For many watchers of Nigeria’s financial space, the many recent successes recorded by the Federal Inland Revenue Service (Nigeria’s central tax authority) in raising the country’s tax receipts, particularly non-oil collection, is no news. This has been particularly helpful in driving the country’s economic recovery and reinforcing Government’s efforts in making the economy’s fortune less dependent on changes in the price of oil on the international market and its attendant headaches. In spite of a contraction of the economy by 0.8% in 2016 and 2017, the Federal Inland Revenue Service (FIRS) was able to grow tax collections by 7.7% over the same period. Also, in 2015 non-oil receipts for the first time in the economy’s petrol-based history accounted for the largest bulk of the country’s tax receipts; a trend the FIRS has been able to sustain in spite of rising crude oil prices.

Behind the Revenue’s success are a number of novel practices introduced by the Revenue in driving tax revenue mobilisation, some of which have been controversial. A number of tax experts have openly called into question the appropriateness and legal validity of some of these practices with little or no sign the Authorities are listening or giving thoughts to these concerns. Indeed, it appears the Government is willing to overlook these criticisms if the FIRS can continue to improve its collections. Perhaps it believes the end does justify the means. For quite a number of reasons, the Authorities should be concerned about these practices.

A quite controversial practice has been the FIRS enforcement action. The FIRS recently began demanding that banks remit taxes believed to be owed to it by “suspected” tax defaulters who are the bank’s customers. Customers have complained that they were only notified of their tax liability after notices have been sent to their banks requesting that the bank hand over their monies as tax due to the FIRS or the banks will be deemed liable for the same sum. Facing the threat of being held liable for Customer taxes and not wanting to hand over Customers’ monies to the FIRS as tax liabilities for which they are unable to validate by reference to tax judgment arising from proper arbitration process or customers consent, many banks have opted to freeze these accounts, asking these customers to make good their case with the FIRS before they can once again access their bank accounts. The manner in which the FIRS has gone about this engagement could reasonably have been expected to lead to the distrainment of taxpayers’ assets. Notwithstanding this outcome, the FIRS has persisted with this approach.

While the FIRS has not publicly provided any legal basis for its action, it appears to be relying on Section 31 of the FIRS Establishment Act, which empowers the Revenue to appoint a person to remit tax on behalf of a taxable person from any monies kept in his/her custody payable by the taxable person to the FIRS. While the law duly grants the FIRS the power to engage banks as collection agents, Sections 31(5) of the FIRS Establishment Act and 86(1) of the Companies Income Tax Act clearly indicates that the right of a taxpayers to object and obtain a final and conclusive settlement must be respected before the Revenue can enforce any payment or distrain the taxpayer of any of his assets. The Government and other regulatory authorities should be concerned about this clear violation of the law for a number of reasons:

Freezing a taxpayers bank account as the first step of tax dispute settlement, borders on coercion and does not allow for an objective settlement of tax disputes. It puts the taxpayer under duress and attempts to rob them of their right to fair arbitration as envisage under the tax law. It is akin to torturing a suspect to confess to a crime. Yes, there will be a rise in convictions, but then you would have put a lot of suspects in a worse-off position than they deserve to be in if they had only had a fair trial.

It also does not serve to strengthen the spirit of partnership that should exist between the private sector and the FIRS. A relationship shaped by the Revenue’s perceived ability to go beyond the limits of the law will create a cat and mouse relationship which does not serve the interest of the Revenue.

Business day

There are also implications for the economy – freezing a business bank account even for a few days without recourse to known legal procedures could put such businesses in jeopardy, threatening growth, profitability, jobs or even the survival of the business. When put within the context of the Nation’s economy, this could put the Nation’s economic recovery at risk. Nigeria only grew at a marginal rate of 1.5% (down from 1.9% in Q1).

There are also implications for foreign investment in the economy. FDI statistics recently released by the Nigerian Bureau of Statistics (NBS) showed foreign investment slowed down in Q2 by 12.53% when compared to Q1 and still significantly falls below pre-recession levels. Perception of how well the Company’s rights are protected is a key factor considered by investors before deciding where to invest their funds. Measures take which could easily be seen as an over-reach of the law could easily dampen the investment appeal of Africa’s largest economy.

The FIRS and the authorities should not just focus on growing the tax numbers but also give thoughts to the appropriateness of methods used to achieve these numbers as they can have a medium to long-term detriment on the Nation.

Oluwarotimi Akintade is a tax specialist in one of the Country’s largest FMCG

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  1. Thanks a lot. I dont think there will be anything wrong if , instead of these coercive methods, the agreed tax debts of these companies are treated as an interest-free, long-term loan to them and terms of payment tied to when profits are made. If we were forgiven a massive debt in 2005 by the World bank, why not forgive our own debtors? What is the point taxing the country into another recession? Yes, there are tax laws but our case here is peculiar and expediency demands we improvise afterall where are the infrastructures to support these businesses? How enabling is the environment? What contributions has government made? If provision of employment is a responsibility of government (in which it has failed) why fighting those helping out? Besides, what assurance has been given that these funds will not go take flight to Switzerland or descend into somebody’s basement? What has been done to build confidence in the Government? What efforts has been made in reducing the cost of Governance?


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