‘ Employers not filing tax returns on time could be prosecuted’
Special Adviser to the Executive Chairman, Lagos Internal Revenue Service ( LIRS), Tokunbo Akande, in this interview with BENJAMIN ALADE, speaks on the need for employers to file their taxes as and when due, among other issues affecting tax remittance.
Could you give an overview of the yearly tax filing process with the LIRS and how it affects businesses?
THE overview of tax filing starts from what are the obligations of the taxpayer. For the campaign that we are running currently, it is not the taxpayer that is filing, what y ou have are the agents of governments that are f iling – agents of government in the sense that we ha ve employers of labour and employers of services and vendors.
What it means is that those entities that have paid compensation for any form of service to any individual or resident in Lagos that is liable to tax on whose behalf those agents have deducted from the compensation are remitted to the gov - ernment as provided for by the law.
So, I am talking of employers, now, you have employees, you have paid t hem a salary for the preceding year and you have deducted because the law empowers you to do it some portion of that is as taxes, which you have now remitted to the government as at when due. You are now just giving us a report card, just like if you have an agent that manages your estate for you and collects money and then gives you a statement.
So, those same people, entities as well could be corporate entities, could be individual sole proprietorship that has a shop employing about five shopkeepers or what have you. It is also bound that y ou have paid a salar y to those people, your shopkeepers, and you have deducted because the law says you should pay taxes and you have paid to the government. So, those who were paid last year, I paid him N100 and the doctor N15 and the N15 I ha ve paid to the government, these are my receipts, and these are the names of the people that I have paid, these taxes I have deducted from them.
The same thing also applies to them if you have an auditor; a service provider is not an employee of that entity, but just a service provider. And then you have paid monetary compensation to the auditor, you are bound by law to withhold what we call withholding taxes on the five per cent. It is important to render returns on what was done last year to you in terms of tax obligations for those who are employed as employees or whoever was engaged in services as vendors.
What are the benefits of filing taxes promptly?
The benefits are enormous because we are all partners working in the same economy. All we are trying to do is that the law says you should do it. So you should be law- abiding anywhere you are or you find yourself. So the rules that guide us are the constitution and also we have laws. The law says that you must be an agent of the government to do this.
Now, for you to do this, helps with planning because we have comprehensive records of what took place last year. It is important to know your past, which would inform your present and then you can project to the future.
So, essentially what we saying is, let us have the comprehensive records of all the financial and economic transactions that took place last year, so filing can help us to build that database and then also which we will interrogate later on in the year when you and I as individuals who are the taxpayers will also need to file our records.
We can do it now. However, we have a gap of about 90 days up to the 31st of March. So, by the time we can get the records of the agents, we can use them to validate the records of the taxpayers.
Are there consequences for late filing?
The deadline for filing PAYE yearly tax returns with the LIRS is January 31. The penalty or financial penalty is not the main deterrent. The main deterrent is the fact that government agency has a right to prosecute you and conviction. So, why do you want to be designated as a convict for something that has been made easy for you to do? It is not your money and it has nothing to do with you. It is the money for the people that you have employed, and you have deducted on behalf of the government and we are just rendering returns.
Also, you may have paid the money during the year and you are just filling. We know it can be cumbersome and that's why all the reforms that we have done in Lagos State, I can’t speak for other jurisdictions are to make it easier for compliance. Like I always tell people, taxes are things that people don't want to pay but aside from tax itself, you have the cost of compliance.
As a sub- national, in Lagos state, we are operating federal laws. So, we can’t even change the rate or change the law. We can make recommendations to various committee setups, but we don't have direct opportunities to tweak them. But what we can tweak is what we have been doing which is the process of complaint.
Initially, we had loads and loads of pages in Lagos, we first shrunk the format by reducing the number of pages that you have to submit but we have gone further to digitise the system.
So, aside from now digitising the system that allows people to file we have digitize the process itself whereby you can do it from the comfort of your home, just populate, just copy and paste what you