A major hurdle in tax administration in Nigeria is about to be crossed, as the Federal Inland Revenue Service (FIRS) has been mandated by law to refund excess taxes paid by individuals and companies within 90 days.
Taxpayers who have “tax credits” to their account, having overpaid as a result of administrative procedures, have often experienced acute delay in getting refunds—a development that is globally acknowledged as an impediment to voluntary tax compliance.
The FIRS said at the weekend that companies and individual taxpayers would now get refunds within three months in accordance with the FIRS Act 2007.
For the refund, a dedicated account would be opened by the Accountant-General of the Federation, to be administered by the FIRS.
Before the Act came into being, taxpayers usually waited endlessly for refunds which could take up to a year, owing to a very slow and cumbersome process.
As has been the order of the day, taxpayers’ excess funds—in Companies Income Tax, CIT, for example—are treated as tax credits and reflected on such taxpayers’ Kalamazoo cards, and balances were usually carried forward to the following year.
According to Section 23 of the new Act, “There shall be refunded to taxpayers, after proper auditing by the Service, such overpayment of tax as is due.
“The Service shall decide on who is eligible for the refund mentioned in sub-section (1) of this section subject to such rules and conditions as may be approved by the Board.
“Any tax refund shall be made within 90 days of the decision of the Service made pursuant to subsection (2) of this section, with the option of setting off against future tax by the tax payer.
“For the purpose of tax refund, the Accountant of the Federation shall open a dedicated account into which shall be paid monies for settling such refunds.
“The Service shall administer the dedicated account as created by virtue of Section 23 (4).
“For the purpose of the dedicated account, the Service shall prepare an annual budget for tax refund to be funded from the Federation Account as may be approved by the National Assembly.”
Throwing more light on the development, Special Adviser, Communications to the FIRS Executive Chairman, Mr. Wahab Gbadamosi, explained that refund could arise from Withholding Tax (WHT) and Value Added Tax (VAT) deductions—particularly in transactions with government establishments, remittances from VAT, as well as in inter-bank transactions—where tax for VAT could be wrongly credited as Personal Income Tax (PIT).
Pointing out that the refund process differed from the old structure in some respects, he said one of these is that “the FIRS could now determine how much refund is due to a tax payer after auditing and determining the tax liabilities of such taxpayer.”
He recalled that a taxpayer’s quest for refund used to “course at snail speed” through the FIRS, office of the Accountant General of the Federation, before the nod by the Minister of Finance and payment from the Federation Account.
Similarly, the FIRS Act 2007 has criminalised the usage of fake documents for any transaction under the Act. The development, the FIRS said, has signaled a regime of enforcement of stern sanctions for the production, transmission and usage of fake Tax Clearance Certificate, TCC for all forms of business transactions and processes.
The provision is in Section 43 of the Act on Counterfeiting documents, which reads: “Any person who: counterfeits or falsifies any document which is required by or for transaction of any business under this Act or any law listed in the First Schedule to this Act; Knowingly accepts, receives or uses any document so counterfeited or falsified; Alters any document after it is officially issued; Counterfeits any seal, signature initial or other mark or used by, any officer for the verification of such a purpose relating to tax; or being an employee of the Service conspires, connives, or participates in the commission of any of the offences in paragraphs (a) to (d) of this Section, commits an offence and shall be liable on conviction to a fine not exceeding N200, 000 or imprisonment for a term not exceeding three years or both to such fine and imprisonment.”
Gbadamosi noted that “the issuance of Tax Clearance Certificates, TCC, earned national attention this year, when the FIRS requested that the Independent National Electoral Commission, INEC allow it to access the TCC submitted by politicians seeking elective office, to ascertain their genuineness.”
Both chambers of the National Assembly passed the Bill for an Act to establish the FIRS as an autonomous service in February this year. Former President Olusegun Obasanjo signed the bill into law on April 16 2007.
Three other bills signed into law on the same were an Act to amend the Companies Income Tax Act, an Act to amend the Value Added Tax, VAT, an Act to amend the National Automotive Council Act, NACA.
The FIRS Act and the three other amendments to existing tax laws were the first set of Acts and amendments to tax laws by a civilian regime in two decades. All past amendments to tax laws were by military governments. Eight bills were sent to the National Assembly in May 2005.
The Special Adviser said the new FIRS Act gives the service oversight functions over all taxes and levies accruable to the government of the federation, including those taxes accruable to other agencies. The legislations to be administered by the FIRS according to the First Schedule of the FIRS Act are: “Companies and Income Tax Cap 60 LFN, 1990; Petroleum Profits Tax Act Cap 354, LFN,1990; Personal Income Tax Act No 104, 1993; Capital Gains Act Cap 42 LFN, 1990; Value Added Tax Act 1993 No 102, 1993; Stamp Duties Act 411 LFN, 1990 and; Taxies and Levies ( Approved List for Collection) Act 1998. No 2 1998.”
According to him, “the FIRS is expected, to administer all regulations, proclamation, government notices or rules issued in terms of these legislations, all tax related rules/enactments by the National Assembly, taxes and levies within the Federal Capital Territory, FCT as well as all taxes, levies and fees collected by other government agencies and companies.
“Such fees, says the First Schedule of the FIRS Act, include “signature bonus, pipeline fees, penalty for gas flared, depot levies and licences, fees for Oil Exploration Licences (OEL) Oil Mining Licence (OML) Oil Production Licence (OPL), royalties, rents (productive and non productive), fees for licences to operate drilling rigs, fees for oil pipelines, haulage fees, and all such fees prevalent in the oil industry but not limited to the above list.”
Gbadamosi disclosed that under the new Act, banks must provide to FIRS, on demand, all transactions of N5 million by individuals and N10 million by corporate bodies.
Also, according to the new FIRS Act, to strengthen the ability of the service to do its duty, the Search and Seizure procedure has changed.
“Under the new Act, warrants will now be issued by a judicial officer. This could be the Chief Justice of the Federation, President of the court of Appeal, Chief Judge of the Federal High court, Grand Kadi or Kadi of the Sharia Court of Appeal of the Federal Capital Territory, FCT, Abuja or of a state, President or judge of the Customary Court of Appeal, FCT, Abuja or of a state. The FIRS Chairman issued warrants under the old law,” he explained.
From Kunle Aderinokun in Abuja
This Day
Monday, September 10, 2007
