The Federal Inland Revenue Service has issued a notification to all the States and Local Governments of the Federation and the general public that it will commence the process of enforcement and recovery of unremitted tax deductions owed by some States and Local Governments in Nigeria.
The provisions of Sections 78(3), 79(3), 81 of the Companies Income Tax Act (CITA), and Sections 91, 3(T) of the Value Added Tax Act (VATA), mandate Ministries, Departments and Agencies of Government (MDAs), Parastatals and other establishments to deduct With-Holding Tax and VAT while making payments to third parties and remit same to the Service.
In a statement issued on Wednesday and signed by the Executive Chairman of the FIRS, Muhammad Nami, the Service stated that 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 twenty one days.
However, Nami said in the statement expressed regret that most of the States and Local Governments have failed in their responsibilities of remitting WHT and VAT deducted from payments made to contractors and service providers as required by law.
He said the implication is the huge tax debts owed by the States and Local Governments.
He said, “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.
“Consequently, the Service has resolved to take the following steps to recover all unremitted tax deductions by the States and Local Governments:
“Advise the Federal Government and the Honourable Minister of Finance, to henceforth decline approval of any request for issuance of state bonds/other securities in the capital market; request for external borrowing: and approval for domestic loans from commercial banks/ether financial institutions by any of the State and Local Governments with outstanding unremitted tax deductions.
“By publicly naming and shaming defaulting States and Local Governments with the amount of unremitted tax deductions; and Invoke the provisions of Section 24 of the Federal Inland Revenue Service (Establishment) Act 2007 as amended, 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 thereafter transfer such deductions to the Federation Account and notify the Service.”
Nami admonished all defaulting States and Local Governments to promptly remit all unremitted tax deductions within 30 days to avoid enforcement actions.