LCCI warns FIRS against adopting tax revenue recovery strategy
THE Lagos Chamber of Commerce and Industry (LCCI) has kicked against the decision of the Federal Inland Revenue Service [FIRS] to appoint banks as collecting agents and subsequent freezing of the accounts of taxpayers considered to be in default of tax payment.
By invoking the powers empowered on it, the collecting agents appointed by the FIRS can debit a defaulting taxpayer’s account to the tune of the alleged tax debt.
Though section 31 of the FIRS Act empowers the tax agency to appoint collection agents for the recovery of tax payable by the taxpayer, the LCCI describes the imple- mentation of the provision as draconian and one that could be used as a tool of intimidation, coercion and harassment of taxpayers.
The FIRS had on Tuesday started writing to banks to appoint them as collection agents of taxpayers considered to be in default of tax payments. In order to achieve this, the FIRS is directing the relevant banks to freeze the accounts of the taxpayers to prevent them from drawing funds from the accounts.
According to the LCCI, its concern is as a result of the recent turn of events, especially the freezing of accounts of bank customers based on tax assessments that are in dispute.
The chamber noted that these are not the best of times for investors in the economy, as many businesses are reeling under a huge burden of high cost of doing businesses, through high energy cost, astronomical cost of logistics, huge regulatory compliance cost, exorbitant property tax, outrageous cost of funds, multitude of taxes and levies imposed by the states and local governments, high import duty, excruciating conditions at the Lagos Ports and the challenges of corruption.
The LCCI therefore urged the FIRS and the banks to exercise utmost restraint in the adoption of the tax revenue recov- ery strategy because of the grave implications for investors and the economy, adding that the damage to the economy may be much more than the contemplated revenue.
“The LCCI is a strong proponent of regulatory compliance by private sector players. However, it is important to underscore the fact that tax administration should be in consonance with the basic tenets of the rule of law and the fundamental principles of a good tax system. Tax administration should be consistent with the basic principles of equity, fairness, legality and accountability.
“This development raises a number of key concerns bor- dering on whether the claim of tax liability by the FIRS of the affected investors applies to a final and conclusive assessment which should be an outcome of an exhaustive engagement between the tax authorities and the taxpayer; the propriety of appointing banks as ‘Collecting Agents’ by the FIRS, given the strategic and catalytic role of the banking system in business operations, financial intermediation and transactions among economic players.
“The development also raises issues about the legality of freezing the accounts of bank customers by the banks on the directive of FIRS for alleged tax liability, given the contractual relationship between the banks and their customers as well as the appropriateness of imposing a lien on funds which may not necessarily belong to the alleged defaulting company. There is a preponderance of third party funds in the accounts of many businesses, among others”, the Chamber said in a statement by its DirectorGeneral, Muda Yusuf.