Nigeria to return embargo on tax defaulters’ bank accounts after 30 days
Tax authority in Nigeria, the Federal Inland Revenue Service (FIRS) has said defaulting taxpayers who have no Taxpayer Identification Number (TIN) or those who have and are not paying their taxes with a turnover of N100 Million in their accounts, have only a 30-day reprieve before lien on their accounts will be returned.
The Executive Chairman FIRS, Tunde Fowler, who said this today in Lagos in a meeting with Manufacturers Association of Nigeria (MAN), disclosed that 59, 000 companies who charge Value Added Tax (VAT) and sometimes Withholding Tax (WHT) do not have TIN to remit the VAT or WHT taxes they charge to the FIRS.
Fowler said the banks will return the lien on tax defaulters’ bank accounts after the 30 days grace period. The lien was lifted last Friday 15th February 2019.
Fowler said to ensure tax justice, protect all taxpayers and also ensure that monies deducted from taxpayers in form of VAT or WHT by business owners are properly accounted for and paid into the right treasury, FIRS had to fall back on ordering restriction of defaulters’ bank accounts.
“Initially, the FIRS did not like to be telling all the stories. But now, with calls for clarification, we have to clarify this. I had a meeting with stakeholders last year where we identified, through records from the banks- that some operators who make a turn-over of between N100 million (One Hundred Million Naira) and N1 billion (One Billion Naira), do not have Taxpayer Identification Numbers. But in the course of their businesses, they charge VAT and perhaps WHT. If these companies do not have TIN, it means that they are not paying their taxes and at the same time, they are not remitting the VAT and WHT they charge on taxpayers to appropriate authority, in this case FIRS.
“But sincerely, it is wrong for any company to deduct monies meant for the government and fail to remit them. Then we said, if these people don’t come forward to get TIN and pay appropriate taxes, we will freeze their bank accounts”, Fowler said.
At a stakeholders’ event late last year, Fowler carped about businesses who are doing well in Nigeria but are not fulfilling their civic obligations: “Tax payment is not only for civil servants or salary income earners alone. Millionaires and billionaires, who make income from this economy need to pay taxes. It is not fair for any business or any person who makes an income from this economy not to pay taxes, while others pay.
“Each of us must contribute to the national till. If any taxpayer has the opportunity to make their wealth in this economy, the least they can do is to pay their tax.”
The Executive Chairman also explained that following turn-up of taxpayers to clear their arrears, the FIRS wrote to the banks to lift lien on bank accounts temporarily for a period of 30 day.
“In the last two weeks, the FIRS office was always besieged by taxpayers who want to clear their arrears. It came to a point we could not attend to all of them at the appropriate time. That is why we sent letters to banks to lift the lien for 30 days to enable taxpayers regularise their accounts.”
The FIRS Executive Chairman assured taxpayers that FIRS’ online solutions have put to rest issues associated with delays in receiving notifications after there are transaction on taxpayers’ accounts.
“Just register your company with your e-mails and phone numbers. Once payment is made on your account, you will get a notification immediately. You can go ahead and download and print the notification for presentation before your Tax Clearance Certificates are ready,” Fowler said.
Some of the initiatives the Service is adopting to improve VAT compliance to include: Auto VAT collect, e-Services, VAT certificates, Central VAT filing, VAT coordination, Tax Audit and Investigation, Joint Tax Force, Taxpayer Education and SAG Platform (State Accountant General Platform), the FIRS Chairman said.
FIRS, Fowler promised, would honour proof of WHT deduction by any government agency.
On behalf of the Service, Fowler apologised to the taxpayers whose accounts were frozen in error in the recent exercise. “We also admit that there was an administrative error and some taxpayers’ accounts were frozen in error. We have expressed our apologies to the affected people. On behalf of the Service, I would like to apologise to them again,” he said.
The President, MAN, Engr. Masur Ahmed, on behalf of the association thanked the FIRS for always giving a listening ear to their demands, requesting that the Federal Government may review VAT charges on animal feed.
“It is important that Nigeria should take a cue from other countries who have zero per cent VAT rate on animal feed. The Federal Government should sign an Executive Order and gazette that animal feed should be VAT exempt in Nigeria. This will go a long way to stabilising the economy because VAT charges on animal feed has adverse multiplier effect on the cost of production,” Ahmed said.
VAT revenue disbursed thus: 15% to Federal Government, 50% to State Government and 35% to Local Government, is critical to development projects at all levels of government. The VAT regime in Nigeria has a rate of 5%, while there are zero rated and VAT exempted goods and services.
Section 31 (1-5) of the FIRS Establishment Act empowers FIRS to appoint banks or any taxable person as a collection agent
(1) The Service may by notice in writing appoint any person to be the agent of a taxable person if the circumstances provided in sub section (2) of this section make it expedient to do so. Section 2 says that: “The agent appointed under sub section (1) of this section may be required to pay any tax payable by the taxable person from money which may be held by the agent of the taxable person.
On the other hand, 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.