KPMG, one of the Big Four auditors in the world, says Nigeria’s Federal Inland Revenue Service (FIRS) has gone draconian by giving fiats to banks to freeze accounts of suspected tax defaulters. In September 2018, Tunde Fowler, FIRS chairman, said the service was going after 6,772 tax defaulters, stating that they would have their account frozen till they pay due taxes. “So, all these ones of TIN and no pay and no TIN and no pay, to the total of 6772 will have their accounts frozen or put under substitution pending when they come forward,” Fowler had said. “First, they refused to come forward in 2016, they refused to come forward under VAT and are still operating here. So, we are putting them under notice that it is their civic responsibility to pay tax and to file returns on these accounts.” In reality, FIRS has not only frozen the accounts in question, but have also stopped some companies from paying staff salaries or carrying out routine transactions. In addition to this, FIRS has also ordered the banks to deduct the alleged tax debt from these bank accounts “in full or partial payment”. In its KPMG in Nigeria issue 2.5 released in February 2019, the professional service firm, said FIRS has gone too far in its bid to get more people into the tax net. KPMG argued that Section 69 of Companies Income Tax Act (CITA) 2004 “allows a taxpayer to object to a disputed assessment within thirty (30) days from the date of service of the notice of assessment”. The firm adds that “Section 77(3) of CITA further provides that the collection of tax, in any case where notice of an objection or appeal has been given by a taxpayer, shall remain in abeyance until such objection or appeal is determined”. KPMG CONTRAVENING COMPANIES INCOME TAX ACT KPMG said “nothing in the CITA or FIRSEA authorises the FIRS to impose a freeze order on a taxpayer’s bank account beyond the amount of tax proven to be due and payable by that taxpayer”. “The requirement directed to banks not to honour mandates from taxpayers over and above the tax amount supposedly proven by FIRS to be due and payable is without foundation and goes too far.” It added that “the letters to the SBs leave them with 7 days within which to comply with the directives of the FIRS. This is contrary to the provisions of Sections 69 and 77(3) of CITA which permit a taxpayer a 30-day period of review and objection”. FIRS BREACHING BANK-CLIENT CONFIDENTIALITY KPMG stated that the letters of substitution issued to the banks breach the confidentiality agreement between banks and their clients. “Generally, a bank has a fiduciary obligation to maintain the confidentiality of its customers and their transactions, and to prevent third-party access to the customers’ account information,” KPMG said. “The exceptions to this duty are in cases where the bank is required by law or a court of competent authority to make disclosure, and where the customer consents to the disclosure. “We note that the FIRSEA and CITA allow the FIRS to request certain banking information (without breaching the bank’s duty of confidentiality), such as names and addresses of new customers and specific individuals, and details of transactions above N5 million and N10 million for individuals and companies, respectively. “However, these provisions, including relevant provisos, should not be interpreted to have given the FIRS the absolute power to demand all forms of customer information, including details of account balances, bank statements and other financial records of a company, its subsidiaries or principal officers; or power to direct when a bank may honour its customers’ transaction requests.” KPMG SALUTES FIRS TAX DRIVE — WITH CAUTION Concluding its intervention to FIRS, KPMG said: “We note and salute the FIRS’ objectives to bring delinquent taxpayers into the tax net and consequently increase the Federal Government’s tax revenue”. “However, the current practice whereby the FIRS issues fiats to freeze taxpayers’ bank accounts generally and to demand that SBs pay alleged outstanding tax liabilities from customers’ bank balances without recourse to affected persons, is draconian. “This will cast doubt on the Federal Government’s drive to improve the ease of doing business in Nigeria, diminish the credibility of the Nigerian tax system, and erode investors’ confidence in the Nigerian economy.” The company also called on taxpayers to “ensure that they fulfil their civic obligations by paying the right amount of taxes and filing relevant tax returns with the tax authorities, as and when due”.     Source: The Cable

Prince Adetokunbo Kayode, President of Abuja Chamber of Commerce and Industry (ACCI), has called for urgent tax reforms to save Small and Medium Enterprises (SMEs) from stifling demands for tax even before they make profit. Kayode who stated this while speaking with newsmen in Abuja, explained that the practice of mandatory requirement for tax clearance from companies newly registered was a disincentive for the growth and thriving of SMEs in the country and also one of the stumbling blocks in the Ease of Doing Business. While noting the ongoing progress in national tax reforms, the ACCI boss advised tax authorities to immediately review the tax clearance system to reduce the burden placed on new and young companies sprouting up across the country. “The growth of Small, Medium and Micro Enterprises depends very much on the enabling environment the government is able to create for them to grow. “Their growth will in turn create jobs and collective wealth for the nation. All that is necessary must be done to nurture such new businesses. “New companies should not be mandated to produce tax clearance until after a year or so of operations”, he noted. Wondering why tax must be imposed before operations, Kayode said members of the Chamber of Commerce had variously lamented the negative effect of that policy in their efforts to run their legitimate businesses. “If this country must grow and have a vibrant economy, the plight of the SMEs must be adequately taken into account. SMEs are of fundamental importance to us due the meaningful contribution they add to economic development. “They are constantly expanding output, generating employment, redistributing income, promoting indigenous entrepreneurship as well as greatly producing primary goods that strengthen industrial linkages. The sector is accountable for about 85 per cent of the total industrial employment in the country and between 10-15 per cent of the total manufacturing output”, the President of ACCI insisted.   Source: Punch

The Society of Women in Taxation, Lagos State Chapter, says it is committed to promoting tax knowledge to women in society. In a statement on Monday, SWIT said it would be educating women during its upcoming tax forum for corporate and professional women in Lagos with the theme, ‘Building a new Nigerian tax culture through women.’ The Chairperson , SWIT , Lagos State Chapter, Mrs  Dena-Rose Ajayi, said women were nation builders. “Thus, there is a need to properly enlighten them on tax policy issues,” she said The chairperson said participants at the forum would include women “who are captains of industries and successful women leaders in both private and public establishments.” She said the event would also feature award session during which deserving individuals and organisations would be recognised for their contributions to development of taxation in Nigeria. According to the statement, the chapter recently held its regular tax programme for the youth by organising an inaugural tax debate for the secondary school pupils both in public and private schools in the state.   Source: Punch

The Federal Inland Revenue Service has appointed Sterling Bank Plc as a collecting agent to recover taxes from 2,933 defaulting companies. This was disclosed in a letter signed by the Chairman, FIRS, Mr Tunde Fowler, and addressed to the Managing Director/Chief Executive Officer, Sterling Bank, Abubakar Suleiman. The letter, which was obtained by our correspondent, was titled, ‘Letter of substitution appointing your bank as collecting agent and notice for release of bank statement and other financial records of the following attached companies.’ In the letter, the tax agency informed the bank of the failure of 2,933 listed companies to comply with provisions of the tax laws by not paying taxes due to the FIRS. The letter read in part, “Pursuant to my powers under Section 49 of the Companies Income Tax Cap C12 LFN 2004 as amended and Section 31 of the FIRS (Establishment) Act No. 13 of 2007, I hereby appoint your bank as a collecting agent for the full recovery of the amount displayed on the attached schedule payable to the FIRS. “In this regard, you are required to set aside the aforesaid sum and pay same to the credit of these attached companies in full or partial amortisation of its aforesaid tax debt. This should be done prior to the execution of all or any related transactions involving these companies or any of its subsidiaries. “I further request that the FIRS be informed of any transactions prior to execution on the accounts, especially the transfer of funds to or from offshore or local accounts of these companies or any of its subsidiaries. Only on my authority should such transactions be exited.” The FIRS also requested the bank to forward to it, within 72 hours, the receipt of the appointment letter, detailed bank statements and financial records for the attached companies and/ or any of its subsidiaries, holding accounts with the bank. “You are also to provide records of all principal officers related to any of these companies. The statement should cover the period from the date the accounts were opened to the date of receipt of this notice,” it stated. The FIRS also informed the bank that failure to comply fully with the notice was an offence punishable under the various tax laws and the criminal code.   Source: Punch

The Federal Inland Revenue Service (FIRS) says it will go after estimated 40, 000 millionaire tax defaulters in 2019. Mr Wahab Gbadamosi, the Head Communications and Servicom Department of FIRS, disclosed this in a statement in Abuja on Thursday. Gbadamosi quoted the Executive Chairman of the service, Mr Tunde Fowler, as making this disclosure when he received the Acting Inspector General of Police, (I-G) Mohammed Adamu who paid him a courtesy visit. Fowler said that FIRS identified 45, 000 millionaire tax evaders in 2018 and recovered N23 billion through substitution of their bank accounts. He explained that N23 billion was realised from over 45, 000 tax defaulters that had over N100 million as turnover in their accounts. He called for collaboration with stakeholders like the Police to continue to go after wealthy tax defaulters in 2019. Fowler requested the Nigeria Police to help the Service bring the tax evaders to pay their taxes. He thanked the Nigerian Police Force for its support and collaboration over the years in assisting FIRS to achieve its target. He sought for more support and collaboration to enable it recovers due taxes from more 40,000 rich tax defaulters in 2019. “Let me put on record that the Nigeria Police Force has been extremely helpful to FIRS. Without the Police, I doubt if the Service would have been able to achieve what we have achieved. “2018 was a successful year. The FIRS collected a total of N5.320 trillion of tax revenue. This is the highest revenue collection in the history of the service. “This is significant, because this collection was when oil prices oscillated between $50 and $70 per barrel. “Oil price was at an average of $100 to $120 per barrel between 2012 when FIRS collected N5.07 trillion. “Oil component of the N5.320 trillion is N2.467 trillion, which represents 46.38 per cent, while non-oil element of the collection is N2.852 trillion, which is equal to 53.62 per cent,” he explained. The acting I-G assured FIRS that the Police would continue to support the service because the job of revenue generation was critical to the survival of the nation. Adamu said that the service rendered by FIRS was important for the survival of the country. He emphasised the need for the service to be supported by all stakeholders so that it could achieve its goals.     Source: PM News