TAX SERVICES

FIRS Enforcement Move Threatens Investors Confidence

Only recently, business owners were awakened to cruel bank transaction notifications running into millions of naira undertaken without their consent. On further enquiries from their respective banks, they were shocked to learn that the Federal Inland Revenue Service (FIRS) had issued fiat to financial institutions to put lid on accounts of suspected tax defaulters. “We just woke up, saw notifications from our banks that the FIRS told them to put a lien of an outrageous amount in taxes we are owing; that was about a N100 million,” one of the affected business owners told THISDAY on conditions of anonymity. The Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Tunde Fowler, recently disclosed that the sum of N23 billion had been recovered from 45,000 tax defaulters, who had over N100 million as turnover in their respective bank accounts. He further hinted that a new batch of 40,000 millionaires would be targeted in this year. However, the latest mode of clampdown on businesses, which had failed to comply with their tax obligations have been severely criticised in some quarters, including FIRS staff and renowned tax and audit authorities. A source further told THISDAY that some staff of the revenue agency had even urged affected individuals to seek legal redress as the move by Fowler was unprecedented, with grave implications for the growth of small enterprises which are critical for economic development. Famous audit firm KPMG, had promptly questioned the FIRS move, describing it as “draconian”. It stated: “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 fiat 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 fulfill their civic obligations by paying the right amount of taxes and filing relevant tax returns with the tax authorities, as and when due”. Apparently, under pressure from critics over its unpopular actions to compel compliance through seizure of accounts, Fowler had within the week halted the freezing of bank accounts of tax defaulters for 30 days. According to him, the directive became necessary in view of the large number of taxpayers, who had besieged its offices in their bid to regularise their tax positions, coupled with the inconveniences they encountered during the process.But in spite of the criticisms bedevilling the FIRS measures, particularly the seeming lack of due process in freezing bank accounts, the service appears unperturbed and has maintained that it possessed powers under its Establishment Act to take the steps. Justifying its actions, FIRS spokesman, Mr. Wahab Gbadamosi, responding to THISDAY enquiries maintained that “tax is anchored on law, the basis of tax is law in the first place” stressing that the FIRS Establishment Act (FIRSEA), Company Income Tax Act (CITA) among others already provided the basis for its actions. Quoting relevant sections of the Act, Gbadamosi said, “The Service may require any person to give information as to any money, fund or other assets, which may be held by him for, or of any money due from him to, any person. “Also note that Section 49 of CITA further empowers FIRS to take all the steps we have taken with respect to recovery of tax debts from billionaire and millionaire tax defaulters.” What Gbadamosi does not seem to understand is that a country tax regime is one of the factors potential investors consider in choosing where to invest their funds. Nevertheless, KPMG, in its position paper released in February, argued that the revenue collection agency had overstepped its bound in a bid to expand its tax revenue base. The firm added that contrary to FIRS’ claim, “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.” As the argument over the legality or otherwise of the FIRS actions persist, particular attention should be paid to the negative impact it would have on the investment atmosphere, especially at a period when the federal government is working hard to improve the ease of doing business in the country, which had been a point of concern to wooing foreign investment into the country. The freezing of companies’ bank accounts at will further calls to question the non-disclosure obligations the banks themselves owe to customers, especially as this is not yet a criminal case until proven by a court of law, and could dampen the confidence of small and medium enterprises, which are struggling to grow under an already harsh business environment. According to a source who had his accounts frozen and later released, what they (FIRS) are doing is illegal and abnormal without following the law. There was nothing like consulting the taxpayers, telling them of their discrepancy and issues in their taxes-absolutely nothing like that. “Somebody sits down, calls the bank, looks at your turnover and slams you a tax, without confirming whether you have paid or not, whether you are in compliance or not, whether you are in breach or not and without even going through your TIN because they are the custodian of who is an active tax payer or not.” The resultant development had seen those who had no issues in their tax filing suffer unnecessarily during the siege on their accounts by the FIRS, which requested affected clients to show up at its headquarters in Abuja to reconcile their tax records. Although, FIRS deserves commendation for embarking on innovations that had seen tax receipts grow in recent times, its new approach to enforcing compliance poses a grave concern, which if not addressed

FIRS Soft Pedals, Directs Banks To Unfreeze Tax Defaulters’ Accounts

As a result of complaints by Nigerians and industry experts, the Federal Inland Revenue Service (FIRS) has written to banks, directing them to lift the lien on tax defaulters’ bank accounts for 30 days. The directive, which takes immediate effect, was contained in a letter from the Chairman, FIRS, to bank Managing Directors. FIRS, however, made the announcement in a statement posted on its official Twitter account Friday night. The agency explained that it issued the directive because of the large number of taxpayers, who have besieged its offices in their bid to regularize their tax positions and the inconveniences they are going through. It should be remembered that the FIRS recently issued Letters of Substitution, pursuant to Section 49 of the Companies Income Tax Act (CITA) 2004 and Section 31 of the Federal Inland Revenue Service Establishment Act (FIRSEA) 2007, to banks in Nigeria, appointing them as tax collecting agents for certain listed customers maintaining bank accounts with such banks. The FIRS, in the said Letters of Substitution, alleged that the affected companies have breached their tax obligations by failing to pay tax to the FIRS, as and when due, and provided the SBs with an indication of a specific amount owed by each said company. The SBs were directed to set aside the indicated sums and pay such over to the FIRS in full or partial payment of the alleged tax debt. KPMG advisory services had on Thursday stated that FIRS have gone draconian by giving fiats to banks to freeze accounts of suspected tax defaulters. “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 for wrote in an explanatory note. It, however, stated that taxpayers must also 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: Tribune

LCCI challenges FIRS over gagging of bank accounts

The Lagos Chamber of Commerce and Industry, LCCI, yesterday, countered the move by the Federal Inland Revenue Service (FIRS) to restrain bank accounts of some individuals and businesses over tax defaults. Muda Yusuf, LCCI boss…debt stock profile not sustainable In a communiqué by the Council of the LCCI, the Director General, LCCI, Mr. Muda Yusuf, said the move would be counter-productive to other measures of the government aimed at promoting investments and financial inclusion. LCCI said, “Revenue generation is not an end in itself, it is a means to an end.  The ultimate objective is to ensure equity, improve welfare of citizens, create jobs and promote the advancement of the economy.  The activities of agencies of government should be in tandem with the Ease of Doing Business Agenda of government and the promotion of the ideals of the Economic Recovery and Growth Plan (ERGP).” Yusuf noted that tax administration should be consistent with the principles of equity, fairness, legality, accountability and due process. “Taxpayers should be given ample opportunity to defend their positions on tax matters before a lien is placed on their bank accounts.  There are instances where company accounts were frozen in error because there was no proper engagement, documentation or communication with the tax payers.   Source: Punch

N3.4bn tax debt: FIRS to sell properties of 52 firms

The Federal Inland Revenue Service is to dispose of the properties of 52 companies over tax debts valued at about N3.4bn. Investigations by our correspondent in Abuja showed that already, the Legal Department of the Service had begun the process to sell the properties in a bid to effectively implement the initiative. It was learnt that apart from the 52 companies, ten other companies are still under investigation for tax evasion while enforcement action is expected to be carried out on another 10 companies in Lagos with a total tax value of N727.42m. Our correspondent gathered that based on an investigation conducted by the FIRS, some private organisations that own properties in Nigeria had not been paying any form of taxes. Following this discovery, it was learnt that the agency took a review of all properties that were under corporate ownership. By law, where a company has not filed or paid any taxes, the tax authority used an estimated assessment based on the company’s turnover. In order to ascertain the level of turnover, the FIRS wrote to commercial banks asking for details of the turnover of some of the affected companies. The first letter to commercial banks from the FIRS, findings showed, was written in May last year. The letter requested a list of companies, partnerships and enterprises with a banking turnover of N10bn and above. The move was aimed at ascertaining those companies that are compliant with the tax laws and those that are not compliant. The second letter according to findings was written to all commercial banks in October 2018, and the responses from the banks are currently being reviewed by the FIRS. It was learnt that the move was part of the special programme to drive compliance. The special programme is targeted at recovering tax liabilities from non-compliant companies that are currently being assessed for tax under the Company Income Tax Act. Speaking on the steps to ensure compliance, the FIRS Chairman, Mr Tunde Fowler, had on Thursday during a meeting with the acting Inspector-General of Police, Mohammed Adamu, explained that the agency would collaborate with security agencies this year to go after wealthy tax defaulters. He had requested the Nigeria Police to assist the FIRS to bring the tax defaulters to pay their taxes. He said, “We looked at businesses, partnerships of any activity that has banking turnover between N100m and N999m. We have done a review of this group of businesses. “We have about seven more banks that we are still waiting for the return from and to review their information. “So far, we have 45,361 that have TINs and are making payments. We have 40,611 that have TINs, that made tax payment and, we have 44,504 that have no TIN and no payment. “So, when you look at it from a glance, we have close to 75,000 in this group that are still not taxpayers and we have said the payment of tax is not only for the civil servants. it’s for all Nigerians. “So, the millionaires and the billionaires will pay tax on behalf of what is due to the national coffers.” Fowler commended the Nigerian Police Force for its support and collaboration over the years, which he said, had helped the FIRS to achieve its target and requested for more support to enable it to recover taxes due to rich tax evaders in 2019.   Source: Punch   

Lagos, taxation and economic development

SEVERAL years ago, fourth President of the United States of America, James Madison said that the power of taxing people and their property is essential to the very existence of government. Similarly, Franklin D. Roosevelt, the only US President to serve three terms also underscored the importance of tax when he asserted that: “Taxes, after all, are dues that we pay for the privileges of membership in an organised society.” Roosevelt relied on taxes, particularly from rich taxpayers, to fund programmes designed to pull the country out of the Great Depression. The various New Deal revenue acts in the mid-1930s substantially boosted the tax burden on the wealthy, raising the effective income tax rate on the top one per cent from 6.8 per cent in 1932 to 15.7 per cent in 1937. Scholars of development economics have written a lot on the issue of taxation and its import to economic development. Amidst the penumbrae of arguments, the central tendency is that taxation is the price people pay for government services. Most often, because of the inherent tendency of people to resist payment of tax for essential services, taxes are compulsory payments individuals make to government. Tax The element of coercion is justifiable in that legitimate government activities can hardly be carried out without fiscal resources. These activities include defense, protection of life, property and individual liberty – which are fundamental rights enshrined in the Nigerian Constitution. Irrespective of the school of thought one belongs, one is doubtless bound to contribute a certain portion of his income to government for the provision of essential social services. Similarly, it is the duty of government to apply such monies in the most efficient way to improve the living standards of the people. Since the return of democratic dispensation in 1999, successive administrations in Lagos State have had to contend with the knotty issue of attempting to boost the State Internally Generated Revenue, IGR, through the implementation of a viable and sustainable tax system. With about N600 million in 1999, when Asiwaju Bola Tinubu took over, the IGR rose to between N10 billion and N11 billion by 2007 when he left office. With continuing reforms in the internal revenue system, aggressive tax drive, capacity building and professionalism of the Lagos Internal Revenue Service, LIRS, the IGR of the state had by 2015 when Mr. Babatunde Fashola, SAN, left office, risen to about N23 billion monthly. What has been the secret of Lagos’s economic growth under the current administration is a revenue enhancement reform which has achieved higher IGR and providing a sustainable financial base for bridging the huge infrastructure deficit estimated at over US$50bn. Implementation of financial policy such as widening of the State tax net, expansion of tax base, updating/upgrading of databases, improvement of administrative processes and operational efficiencies, among others has so far achieved an average monthly IGR of N34 billion in 2018 compared to monthly averages of the last three years. It could be recalled that in just two and half years, the Lagos Government constructed Abule-Egba and Ajah bridges among several other capital projects. There is vast empirical evidence that taxation correlates highly with economic growth in addition to some spill-over effect on effective service delivery. Lagos is a good example for research work in this direction. At the global level, no economy in history has ever achieved high per capital growth without a sustainable tax system. In fact the advanced capitalist economies depend heavily on taxation in running their economies. In Europe, U.S.A and Latin America, tax evasion is a punishable offence without the option of fine. The global economic power of Japan is Personal Income Tax. Taxes available to state governments to collect from the citizens across the country include: Personal Income Tax in form of Pay-As-You-Earn, PAYE, or Direct Taxation (Self-Assessment), withholding Tax (Individuals Only), Capital Gains Tax (Individuals Only), Stamp Duties on instrument executed by individuals, Pools Betting, Lotteries Gaming and Casino Taxes, Road Taxes, Business premises registration fee in respect of urban and rural areas which includes registration fees and per annum for the renewals as fixed by each state, Development Levy (individuals only) not more than 100 per annum on all taxable individuals and Naming of street registration fees in the State Capital. Other classification of taxes are: Right of Occupancy fees on lands owned by the State Government in urban areas of the State, Market Taxes and Levies where State finance is involved, Land Use Charge, where applicable, Entertainment Tax, where applicable, Environmental (Ecological) fee or levy, Hotel, Restaurant or Event Centre Consumption Tax, where applicable, Signage and Mobile Advertisement, jointly collected by the State and Local Government among others. It is, thus, surprising that today many states and local governments still give the impression that their entire operations depend on the statutory Federal allocation. It is an aberration that even the Federal Government still depends heavily on oil. In Lagos, the impacts of enhanced revenue base in development strides in the state are quite visible to all. For instance, in 2016 alone, the state government commissioned 114 roads across the state while another 181 roads were built in 2017.   In the health sector, 14 additional LASAMBUS operational points were created while 26 new ambulances for General Hospitals and LASUTH as well as 20 new Mobile Intensive Care Units were inaugurated.   With a view to bridging the housing deficit gap in the state, between February and April 2017, 500 lucky beneficiaries of the Rent-To-Own Housing Scheme were presented with keys to their home.   Similarly, numerous giant strides have been made in education, sports, transportation, food security, tourism among others. Governments across the country need to borrow a leaf from Lagos State and be committed to expanding their tax net, updating/upgrading of databases, improvement of administrative processes and operational efficiencies of their tax agencies. Source: Guardian

LIRS Extends The Deadline For Filing 2018 PAYE Returns

The Lagos State Internal Revenue Service (LIRS) has extended the statutory deadline for employers to file their annual Pay-As-You-Earn (PAYE) tax returns by six working days from 31 January 2019 to Friday 8 February 2019. The extension became necessary to accommodate the significantly high number of taxpayers who are yet to file their PAYE tax returns through the designated online channel due to glitches on the platform.  The LIRS also announced that, with effect from Monday 4 February 2019, it will establish an alternative platform for taxpayers who have high volume of tax returns to file. Employers who are yet to file their PAYE tax returns to the LIRS should, therefore, take advantage of the extended window to comply, and promptly escalate any further teething problem with the e-filing platform to the LIRS. Source: Proshare 

Federal Government realises N35bn from tax recoveries

The Federal Government realised over N35 billion in tax recoveries out of N92.7 billion tax liabilities by tax defaulters as it deepened enforcement reforms to shore up its non-oil revenue. The tax reforms initiative increased the number of taxpayers to 19 million with additional of over five million new taxpayers enrolled, Minister of Finance, Mrs. Zainab Ahmed disclosed over the weekend in Lagos while interfacing with journalists on major economic mileages of the current administration. The government, in 2017 introduced Voluntary Asset and Income Declaration Scheme (VAIDS), a time-limited opportunity for taxpayers to regularize their tax status relating to previous tax periods and pay any taxes due. In exchange for fully and honestly declaring previously undisclosed assets and income, taxpayers will benefit from forgiveness of overdue interest and penalties, and the assurance they do not face criminal prosecution for tax offences or tax investigations. Ahmed said government was oblivious of pileups of tax related cases; a development she said hampered government tax revenues. To break the deadlock, she said eight Tax Appeal Tribunals (TATs) were constituted last year across the nation to accelerate the resolution of over 209 pending cases relating to tax revenues of about $18.8 billion, N205.654 billion and €821,000 respectively. The minister listed other steps taken by government to boost collection of nonoil revenues to include, the reconstituted Presidential Revenue Monitoring and Reconciliation Committee (PRMRC) to provide reconciled data on oil and non-oil revenues (1999 – 2018; & 2019); to enable real-time monitoring of oil and none oil revenue collection; enhance scrutiny of budgeted expenditures and operating surplus remittances by Government-Owned Entities (GOEs); increased tax collection through Federal Inland Revenue Service’s automation of VAT collection at source and implementation of Project Lighthouse to mine data from recent tax amnesty exercises and recover unpaid taxes. Source: Headline Nigeria 

Revenue Generation: NNPC, FIRS, Customs Got N249bn In 2018

A whopping N248,871,621,023.767 billion went into the coffers of the Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS) and the Nigerian National Petroleum Resources (through the Department of Petroleum Resources) as income from cost of revenue collection for the Nigerian government in 2018 alone.   LEADERSHIP findings showed that the monies went into the respective major revenue generating agencies as statutory and Value Added Tax (VAT) entitlements between the period of January and December 2018.   Expectedly, FIRS got the highest chunk of the money. From January to November (11 months) of the year under review, FIRS’s four percent cost of collection amounted to N83, 755,175,660.67 billion (both statutory and VAT). On the other side, the Nigeria Customs Service’ seven percent deduction from the revenue generated in the 11 months stood at N47,892,491,791.84 billion, during which DPR took the sum of N45223953571.04 billion as its four percent cost of revenue collection.   In December alone, the three agencies also got the sum total of N72.187 billion, based on independent findings by LEADERSHIP. FIRS made the biggest revenue for itself in July when it took a whopping sum of N12.21 billion as cost of revenue collection for the month of June alone.   Compared to the N194.52 billion disbursed to the 36 States of the federation, FIRS would have made over double the allocation to each state in the month of July. A detailed analysis of the figures showed each State got N5.4 billion in July, in a month each of the 774 LGCs received paltry N189.987 million. DPR also got increased revenue sum of N5.4 billion, with NCS keeping its fair share of N4.818 billion within July. N4,141,323,813.22 billion. What that means is that each of the agencies, especially FIRS got more than the monthly allocation to each of the States. Compared to 2017, deductions to the agencies in 2018 were obviously higher than what was recorded in the same period of 2017 when the country was in recession and prices of oil products lower.   The agencies retain the respective percentage as cost of revenue collections they make on behalf of the federal government and the States and Local Councils. The deductions are for self-funding of their individual operations. The three agencies are not captured in the annual federal budget. Official documents showed that FIRS remitted about N4.63 trillion to the Federation Account between January and November, 2018. According to the revenue agency, the collections were chiefly from three major tax streams, namely Petroleum Profit Tax (PPT), Companies Income Tax (CIT) and Value Added Tax (VAT).   FIRS is setting an N8 trillion target of revenue generation for itself in 2019. It has failed to meet its target since the last three years. In that same vein, the Nigeria Customs Service announced a total revenue generation to the federation account last weekend. It put the total remittance at N1, 202,271,240,478.30 trillion for the year 2018. Its jubilation was that the 2018 figures N1, 037,373,967,400.80 billion collected in 2017 by are presenting N164, 897,273,077.50 billion. Comptroller-General of Customs, Col. Hameed Ibrahim Ali (Rtd) described the result to what he called dogged pursuit of what is right rather than being populist by compromising national interest on the altar of individual or group interests. Source: Punch

LIRS directs employers to deduct 10% tax from termination benefits.

THE Lagos Inland Revenue Service, LIRS has directed employers to deduct Capital Gain Tax (CGT) from employee’s termination of service payments, which is 10 percent of the terminal benefits of employees. According to LIRS, such compensations are subjected to taxation in line with section 6(a) of    the CGT Act, although it is exempted from taxation in paragraph 26 of schedule three of Personal Income Tax    (PIT) Act and the compensation will be exempted from Pay As You Earn (PAYE) if the sum was not agreed on or before the disengagement process began. The notice read: “Pre-agreed amounts are generated from employment and subject to PAYE. Gratuity payments are tax deductible for PAYE purposes if they are paid under an approved pension scheme in line with Section 5 of the Pension Reform Act (PRA) 2014. “If paid outside the PRA, the gratuity payments would be taxable if the conditions under Paragraph 18 of the 3rd Schedule is triggered, i.e. The service period is not up to 10 years; Any amount in excess of N100, 000; and Where the service period is not up to five years (or an aggregate of 63 consecutive months in the case of a service that is not continuous), the exemption allowed is N1, 000 per annum for such period or aggregate period of employment. Any excess calculated does not qualify for the exemption.”   The agency enjoined employers to henceforth, notify the LIRS of payments for compensation in a situation of loss of employment.   “It is no longer acceptable to lump terminal benefits under the heading of compensation for loss of employment. Employers are required to show each pay component and the corresponding payments in their tax returns to enable the LIRS determine the correct tax treatment,” its stated… Source: Vanguard  

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