The Federal Inland Revenue Service (FIRS) has generated over N23billion in unpaid taxes from the recently suspended substitution exercise on corporate bank accounts, which was marked by the imposition of restriction on the accounts of tax-defaulting organisations.
This was disclosed in Lagos on Thursday by Mr. Babatunde Fowler, the FIRS Chairman. The FIRS boss made the disclosure at the Manufacturers Association of Nigeria (MAN) Interactive Forum on Tax Matters. Fowler, who was guest speaker at the event, which held at the MAN House in Ikeja, explained that the focus of exercise were 3,000 companies deducting Value Added Tax (VAT) and Withholding Tax (WHT) on behalf of the Federal Government without remitting such.
The companies, he said, had no tax identification and therefore could not remit the deducted taxes to government, making them treat such deductions as part of their cash flow.
Fowler stated that the suspension of the exercise for 30 days, announced last weekend, was occasioned by the deluge of corporate taxpayers visiting FIRS offices to regularize their tax affairs and make payments, a situation that stretched the Service administratively, as it could not lift the lien on their accounts as quickly as it wished. Thus, the FIRS directed banks to lift restrictions on such accounts to allow affected tax companies regularize their tax status within 30 days and begin to make arrangements for the liquidation of their tax liabilities.
According to the FIRS Chairman, the Service’s decision to place lien on accounts of businesses, corporate organisations and partnerships with an annual banking turnover in excess of N1billion, but without tax identification, was announced at a stakeholders’ meeting last September.
“Our position was that if you charge VAT, which is not your money; or deduct Withholding Tax from vendors and you have no tax identification, you cannot even pay tax to the FIRS because you can’t pay without tax identification. So these operators were defrauding the society and the nation by charging consumers VAT, by deducting Withholding Tax and not remitting on behalf of other taxpayers. We had over 3,000 of such and we said if they do not come forward, we’d follow the law and do what they call substitution. Now, what the Act actually says is that the banks should deduct the amount of taxes from accounts. We, however, told the banks not to deduct the amounts, but put a lien on those accounts and let the taxpayers come forward. And till date, over N23billion has been paid on those accounts,” he said.
Fowler added that the FIRS also noticed that operators that had banking turnover of between N100million and N1billion were equally guilty. The FIRS, he disclosed, received information from banks that there are 59,000 of such operators, who are without tax identification and have not been making payments to the Federation Account.
Fowler stated that the decision to place restrictions on accounts was taken to protect taxpayers, who had Withholding Tax deducted from their contracts, and consumers, who paid unremitted VAT.
He stated that 85 per cent of VAT goes to the states, which need them for salaries and other obligations. He equally stated that during the implementation of the Voluntary Assets and Income Declaration Scheme (VAIDS), it was discovered that 50 per cent of the N96billion tax debt was related to VAT.
Responding to MAN President, Engr. Mansur Ahmed’s plea that the FIRS should expand the tax net and not the tax burden, Fowler said the restrictions placed on corporate accounts have helped achieve the former.
In addition, he disclosed that in the last 18 months, the FIRS has added over 1.2million business accounts to the tax net and under the Joint Tax Board, which he chairs, over 1million individual accounts have been added.
The FIRS Chairman, however, admitted that the Service made some administrative errors, which made banks place restrictions on accounts of a few companies with tax identification. This, he explained, arose from wrong information from the banks. But restrictions on such, he added, were lifted within 24 hours in addition to the tendering of formal apology to those impacted.