A tax and audit expert, Mr. Albert Folorunsho, has said most of the people who run away from tax obligations have no reason to do so if they keep proper records of their operations.
Folorunsho, who is the Managing Consultant of Pedabo, expressed this view at the Meristem private breakfast session with the theme: “Conversation You Do Not Want to Have”, in Lagos at the weekend.
He said: “We don’t keep record and that is why we keep running from tax people instead of us asking for refunds.”
The tax expert argued that if taxpayers arranged their transactions to take advantage of all the loopholes by avoiding taxes, they had not done anything wrong in the eyes of the law.
While noting that tax was a compulsory levy imposed by law and a civic responsibility, he said the vehicle for paying taxes were vital.
He said: “Do you operate as a sole proprietor, as a partner, incorporation? You must analyse the tax implication before you venture into any of the transactions.
“You can collapse your several joint companies into one to reduce statutory obligations like NSITF, ITF, all of these companies have obligations.”
Elaborating further on the importance of selecting the vehicle for transaction, he said, “I have someone that for every small transaction he opens a new company, like XYZ limited. He likes limited. Every time you put limited, you are looking for trouble. It is 32 per cent as against 19 per cent effective rate of tax.
“If you have all your receipts in XYZ limited, and the dividend has already suffered tax. If you put same in fixed deposit and you earn interest, it is exposed to tax. It will be liable to income tax at 30 per cent, plus education tax at two per cent. There is now a new policy liability of 0.05 per cent.
“So, it is important what name you use to fix the money. If you put it in your personal name and you earn interest, withholding tax at 10 per cent will be deducted and that is final, you can go ahead and spend your money the way you like.”
He added that individuals and corporates must take taxes very seriously because they could lead to “reputation damage, distortion in your business operation, denial of government services and distortion in your cash flow planning.”
