Lagos State will be losing about N30 billion annually, as Nigeria Liquified Natural Gas Limited (NLNG) relocates its head office from Lagos to Port Harcourt in the next 40 days, in what observers and oil and gas industry players describe as a major economic relocation in the last ten years. This amount becomes real when the tax revenue that will flow from Lagos State to Ogun State under a new tax payment arrangement being fashioned out by the two states comes under full implementation soon.
BusinessWorld can reveal that NLNG was crowned the best tax-paying corporate body in Lagos State this year as it topped the tax revenue chart of the state among all the big companies in the state. Every staff of NLNG including all their contractors pay a minimum of 25 per cent of their income as tax and this is paid full to the state. The company, which is the largest single industrial project in sub-Saharan Africa, is reputed for transparency and due process in all its activities. The Ogun State government’s move to block tax leakages with the planned implementation of what it calls “Personal Income Tax Residency Rule for Employee” is also coming at a time that the NLNG relocation seems to be a hard pill for the Fashola administration to swallow.
The Personal Income Tax Residency Rule for Employee initiative is part of the effort by Ogun State government to beef up the revenue base of the state with a view to enabling it up the infrastructure stock int he state and expand the existing ones which have been put under severe pressure by residents who work and pay their taxes to other states, a situation, which it described as unfair.
Following the high cost of rent and landed property in Lagos, workers in the state are relocating en mass to neighbouring Ogun State, where cost of living is relatively less challenging while still retaining their employment in Lagos State where their monthly income tax are deducted at source by their employers, who remit them to Lagos State.
The Ogun State Government said it is losing about N2 billion every month as a result of what it called wrongful remittance of taxes payable by people resident in the state but work for employers based in other states across the nation, adding that the influx has put pressure on the utilities in the state, hence the Residency Rule Initiative, which will soon kick-off.
Senator Ibikunle Amosun, governor of Ogun State said last week in Abeokuta, the state’s capital that he has discussed the matter with Mr. Babatunde Raji Fashola, his Lagos State counter, who he said has agreed to cooperate with Ogun State government’s new revenue generation initiative.
He said the demand that the tax rule be obeyed should not be interpreted to mean waging war against Lagos, since both governments agree on the true position of the law. The relation between both governments, he continued, is indeed cordial and that Lagos has assured Ogun of its commitment and support for the project. Amusun said his government had begun to put in place measures to ensure that employees’ personal income tax deductions due to the state are henceforth remitted to the state’s coffers.
He stated that the violation and wrongful administration of the statutory tax by companies and institutions is marginalising Ogun State, explaining that this tax leakage is an obvious case of revenue erosion and the economic strangulation of the state. The Personal Income Tax Act (PITA) Laws of the Federation of Nigeria states that an employee’s residence should be the determinant factor in respect of where an employer remits the employee’s personal income tax to.
The ‘Residency Rule’ implications of this tax law affects residents of border line towns like Akute, Ibafo, Magboro, Mowe, Ojodu-Abiodun and Sango-Ota, just to name a few of the locations where people commute to Lagos regularly. Ogun State government believes that compliance with this extant tax law would go a long way in ensuring that the state delivers on its obligations to its numerous stakeholders.
Amosun further said the state was taking the lead in ensuring that all stakeholders including private and public sector employers, employees, the business community, industry associations, professional bodies and employee unions “understand and comply with the residency rule” aspect of the tax laws of the country.
Today, he said, the state has internally generated revenue of less than N1 billion, in addition to the N2.5 billion average from the Federation Accounts Allocation Committee (FAAC) disbursement, compared with a monthly wage bill of between N6 and N7 billion, following which the state has to borrow to meet obligations.
Governor Amosun said there are several projects calling already for attention, including a 32-kilometer Ojodu-Ota (six-lane) Road for which bids have already been submitted, the least being N23.5 billion, in addition to about 50 new schools and primary healthcare projects under construction across the state. Wondering aloud, the governor asked: “How much do we generate, we are losing between N1.5 and N2 billion monthly. What are we going to use to do all of that?
“We want to give Ogun State that befitting outlook for business to thrive,” he said, listing sectors in need of attention in the state to include security, healthcare, education, agriculture and employment generation.
BusinessWorld can reveal that NLNG was crowned the best tax-paying corporate body in Lagos State this year as it topped the tax revenue chart of the state among all the big companies in the state. Every staff of NLNG including all their contractors pay a minimum of 25 per cent of their income as tax and this is paid full to the state. The company, which is the largest single industrial project in sub-Saharan Africa, is reputed for transparency and due process in all its activities. The Ogun State government’s move to block tax leakages with the planned implementation of what it calls “Personal Income Tax Residency Rule for Employee” is also coming at a time that the NLNG relocation seems to be a hard pill for the Fashola administration to swallow.
The Personal Income Tax Residency Rule for Employee initiative is part of the effort by Ogun State government to beef up the revenue base of the state with a view to enabling it up the infrastructure stock int he state and expand the existing ones which have been put under severe pressure by residents who work and pay their taxes to other states, a situation, which it described as unfair.
Following the high cost of rent and landed property in Lagos, workers in the state are relocating en mass to neighbouring Ogun State, where cost of living is relatively less challenging while still retaining their employment in Lagos State where their monthly income tax are deducted at source by their employers, who remit them to Lagos State.
The Ogun State Government said it is losing about N2 billion every month as a result of what it called wrongful remittance of taxes payable by people resident in the state but work for employers based in other states across the nation, adding that the influx has put pressure on the utilities in the state, hence the Residency Rule Initiative, which will soon kick-off.
Senator Ibikunle Amosun, governor of Ogun State said last week in Abeokuta, the state’s capital that he has discussed the matter with Mr. Babatunde Raji Fashola, his Lagos State counter, who he said has agreed to cooperate with Ogun State government’s new revenue generation initiative.
He said the demand that the tax rule be obeyed should not be interpreted to mean waging war against Lagos, since both governments agree on the true position of the law. The relation between both governments, he continued, is indeed cordial and that Lagos has assured Ogun of its commitment and support for the project. Amusun said his government had begun to put in place measures to ensure that employees’ personal income tax deductions due to the state are henceforth remitted to the state’s coffers.
He stated that the violation and wrongful administration of the statutory tax by companies and institutions is marginalising Ogun State, explaining that this tax leakage is an obvious case of revenue erosion and the economic strangulation of the state. The Personal Income Tax Act (PITA) Laws of the Federation of Nigeria states that an employee’s residence should be the determinant factor in respect of where an employer remits the employee’s personal income tax to.
The ‘Residency Rule’ implications of this tax law affects residents of border line towns like Akute, Ibafo, Magboro, Mowe, Ojodu-Abiodun and Sango-Ota, just to name a few of the locations where people commute to Lagos regularly. Ogun State government believes that compliance with this extant tax law would go a long way in ensuring that the state delivers on its obligations to its numerous stakeholders.
Amosun further said the state was taking the lead in ensuring that all stakeholders including private and public sector employers, employees, the business community, industry associations, professional bodies and employee unions “understand and comply with the residency rule” aspect of the tax laws of the country.
Today, he said, the state has internally generated revenue of less than N1 billion, in addition to the N2.5 billion average from the Federation Accounts Allocation Committee (FAAC) disbursement, compared with a monthly wage bill of between N6 and N7 billion, following which the state has to borrow to meet obligations.
Governor Amosun said there are several projects calling already for attention, including a 32-kilometer Ojodu-Ota (six-lane) Road for which bids have already been submitted, the least being N23.5 billion, in addition to about 50 new schools and primary healthcare projects under construction across the state. Wondering aloud, the governor asked: “How much do we generate, we are losing between N1.5 and N2 billion monthly. What are we going to use to do all of that?
“We want to give Ogun State that befitting outlook for business to thrive,” he said, listing sectors in need of attention in the state to include security, healthcare, education, agriculture and employment generation.
