Businesses and individuals who have defaulted in their tax remittances may be at risk of having their operations interrupted by the Federal Inland Revenue Service (FIRS) as the seven-day notice by the tax regulator expires today.
The FIRS had in a public notice dated December 17, 2019 warned that it would commence a nationwide tax enforcement exercise on all taxpayers – individuals, partnerships, enterprises, corporate organisations, ministries, departments and agencies – that are in default of payment of taxes.
It “strongly advised” all taxpayers to settle their tax liabilities within seven days of the publication to avoid any inconveniences or interruptions in their operations.
“Obviously, this could hamper sales particularly for businesses that are defaulters and rely on holiday sales to boost yearly revenue,” Ayorinde Akinloye, a consumer goods analyst at Lagos-based CSL, said.
The FIRS, in the notice signed by Muhammad Nami, its new chairman, said the tax enforcement was pursuant to the provision of Section 8, 26(2), 33 and 35 of the Federal Inland Revenue Service (Establishment Act, 2007).
“The taxes referred to are as follows: Petroleum profit tax, companies income tax, value-added tax, withholding tax, tertiary education tax, NITDA levy, stamp duty and capital gain tax,” the notice read.
Analysts see the recent tax enforcement notice by the Service as a move to widen the tax net and upscale Nigeria’s revenue.
Africa’s largest economy has tax-to-GDP ratio of 5.6 percent, one of the lowest in Africa, according to data from the World Bank. Tax-to-GDP ratio in Algeria, South Africa, Morocco, Angola, Kenya and Egypt currently stands at 34.75 percent, 26.80 percent, 21.35 percent, 19.25 percent, 18 percent and 15.20 percent, respectively.
The number of tax defaulters in Nigeria stood at about 55,000 as at June 2019, according to Tunde Fowler, immediate past FIRS boss. This leaves the country, which depends heavily on funds from
In a bid to upscale tax remittance, the Fowler-led FIRS administration had appointed banks as collection agents of taxpayers considered to be in default of tax payments. In order to achieve this, the FIRS directed the relevant banks to freeze the accounts of the taxpayers to prevent them from drawing funds from the accounts.
The analysts, however, say the notice is too short and that the regulator should go by the number of days stated by the tax law.
Commenting on the seven-day deadline by the tax authority, however, Taiwo Oyedele, head of tax services at PwC, said the notice was inappropriate because in the processes of tax enforcement, there is an assessment process that leads to the tax appeal tribunal which will go on for as long as the court decides. As such, to issue a seven-day public notice is “completely meaningless”, he said.
In the event that a taxpayer is not disputing a tax assessment, Oyedele said “it would imply that such a taxpayer has an amount to pay and hasn’t remitted it and for such a situation the law allows for a grace period as it relates to a different kind of tax, whether its VAT, personal income tax, company tax, they all have different timing but there are no seven days in the tax law”.
Checks by BusinessDay show that the provisions of section 33 of the Federal Inland Revenue Service Establishment Act (“FIRSEA”) give the tax authority the power to distrain, that is, to go after a tax defaulter.
This can also be found in Section 86 of the Companies Income Tax Act (CITA), Section 104 of the Personal Income Tax Act (PITA), and Section 3(1)(b) of the Petroleum Profits Tax Act (PPTA). This power is exercised by a simple issuance of a warrant of distraint by the FIRS.
However, for FIRS to exercise the power to distrain, two conditions must be met: an assessment by the FIRS must be final and conclusive and, secondly, a demand notice must have been served and the time stipulated on the demand notice must have expired without the tax being settled.
On how to get more Nigerians to be tax compliant, Oyedele suggested the use of data. According to him, the way to get people to comply with tax remittances is to ensure that there is the right use of data.
“Data is very powerful in tax collections. Once I have enough information about you, I can determine what you should be paying and I can tell that based on your tax returns. You haven’t submitted what you are supposed to submit and you haven’t paid the right amount of tax and based on the law, I will be able to give you the deadline and also what the consequences are as stated by the law,” he said.
ENDURANCE OKAFOR
