Nigerians need dividends of tax money to encourage compliance – Andersen Tax managing partner

Olaleye Adebiyi is the Country Managing Partner of Andersen Tax in Nigeria, the global firm which is making its debut in Africa. Adebiyi who started his career with Arthur Andersen in 1991 said Andersen Tax, a transition by the former partners of WTS & Adebiyi Associates, which becomes a member of Andersen Global would continue to provide tax advisory services for  multinational and individual clients in Nigeria. In this interview, Adebiyi speaks on a number of tax issues in Nigeria including the lack of awareness by some citizens to pay their taxes and what governments at the State levels need to do. Excerpts

Could you tell me more about Andersen Tax and yourself?

I started my career with Arthur Andersen in 1991. Upon the implosion of the Firm in 2002, it became KPMG and I was there till January 2003.  I joined a law firm where I set up the tax department. But, the Andersen effect was missing. I then told myself that the best way to predict my own future was to create the future myself. I set up  my practice, what later became  known in the market as WTS Adebiyi & Associates. The firm was comprised of tax lawyers advising companies on tax and regulatory advisory services. We were also involved in handling  cases  either at the tax tribunal or the court.  We have  won several  landmark cases. Along the line, the WTS Alliance was not giving us the leverage we wanted as an organization and in the market.  We then had the opportunity to join Andersen Tax globally, to enable us service our clients drawing on expertise around the world and to give us the leverage we need. For me personally, I’m back to where I started, back to the Andersen family.

Are you saying that Andersen Tax is associated to the Arthur Andersen Family?

Arthur Andersen was one of the big five professional service firms in those days before it folded up and it was number one in most markets including Nigeria. Arthur Andersen was into Audit, Advisory, Tax and other Consulting Services. After the implosion, some Partners of Arthur Andersen who were working in the San Francisco Office, providing wealth management services to Andersen clients were bought over by HSBC to provide this same services to their clients.  They later decided they could do this business on their own and initiated a management buy-out  in 2012.  At this point they registered a company called WTAS, (Wealth Transfer Advisory Services) which was different from the  WTS we had an alliance with. When they wanted to start expanding internationally, they then realized there would be a confusion in the market with the existence of  WTS Alliance.  They then approached the liquidator of Arthur Andersen and bought the name, logo and IP but adopted  the name to Andersen Tax because they wanted to make sure people did not continue to focus on Enron which led to the wrong conviction of  Arthur Andersen. Though Andersen Tax is bringing the same Andersen philosophy of best in practice quality service to its clients globally,  we do not do Audit, which Arthur Andersen did.

The moment you mention Andersen Tax, Arthur Andersen immediately comes to mind, how are you managing the brand perception considering what Arthur Andersen went through

The brand Arthur Andersen is still as strong today as it was when the Firm imploded.  As I mentioned a few minutes ago, I know when Arthur Andersen is mentioned people quickly remember Enron.  It was true that Arthur Andersen was involved in Enron but remember that Arthur Andersen was cleared by  the US Supreme Court which stated that Andersen was wrongly convicted and should not have been held  liable. It was however too late to reverse the implosion which happened very quickly.   So, in order to ensure some differentiation, we have called the firm Andersen Tax. Since we do not do Audit, we are therefore not conflicted acting for our clients. This is one advantage the Big 4 don’t have.   With audit, attestation of accounts is required and a wrong attestation may result in a huge  liability. This is a purely tax practice rather than the one that would require attestation.  Even though Andersen is an offshoot of Arthur Andersen, Andersen Tax is  focused purely on Tax.

For how long have you been operating now as a separate entity?

We started in 2005 as a separate entity. As I said, when I left Arthur Andersen when it became KPMG, I went to another law firm and I left in 2005 to set up the tax practice which was WTS Adebiyi and Associates.

Then how would you describe the practice in the last 12 years?

I would say it has been challenging as my international friends ask me how I make money  in a country where people don’t pay tax. I always explain to them  that the level of non-compliance is higher among  individuals but that 70 percent of our clients are multinationals who pay their taxes regularly and when they have any dispute with tax authorities we help them to resolve it. Andersen Tax entry into the market  coincides with the time most tax authorities are realizing  the need to raise revenue through taxation.  It has become glaring with the recession, that government at all levels need to diversify revenue generation  and not rely entirely on  crude oil.  Tax revenue is one such avenue. And if the tax authorities become overly aggressive, we are here to help our clients.

In addition to tax disputes resolution and advisory services what other services would you handle for clients?

In the last 3 years, my firm has adjudicated  several cases on behalf of our clients and tax authorities and discharged tax liabilities in excess of US$2billion.  We have also advised several clients in structuring their investments for tax efficiency to avoid multi-million dollars in taxes.  Under Andersen Tax, where we will continue to give the same high quality services to our clients,  the practice would be organized around in six major areas-  Tax Advisory & Regulatory Services, Transfer Pricing, Energy & Infrastructure, Consumer & Industrial Markets, Tax Adjudication/Litigation and Family Wealth and Private Clients. Family Wealth and Private Clients in particular, will differentiate us in the market as no other professional services firm provides this service. Here we will work with wealthy families to enable them pass on their wealth to the future  generations because in Nigeria wealth usually ends with the second generation. Whilst they will continue to pay appropriate taxes, we will help our clients to ensure that their wealth endures and is sustained for generations to come.

What is your take on why individuals don’t pay taxes in Nigeria?

In Nigeria,  the State Governments  collect taxes from individuals and the Federal Government collects from companies.  But many of the States have been depending on federal allocation for too long and they are not aggressive like Lagos State in collecting taxes from residents. But some of the states are now waking up. For instance, Ogun State has done over 100 percent increase year to year three years in a row now.  Osun, Rivers and a few others are picking up.  When our  Firm realized the role sensitization and creating tax awareness could play in making enlarging the tax bracket,  we translated the Personal Income Tax Act, the enabling law, into Nigerian major languages – Yoruba, Hausa,  Igbo and Pidgin. In addition, a State like Benue even asked us to translate the book further into its local languages – Tiv, Igede and Idoma. The idea is to create awareness among the people to understand their civic responsibilities and rights under the law.  We have also developed a Tax App to help especially people in villages and towns with no banks to pay taxes directly into Government accounts.  Once it is installed on your phone, you can pay your taxes without going to a bank.

I understand that what you are doing is to assist government bring more people into the tax net

That is very correct as oil money would not last forever.  In other developed countries they depend on tax to run government.  When people pay tax they can also hold government accountable.  But  Nigerians have not held government accountable because so far Nigeria depends on oil money which is nobody’s money.

Are there other strategies of bringing more people into the tax net?

We are helping  a State  on sensitization of the people. We are adopting various strategies to achieve this.   Hands in hands with sensitization,  government needs to demonstrate to its citizens that the tax money is being judiciously spent on projects that would be of use to the people, but not the building of a Stadium.  When the people can see that government is doing something with tax money, they would start paying willingly.

Who are your clients now?

Among our clients include Chevron, British American Tobacco, Brass LNG, Helios Partners,, Benue State government,  Oando, Citibank  and MTN among others. Others are coming on board.

Nigeria’s tax ratio to GDP is low, what is your take on this?

Government is not doing enough to bring more people into the tax net. There are so many people outside the tax bracket. In most States, the gap between registered voters and tax payers is so wide. Regarding small companies, many of them don’t pay taxes or  are not paying the right  amount.  Over 65 percent of Nigerians are outside the tax bracket. Tax is Pay As You Earn, whether you are a trader or farmer. Even VAT that is a consumption tax, how many transactions in Balogun or Iddo markets are captured?  This is because most transactions are cash-based, so maybe as the country gradually moves towards e-payments, some of these transactions would be tracked.