Home Economy FIRS recovers N23b from tax defaulting firms through substitution—Fowler

FIRS recovers N23b from tax defaulting firms through substitution—Fowler

by Business News Report

The Executive Chairman Federal Inland Revenue Service (FIRS) Mr. Babatunde Fowler has said that the service recovered over N23 billion unpaid taxes from the suspended substitution exercise on corporate bank accounts, as a result of the imposition of restriction on the accounts of tax-defaulting organisations. Fowler who was guest speaker at the Manufacturers Association of Nigeria (MAN) Interactive Forum on Tax Matters said that the focus of the exercise was 3,000 firms  deducting Value Added Tax (VAT) and Withholding Tax (WHT) on behalf of the Federal Government without remitting same. 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 said that the suspension of the exercise for 30 days, was informed by the deluge of corporate taxpayers visiting FIRS offices to regularise 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 regularise their tax status within 30 days and begin to make arrangements for the liquidation of their tax liabilities.

According to the FIRS chief, 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.

He said “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. Service made some administrative errors, which made banks place restrictions on accounts of a few companies with tax identification. 

This, he said, arose from wrong information from the banks. But restrictions on such, he added, were lifted within 24 hours in addition to tendering of formal apology to those impacted. He said that the non-oil sector contributed about 54 per cent of the N5.32 trillion revenue it generated in 2018. Fowler noted that the manufacturing sector and other sectors under non-oil sector have overtaken the oil sector in contributing immensely in terms of revenue generation to the nation’s economic growth. He said that the Ease of Paying Taxes sub index under the World Bank’s Ease of doing business ranking shows that Nigeria currently ranks 171 out of 190 countries, having moved up 11 places from its 2017 ranking.

According to him, several initiatives were evolved to improve revenue collection and compliance, while reducing the cost of collection. He said that the agency has lifted the lien placed on tax defaulters bank accounts for 30 days to allow them regularise their tax positions, while apologising to businesses that were wrongfully affected by the accounts freeze. Fowler criticised the perfidy of businesses who collect Value Added Tax (VAT) and fail to remit to government, saying era of tax evasion was over. He said that FIRS in collaboration with the Joint tax Board and the Small and Medium Enterprises Development Agency of Nigeria (SNEDAN) forged a partnership to improve the level of voluntary tax compliance by operators in the Micro, Small and Medium Enterprises sector. Fowler said that to support the growth of the sector, interests and penalties for unremitted taxes were waived for tax defaulters, a proposed special tax regime was being developed and commitment to patronise 40 per cent of locally produced goods. The FIRS boss pledge its commitment and support to engage more with the private sector, especially manufacturers, in its operation, assessment and development of the nation’s economy.

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