From the Executive Chairman, Federal Inland Revenue Service, FIRS Tunde Fowler came a stern admonition to the nation’s accountant on Wednesday: don’t go to bed with tax evaders. Rather let’s join hands to build a bigger cake for the nation.
But accountants and lawyers scoffed at Fowler’s admonition, alleging that he was employing strong tactics in getting taxpayers to be tax compliant.
He should abide, in strict terms, with the processes and stipulations of the FIRS Establishment Act 2007, which the FIRS Chairman maintained, is the source of his powers to place lien on the bank accounts of defaulting taxpayers. Fowler should collect taxes by abiding with the Rule of Law, the accountants charged.
It was at the was the 49th Annual Conference of the Institute of Chartered Accountants of Nigeria, ICAN, where Fowler was the keynote speaker at a panel discussion on FIRS Power of Substitution. Critical Review and Matters Arising. It was chaired by former Executive Chairman, FIRS, Ifueko Omoigui Okauru.
As he explained the dynamics involved in the Substitution of Accounts, Fowler urged accountants at the conference to partner with FIRS in order to improve the revenue collection efforts of all tax authorities.
He said, “you play a very important role in this cycle. Without you, the chartered accountants, it will be very difficult to ensure that adequate taxes are being paid. Talking about corruption, corruption is not only when you do something wrong. Sometimes, corruption borders on when you do nothing at all. When you review the books that are brought to you, you do your own internal assessment on what your clients should pay, you are truthful, you drop accounts that are not willing to do the right thing.
“We should realise that the revenue collected by the FIRS is distributed among the three tiers of government: the Federal, State and Local Governments. Today, well over 30 states rely on that monthly collection. Without that monthly collection, you can imagine what life would be in those states.
“We are all here for this conference, certain that chartered accountants came from various states across the nation. If in your state, we were not able to support your revenue drive, what level of security would you have in your state?
“I went to deliver a speech in one West African country. I was asked to come and encourage tax compliance, and I used a very simple example, an example I had used in Lagos, an example that you and I may not have thought about. Under the Joint Tax Board, JTB I went on a visit to a hospital in Lagos. The nurse complained about the high mortality rate of children under five. And I asked what was the main cause, she said ‘malaria’. And I said, so we have malaria medicine, she said ‘yes’. But I found out on that visit that for children, when malaria gets to a certain stage, it becomes irreversible and almost impossible to save that child.
“The cost of that medicine for prevention is N2000. There are people in this country who do not have N2000 to treat malaria. Some pray and hope that the fever will break. But for some, they have no choice and they lose those children. They lose potential presidents. They lose potential political leaders. They lose potential inventors among others. This is endless. But with N2,000 you could save a life.
“For those books that you look at, think about this. If you look at those books, you should know that for every additional N1billion or N2 billion that is collected, even if it is shared at the ratio of 52 per cent, your state and your local government will get the balance. N1 billion could build 10 medical facilities in those states. That is the
impact and power that you have.”
”I am sure you wont allow those not paying taxes to go scot free. Before FIRS voted for lien on bank accounts of defaulting taxpayers, the Service granted a waiver of penalty and interest for three years (2013-2015), followed by the Voluntary Assets Income Declaration Scheme, VAIDS. It was when millionaire and billionaire taxpayers with turnover of between N11 million and N1 billion did not take the opportunity to pay their taxes, that FIRS decided to place lien on the accounts of defaulting taxpayers
“All defaulting taxpayers were considered, provided that such
taxpayers came forward to declare their indebtedness, pay at least 25%
of the outstanding amount and present a payment plan on the
outstanding tax liability that was acceptable to the Service. This
window was opened from 5th October to 24th November, 2016. A total of
2,400 companies took advantage of the window, from which FIRS realized
about N98.8 billion.
“ The last speakers spoke about integrity and vision in public
service. You may have the integrity, you may have the vision, but
without the revenue, it remains a dream. Most of us here like to
complain about what the government has done and what the government
has not done, but even with the best vision and leadership, we still
require revenue and the revenue certainly will come from taxes.
“The Voluntary Assets Declaration Scheme (VAIDS) commenced on 1st
July, 2017 to be run for a period of nine months was formally launched
on the 29th of June, 2017 by the then Acting President, H.E. Yemi
Osinbajo. VAIDS was an initiative designed to encourage voluntary
disclosure of previously undisclosed assets and income for the purpose
of payment of all outstanding tax liabilities. It was implemented by
the FIRS in collaboration with the 36 States and FCT Internal Revenue
Service. It offered a grace period from July 1, 2017 to March 31,
2018, for defaulting taxpayers to voluntarily declare their true tax
status and pay to government what they owe over an agreed period of
time.”
The scheme was expected to help expand Nigeria’s tax base and improve
the low level of tax compliance. So far ₦77 billion out of ₦
92.7billion has been collected from this initiative for federal taxes.
Further to the obligations of the taxpayers, the FIRS has also been
empowered, Fowler said, by Section 8 (1)(a) of the FIRSEA empowers
the Service to assess persons chargeable with tax under the extant tax
laws and enforce payment of taxes as may be due to Government.
Section 8 (1)(c) of the FIRSEA empowers the Service to collect,
recover and pay to the designated account any tax under any provisions
of this Act. Section 8 (1)(g) of the FIRSEA empowers the Service to
adopt measures, to identify, trace, freeze, confiscate or seize
proceeds derived from tax fraud or evasion. The operating words in
this provision, is the “power to adopt measures to address tax fraud
and evasion”.
Section 31 of the FIRS Establishment Act (FIRSEA) provides for the
Power of Substitution which is one of the enforcement powers of the
Service. Section 49 of Companies and Income Tax Act (CITA) also
provides similar powers to the Service.
Section 31 (1-4) of FIRSEA provides:
“(1) The Service may by notice in writing appoint any person to be the
agent of a taxable person if the circumstances provide in sub-section
(2) of this section makes it expedient to do so.
(2) The agent appointed under sub-section (1) of this section may be
required to pay any tax payable by the taxable person from any money
which may be held by the agent of the taxable person.
(3) Where the agent referred to in subsection (2) of this section
defaults, the tax shall be recoverable from him.
(4) For the purposes of this section, 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”.
S 49 (2) (a – d) of FIRSEA provides:
“(2) Where an Offence under this Act is committed by a body corporate
or firm or other association of individuals.
(a) every director, manager, secretary or other similar officer of the
body corporate;
(b) every partner or officer of the firm;
(c) every person concerned in the management of the affairs of the
association; or
(d) every person who was purporting to act in any capacity, commits an
offence and shall be liable to be proceeded against and punished for
the offence in like manner as if he had himself committed the offense,
unless he proves that the act or omission constituting the offence
took place without his knowledge, consent or connivance”.
The Executive Chairman explained that S31 (2) of the FIRS
Establishment Act (FIRSEA) empowers FIRS to substitute. The said
power can be invoked when any tax has become payable. Tax is said to
become payable when the liability has been established, the said
taxpayer is in default of payment of taxes as when due and demand for
the said liability has been made, and adequate opportunity to be heard
has been afforded the taxpayer and the tax payer has refused to pay or
has refused to object to the established tax liability. In such
circumstance, the FIRS is at liberty to substitute by appointing an
agent in place of the tax payer.
Two discussants Wole Obayomi, Head of Tax KPMG in Africa and a
lawyer, Barrister Igonikon Adekunle both maintained that Sections 33
of the FIRS Establishment Act and Section Section 49 of Companies and
Income Tax Act (CITA) grants no such powers to the FIRS.
The Service, both maintained is acting ultra vires and should place
lie on accounts only when there is a definite assessment and when an
assessment has become final and conclusive.
FIRS should try to operate within the law they maintained.
Former FIRS Chairman, Ifueko Omoigui Okauru, who chaired the session
reiterated FIRS’ position that it is acting within the Law and the
objections by accountants and discussants.
She suggested that FIRS and the complaining taxpayers should seek a
middle ground”, possibly through an Ombudsman to address the
complaints of taxpayers.