States and Local Governments still owing the Federal Government unremitted tax deductions are to account for them as the Federal Inland Revenue Service (FIRS) says it would soon kickstart the enforcement and recovery process.
The revenue service said in a Public Notice by its Chairman, Muhammad Nami, said most States and Local Governments have failed to remit to its coffers Withholding Tax (WHT) and Value Added Tax (VAT) deductions from payments by them to contractors and service providers as required by law.
The public notice highlighted the relevant portions of the Companies Income Tax Act (CITA) and the Value Added Tax Act (VATA) mandating government Ministries, Departments and Agencies as well as Parastatals and other establishments to deduct certain taxes from payments to third parties and remit same 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 collection agents, to deduct at source and remit to the Service, all taxes deducted, within 21 days,” the FIRS notice read.
Also, the FIRS accused most States and Local Governments of failure to comply with these provisions of the law, despite appeals from it.
Expressing regrets over the misconduct of most of the States and Local Governments that have failed in their responsibilities of remitting WHT and VAT deducted from payments made to contractors and service providers as required by law, the FIRS drew their attention to the implication of the huge tax debts the government’s revenue drive.
“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 FIRS said.
Consequently, the Service warned that failure to remit by defaulting States and Local Governments would attract serious sanctions
The sanctions, the FIRS said, include an advice to the Federal Government and the Office of the Minister of Finance, Budget and National Planning to henceforth decline approval of any request for the issuance of state bonds or other securities in the capital market for the defaulting States and Local Governments as well as requests for external borrowing and approval for domestic loans from commercial banks or other financial institutions.
The tax authority also threatened to publicly name and shame the defaulting States and Local Governments, while publishing the amounts owed in unremitted tax deductions standing against them in the public records.
Besides, the FIRS said 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 allocations from the Federation Account Allocation Committee unremitted value for taxes due from any government agency and to thereafter transfer such deductions to the Federation Account and notify the Service.
“All defaulting States and Local Governments are to promptly remit all unremitted tax deductions within 30 days of the publication of this Notice to avoid unpleasant consequences these enforcement actions would bring’, the FIRS warned.