In keeping to its words as announced earlier in the month, the Federal Inland Revenue Service (FIRS) will next month, begin a nationwide check of compliance to Value Added Tax (VAT) and Withholding Tax (WHT) by taxable persons and entities between 2016 to 2020.
FIRS Executive Chairman, Muhammad Nami announced the exercise that is coming on the heels of a June 1 notice by the Service, will cover private companies, government parastatals and tiers of government with huge unremitted tax deductions owed the Federation.
Nami, in a June 1 public notice announced that the FIRS will by July begin to recover unremitted tax deductions from some defaulting States and Local Governments in the country.
Alternatively, Nami warned that the agency will recommend that the federal government withhold approval of allocations to the defaulting tiers of government amongst other sanctions which the FIRS ones.
In a fresh notice on Friday, the Tax agency said the July VAT and Withholding Tax Compliance Monitoring exercise will involve FIRS officials visiting selected taxpayers and taxable persons to review their VAT and Withholding Tax records.
“The Federal Inland Revenue Service (FIRS) shall embark on a nationwide VAT and WHT compliance monitoring exercise with effect from July 1, 2022,” the notice reads.
“As a result, teams of officers from the Service shall visit selected taxpayers, taxable persons including companies, NGOs or MDAs to review their VAT and WHT records.”
In the notice, Muhammad Nami also highlighted that the exercise will cover the 2016 to 2020 accounting years for taxable persons whose records have been audited by the Service up to the 2015 accounting year.
He however noted that for taxpayers whose records have not been audited by the Service up to 2015, the exercise will be extended to include the prior years that have not been tax audited.
The Service also called on all taxable persons and tax agents to immediately remit deductions of VAT and Withholding Tax they have made on its behalf.
“All taxable persons or tax agents who have made deductions of VAT or WHT on behalf of the Service are required to immediately remit all such deductions to the FIRS within two weeks of this publication.”
The notice also stated that those who would be visited during the monitoring exercise will be notified and informed of the required documents for review beforehand.
It would be recalled that the FIRS last week announced that some states and local governments had refused to adopt the e-payment platforms provided by it for a seamless deduction and remittance of these taxes.
Consequently, those States and Local Governments and parastatals have failed to remit to the Service, Withholding Tax (WHT) and Value Added Tax (VAT) deductions from payments made to contractors and service providers by them as required by law.
States and local governments are by law mandated to deduct certain taxes while making payments to third parties and remit those deductions to the FIRS according to sections 78(3), 79(3), 81 of the Companies Income Tax Act (CITA), and Sections 9(I), 13(1) of the Value Added Tax Act (VATA).
By the provisions of the relevant laws, States and Local Governments are statutorily mandated, as agents of collection, to deduct at source and remit to the Service, all taxes deducted, within 21 days.
The notice further stated that most States and Local Governments continue to default on this leading to huge tax indebtedness despite several appeals by the federal tax agency.
“All entreaties by the Service to ensure the remittance of the established unremitted tax deductions by the defaulting States and Local Governments have been unsuccessful as a result of lack of cooperation in adopting the e-payment platforms provided by the FIRS for a seamless deduction and remittance of these taxes.”
The tax authority stated that it would also publicly name and shame the defaulting States and Local Governments while publishing the amounts owed in unremitted tax deductions.
It further stated that it would also invoke the provisions of Section 24 of its Establishment Act which empowers the Accountant General of the Federation to deduct at source, from the monthly FAAC allocations, un-remitted taxes due from any government agency and to thereafter transfer such deductions to the Federation Account and notify the Service.
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