The Federal Inland Revenue Service (FIRS) has disclosed its decision to commence enforcement and recovery of unremitted tax deductions owed by some Ministries, Departments and Agencies in Nigeria.
In a Public Notice, signed by its Executive Chairman, Muhammad Nami, the tax authority noted that most States and Local Governments have failed to remit 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.
Highlighting the Companies’ Income Tax Act (CITA) and the Value Added Tax Act (VATA), Special Assistant to the Executive Chairman, Johannes Oluwatobi Wojuola pointed out that the notice stated that Ministries, Departments and Agencies of Government, as well as Parastatals and other establishments, were mandated by law to deduct certain taxes while making payments to third parties and remit those deductions to the FIRS.
“The provisions of 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), mandate Ministries, Departments and Agencies of Government (MDAs), Parastatals and other establishments to deduct WHT and VAT while making payments to third parties and remit same to the Service.
“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,” the Notice read.
“However, it is regrettable to note 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.
“The implication is the huge tax debts owed by the States and Local Governments.
Due to non-remittance of tax by some States and Local Governments, the FIRS has stated that it will consequently advise the Federal Government to henceforth decline approval of any request for external borrowing and approval for domestic loans from commercial banks or other financial institutions by any of the State and Local Governments with outstanding unremitted tax deductions.
While threatening to publicly name and shame defaulting States and Local Governments by publishing the amounts owed in unremitted tax deductions, the tax authority urged defaulting MDAs to promptly remit all unremitted tax deductions within 30 days of the publication of the Notice to avoid it taking these enforcement actions.
the notice 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.