The Federal Inland Revenue Service (FIRS) and the global financial consultancy firm, KPMG have reiterated their commitment to transparent audit process of transfer pricing.
Speaking during a breakfast meeting with stakehokders in the taxation industry, the Head, International Taxation Division, FIRS, Mr M.O Gbonjubola, it is the prerogative of the tax authority to ensure that citizens pay their taxes.
According to him, “audit exercise in Nigeria is prerogative of the tax authority so much so that tax authority has a moral and social duty to ensure that every tax payer contributes, this means that tax audit in Nigeria is both a legal right and moral duty of the tax authority.
“What does the law expect from tax payers? Documentation remains an important issue and one of the reasons why transfer pricing audit drags for too long is because a lot of time the documentation we have are not well prepared, many times we have to check back at what happened two years ago. And usually in making up a story, some loose ends are left which the tax authority will pick up and see some inconsistencies. Reg 6(9) was clear on the duty of the tax payer which states that a tax payer must have adequate documentation.”
Furthermore, “A lot of tax education is going on in a bid to enlighten tax payers in Nigeria and we are working with international organizations to sharpen our skills. Before the end of this year, we will come up with new Transfer pricing regulation because we are currently drafting new CDCR regulations. We will continue to build our capacity to serve tax payers better and those without proper documentation will be sanctioned,” he said.
On his part, Partner and Head, Global transfer pricing services, KPMG, U.S.A, Sean Foley, stated that “One of the things that tax authorities don’t understand is that the arm’s length which is the standard we apply is that companies sometimes need money. So what a company needs to do in presenting the best transfer pricing audit and to ensure it is correct and it has robust documentation including detailed and evasive risk assessment that is validation of the disclosure made to the tax authorities.
“Information needed for transfer pricing should be about the business itself in areas of risk profile, how it is making money and factors that provide value to customers. When the tax authorities come knocking, and this information is recorded and presented, there won’t be need for rooted and deep investigation by tax authorities as they already have this information.”
He concluded that business activities can also be structured in parallel with bi-lateral tax treaties so as to allow access to Mutual Agreement procedure (MAP).
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