April 4, 2019 – Sunmola David & CO

VAT: Economy Will Be More Vulnerable, Manufacturers Warn Nigerian Govt

The Manufacturers Association of Nigeria (MAN) has asked the Federal Government to tread with caution in the drive for improved revenue. The Director-General of MAN, Mr Segun Ajayi-Kadir, said this in a statement on Wednesday while reacting to the plan by the government to increase the Value Added Tax (VAT). Officials of the Federal Ministry of Finance had defended the Medium-Term Expenditure Framework (MTEF) that VAT be increased by 50 per cent during a presentation in the Senate. Ajayi-Kadir, however, said such policy was not ‘manufacturing friendly’, adding that implementing it would have a negative effect as a result of the planned increase in minimum wage. “As plausible as the recommendation to increase VAT may look, implementing it at this time would boomerang because the timing is inappropriate, especially at a time when the minimum wage of N30,000 was just agreed upon,” he stated. The MAN DG added, “This could send a wrong signal that the government is not sensitive to the plight of the low- and middle-income earners, who are clearly in the majority. The Nigerian economy will be in a more vulnerable state if VAT is increased. “No controversy, the burden of the tax would be shifted to the Nigerian consumers that are already struggling, the economy would certainly experience demand crunch, inventory of unsold items would soar, profitability of manufacturing concerns would be negatively impacted, many factories will witness serious downturn or wind down operations.” Ajayi-Kadiri, therefore, advised the government to widen the tax net rather than increase the rate in order to meet the growing need for more revenue to address the development objective of the country. He also appealed to the government not to increase the VAT at this time but consider the implementation of the afore-mentioned tax specific recommendations. The MAN DG asked the government to continue to ramp-up support for the manufacturing sector in the best interest of the people. Source: Channels

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FIRS Warns Defaulting Taxpayers About Potential Restriction On Their Bank Accounts

Federal Inland Revenue Service (FIRS) has issued a warning to defaulting taxpayers on the impending lien to be imposed on their bank accounts for non-compliance. In the publication issued, FIRS admonished business entities with annual banking turnover of ₦100million and above and those who have been collecting Value Added Tax (VAT) and deducting withholding tax (WHT) without remitting same to it, to regularise their tax status by 15 March 2019 or risk being locked out of their bank accounts. You would recall that FIRS recently instructed banks to suspend lien placed on defaulting taxpayers’ accounts for a period of 30 days, without clearly stating what will happen to the bank accounts at the expiration of the 30-day period. By this notice, FIRS has cleared all doubts on events to follow after expiration of the 30-day grace period. FIRS is empowered under Section 31 of the FIRS (Establishment) Act (FIRSEA) and Section 49 of the Companies Income Tax Act (CITA) to appoint any person to be the agent of a taxable person for the purpose of recovering tax debts from such taxable person. Also, the agent appointed may be required to pay any tax payable by the taxable person from any money held by the agent on behalf of, or due to, the taxable person. However, the FIRS power of substitution derived from the sections noted above has been greeted with widespread criticism from various stakeholders and raised a number of legal questions. Further, the approach has resulted in disruption of business operations of taxpayers and ultimately, ease of doing business in Nigeria. We will continue to monitor developments in this space and provide updates as soon as they become available. Meanwhile, we advise taxpayers to continue to review their tax records and ensure full tax compliance to avoid disruption of their business operations. Source: Mondaq