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Home Business News

Nigerian Companies will soon start contributing to the Police Trust Fund 

Emmanuel Abara BensonbyEmmanuel Abara Benson
3 years ago
in Business News, Company News
Nigerian Companies will soon start contributing to the Police Trust Fund, Police Reforms, FG tasks expert and host institutions on Police Reforms, calls for membership of sub-technical committee on police reform.
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Companies operating within the shores of Nigeria will soon have an extra cost to worry about, no thanks to the Nigerian Police Trust Fund Act which President Muhammadu Buhari recently signed into law. Now, PwC Nigeria is expressing mixed reactions to the development. 

What you should know: The Nigerian Police Trust Fund Act specifies the imposition of a 0.005% levy on every Nigerian company’s net profit. Also, 0.5% of the total revenue accruing to Nigeria’s Federation Account will be added to the fund. The aim here is akin to every other trust fund there is, in that the assets accumulated will be held in trust and used for the purposes of training police personnel and procurement of needful police equipment. 

The fund will have a duration of six years, during which time a Board will be constituted and charged with the responsibility of overseeing it. Specifically, the responsibilities of the board will include:  

  • Administering the fund 
  • Deciding on viable investment options, etc 

Note that at the end of the six-year period, the fund (along with its assets and liabilities), will be transferred to the Nigeria Police Force.  

PwC’s issues with this:  While acknowledging that funding the Nigeria Police Force for optimal efficiency and security of Nigerians is an important thing to do, professional services firm – PwC Nigeria – also noted that the development entails additional costs for companies. Moreover, the law does not make any provision for tax deductibility on the part of companies paying into the Police Trust Fund, even though it clearly specifies that all the money going in there will be tax-exempt. 

[READ: A guide to how Mutual Funds work in Nigeria]

“0.005% levy (N5 per N100,000) of net profits may not be very significant, but it places additional administration on corporate taxpayers... Although funding of the police and improving security is a priority issue, it could be funded through more allocations from already existing revenue streams. Introducing earmarked taxes could create concerns around the stability of the tax regime in Nigeria.  

“The Act specifies that the Fund’s income is tax-exempt but does not make provision for tax deductibility for the companies making the payments.” 

PwC went further to make other observations, including the fact that the Police Trust Fund Act ought to be classified as an “income tax” instead of a “levy”. This is because it is imposed on income/profits.  

Nigerian Police Trust Fund Act

Also, the Act does not exactly specify the provisions for the collection and administration of the funds, according to PwC. The professional services firm is, therefore, recommending that this be made clear. According to PwC, the Federal Inland Revenue Service could be charged with the responsibility of administering the fund because any other option would increase the cost of administering it. 

“We envisage that any regulation or guidelines to be issued under the new law will spell out details regarding commencement and administration.” 

[READ: Nigeria’s Asset to GDP Ratio Is low despite a rise in Mutual Fund value]

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Tags: Nigerian Police Trust Fund ActPwC Nigeria

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