makes it difficult for the local offices to reverse.

We often advise startups or companies to try to pay up a part of what they feel is their tax liability once an assessment notice is received. After making payments, follow-up with self instigated meetings with the Inland Revenue. We also advise that you go with a qualified and experienced tax consultant.

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This article was first published on Nairametrics on July 3 2016.

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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Billionaire Watch

Want to be like Warren Buffet, Michael Phelps? Here are their secrets

The distinctiveness among Buffet, Dangote, Ovia, Phelps, Bolt, Musk, is not what they do, but how they do it and how often they do it.

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Warren Buffett

Michael Phelps won 22 Olympic medals (18 gold), how did he do it? Well, he trained and trained and trained, then he ate and ate and ate every day. He was also blessed with natural attributes i.e., he was tall.

So, wait, if I am tall and eat, and train, I can also win 18 gold medals? No! but stay with me.

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Warren Buffet likes to invest. He reads research reports, likes numbers and is always looking a discount deal on great stocks. Ok. So, if I am good with numbers, research buy great stocks I will become as rich as Warren Buffet? Well, maybe not as rich but you will earn more from your investments. The distinctiveness among Phelps, Bolt, Buffet, Musk, Dangote, and Ovia, is not what they do, but how they do it and how often they do it.

READ ALSO: Investing in Cryptocurrencies during this economic shutdown; here’s your need to know

Let’s look at an Olympic swimmer like Michael Phelps. When Michael was eight, he wrote out his goals; he wrote, “I would like to make the Olympics,” then listed his time goals for the various races i.e. breaststroke, freestyle etc. At the age of eight, this future Olympian had visualized his goals, written them down, and put a date for accomplishing them.

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When seeking to create a financial plan, it is impossible to achieve success without visualizing out a goal on paper. Imagine creating an investment plan without any idea of a retirement date or income or rates of return. It’s impossible without a clear road map to determine how much to save and invest for five years. During his teenage years, he trained “every single day, 365 days a year, Sundays, Christmas and Thanksgiving days included… and twice on his birthdays,” says his coach, Bob Bowman.

If an investor saved N1.00 every day for 5 years at 0%, that saver would have N1,826.00 What if those savings increased to N5.00 and were invested at just 5% annually? Then the savings pot will become N10,373.04. Yes, inflation will erode the value after 5 years, but applying a 13% inflation rate, the saver still has a real saving of N5,170.14.

READ MORE: Top 10 risks Nigerian businesses will face in 2020/2021 – Report 

So, the second lesson we take from Olympic champions is to start early, save, and then invest constantly. Micheal Phelps is a swimmer, a sport for endurance and speed. What do endurance athletes like swimmers and marathon runners eat? Food rich in carbohydrates; they need the carbs to fuel the massive amount of energy they expend during their sports. Phelps, for instance, for breakfast eats as many as 12,000 calories prior to his races. His breakfast consists of “three fried-egg sandwiches, three chocolate chip pancakes, a five-egg omelette, three sugar-coated slices of French toast, and a bowl of grits.”

What does a sprinter like Bolt eat? Not calories but lean protein, eggs, meat, fish, dairy. Protein allows muscles to recover and develop after sprinting, which causes minute damages to muscle fibres that can be easily converted to energy. So, two different Olympic champions, each multiple gold medal winners, but because of their different sports, they eat very differently to achieve a different objective.

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Similarly, in investing, each investor is different, bond investors have instruments that have 30-year durations as opposed to stock traders who may be looking to buy and flip a stock in hours. What is key is to invest according to a stated objective and risk profile.

Patricia

Where the investor has a longer endurance factor to risk, meaning the investor can accommodate volatility in his earning, that investor will be comfortable investing on equities. Equities are higher-risk investments and can lose all invested capital but can also gain 100%.

However, where the investor has a lower risk endurance, then the investor will fill his plate with lean risk asset classes like sovereign bonds which offer lower volatility to stock and deliver a fixed return, but suffer if interest rates rise.

Thus, our third lesson from the Olympians, the food each investor eats, is a function of his individual sport. Where the investors have lower risk, his asset allocation diet is different. Each investor must tailor his asset allocation to his objectives and investment goals.

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Investment Tips

Proxy Voting: Making Your Voice Heard Inspite of COVID-19

Proxy voting is a process where one person chooses another to represent him or her in casting a vote on his or her behalf.

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Proxy Voting: Making Your Voice Heard Inspite of COVID 19

One of the privileges of owning shares in a company is the ability to attend the shareholders’ meetings and vote on important issues about the company. In most cases, such issues touch on dividend declaration, election and/or reelection of directors, authorization to fix independent auditors’ remunerations, and the election of members of the audit committee, among others.

It has been observed that shareholders love to attend such annual general meetings in person for the pride of place it provides, as well as the social status it bequeaths to the attendees in addition to the souvenirs they receive during such meetings.

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Unfortunately, that era of a social event involving the physical gathering of shareholders seems to be going extinct, thanks to COVID-19.  However, in spite of the devastating effects of COVID-19, and the changes it is bringing to our social life, shareholders can still make their voices heard during non-physical shareholders’ or annual general meetings. This they can do using proxy votes.

What is Proxy Voting: Proxy voting is a process where one person chooses another to represent him or her in casting a vote on his or her behalf. Proxy voting has not been more important than in the present COVID-19 times. In reaction to the pandemic, proxy voting is being used in areas outside corporate governance. For example, the US House of Representatives is pushing for proxy voting as a means of getting things done in the house. In a proposal released by the House Speaker, Nancy Pelosi, US lawmakers would be allowed to cast votes for their colleagues who are not in the Capitol in person. That underscores the advantage and the increasing importance of proxy voting.

Nigerian Companies and Proxy Votes:  Proxy voting is not new in Nigeria, especially among Nigerian companies. Whether it has been effectively used or taken advantage of is another question. However, Nigeria’s Corporate Affairs Commission (CAC) has been proactive and forthright in its quest to ensure that companies in Nigeria and Nigerian shareholders alike, take advantage of the proxy voting process in keeping with the social distancing rules put in place by various governments to curb the menacing COVID-19. The CAC has therefore asked companies to take advantage of “S.230 CAMA on the use of proxies in holding their Annual General Meetings.”

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(READ MORE: IMF, World Bank to hold virtual meetings over Coronavirus epidemic)

In line with the availability of the proxy voting process as a way to give every shareholder a voice and the encouragement and enablement from the CAC, many companies in Nigeria are complying with the advice. A visit to the website of the Nigeria Stock Exchange indicates that all the 30 companies that notified the public about their annual general meetings via the Nigeria Stock Exchange, since April 1, 2020, included notices or indications of the need for proxy votes in such notifications. Many of them even included links to live-stream the events, for those who would like to participate online.

Proxy Voting: Making Your Voice Heard Inspite of COVID 19

Brace for Change: There is no doubt that COVID-19 has changed and will continue to change the way certain things are done. From the look of things, proxy voting may become the new normal in corporate governance and conduct of shareholders Annual General Meetings.

Shareholders, big and small, should start getting used to voting by proxy, especially those who have not been doing so in the past. It is only by so doing that you will make your voice heard, in the affairs of the company in which you have worked so hard to invest in.

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Patricia
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Financial Literacy

7 common money mistakes I made and why you should avoid them

Don’t plan your wedding with the hope that your uncle will foot the bill. It is setting yourself up for frustration. Uncle also has his money issues that you have no clue about.

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On Sunday, March 17th, 2020, Nairametrics Founder, Ugodre Obi-Chukwu, tweeted a question that has over time garnered more than seven hundred interesting responses. His question was about debt and it was straight to the point —”What was the most amount you lent out to someone and never got paid back?”

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As you can expect with this type of question, the responses were varied and highly personal. The Twitter thread also proved one thing, and that is the fact that banks are not alone when it comes to bad debts. One of those whose responses stood out for this author is Gabriel Omin, a personal finance enthusiast. Interestingly, Mr Omin had earlier written extensively about the 7 money mistakes he made in the past, and lending is atop his list. See below.

Never Ever Lend Money Kept In Your Custody.

There is a reason you were chosen to keep the money. People do not joke with their money and so they carefully choose who keeps corporate funds. Even thieves chose trusted people to keep their money.

When you betray the trust of people for whatsoever reason, you’ve soiled your name. You will lose social capital, which is a very important capital (this is one of those, not everything that counts that can be counted). That is very hard to undo. Whatsoever happened, it’ll be hard for people to forget. My dad will not touch the original money that is given to him to keep. If you numbered your money, you will get it back the same way. Basically, you will get the same notes you gave him to keep except he took the money to the bank.

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I learned this the hard way. A friend of a friend came with a need. He told me he had funds in the bank but it did not clear and the next day was a public holiday (this was pre-online banking). I loaned him money that someone gave me to keep. The person who gave me the money to keep, trusted me to the extent that he refused to sign a contract with me because he trusted me. I was supposed to get the money on the next working day, from the friend of a friend. Till today the next working day nefa reach. I had to go to the guy who gave me the money to keep for him, spoke a lot of English and paid back though I missed the day we earlier agreed. It was sad but I learned the hard way.

READ ALSO: COVID-19: What businesses must do to mitigate crisis

Avoid Impulse & Unplanned Expenses.

No budget, no spend. Spending without a budget is misappropriation. It doesn’t apply only to politicians. Have a budget & stay on it. This is the epitome of discipline. People will say what they want to say but instilling financial discipline is more important. A budget creates boundaries. Without a budget, you are on the speed lane to debt and debt…s/he is cruel. Plan plan plan. There might be surprises but a plan keeps you in order. It helps you know where you have detoured. You must not buy every AsoEbi. ATM cards are sweet to swipe but hard on the balance.

One of the ways to avoid impulse buying is to hold cash. Yes. It sounds not- so-tech in a tech age but believes me it works. When the cash is finished, it is finished. Sitting down in one place also helps. Yes o. The more the outing, the more the expense. I can feel the envy I am generating with this but na so e bi.

The Money Will Come.

You are old enough now to know that the money will not always come. Things happen. Have a buffer for emergencies. The difference between politicians & business people is that politicians do not understand why the money should not come. Business people work for money. They know that you have to make it happen. Stop planning your expense based on the generosity of strangers.

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Patricia

Spending Based On Other People’s Purse.

Don’t plan your wedding with the hope that your uncle will foot the bill. It is setting yourself up for frustration. Uncle also has his money issues that you have no clue about. Don’t plan to fly business class with the hope that someone else will pay. You are not on welfare. Even if you are on welfare, please bring something to the table. That something is humility.

Responsible people spend within their means. They may not have Rolexes or iPhones but they hardly ask for help on predictable things like house rent, school fees, etc. It takes 9 months to have a baby. It is not an emergency; plan for it. I take God beg you; plan.

READ ALSO: COVID-19: The ‘New Normal’ for Nigerian aviation industry

Your kids should be in schools that you can afford. People have come to me for fees of school that my kids cannot even attend. I once headed a scholarship board and we set our requirements from day one. But parents kept coming for help in schools that they cannot afford. I mean households that both parents were not earning any income. You see what I mean by the fact that you have to contribute humility when you come to the welfare board?

Don’t buy with the hope that someone else will pick the bill. Try and agree upfront for a joint transaction. For the fact that someone paid upfront might mean that s/he expects repayment. Don’t think s/he is wicked when repayment is expected and asked for. In joint transactions, always think of going Dutch except you are advised otherwise. Err on the side of caution.

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Spending Money Before It Gets To You.

Things happen. Until money enters your account, don’t go & pick something with the hope that you will pay when you get the money. That habit will lead you into the red. How about if that money does not come at the end of the day? I try not to make promises to people based on expected money. I see people start piling up debt just because they got a new job. It will distort your balance sheet if you start that way. It never ends well.

Money Sent Me On Errand.

I have seen people who were given a raise, upgrade their lifestyle in a heartbeat. Fly business class by the next day. Buy an expensive toy they never planned for. This is what happens to lottery winners. They pursue the appearance of wealth. The appearance of wealth is demonstrated when you get those things that make it look like you’ve arrived. It is the reason people take pictures sitting on cars; same reason musicians record videos in mansions and nice cars and private jets. Gang stars wear fur coats. Same when people buy TV/stereo set/gadgets with their first salary. Always allow the money to cool down. Take out time to plan what to do afterward. I have a one month rule for windfalls. They stay in the account until such a time that I have decided the way forward.

Depending on the Generosity of Strangers.

This is living life with the hope that somehow someone else will show up in the nick of time to pick your bills. It leads to living in debt and hoping that those you are indebted to will forget the money. These people can come to you with their family to thank you for the debt forgiveness you have rendered them. Meanwhile, you have said nothing of such. They always convert their debt into forgiven loans by themselves without your consent. They are experts at this. They quarrel and get contentious if you do not forgive. Money problems abound.

So, next time you think of doing any of these, have a rethink.

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