May 21, 2024

FIRS Threatens States, LGAs over Unremitted Tax Deductions

The Federal Inland Rev­enue Service (FIRS) has threatened states and local governments that it would advise the Ac­countant-General of the Federation to deduct at source, from the month­ly FAAC allocations, un­remitted taxes due from any government agency.

This decision is con­tained in a public notice signed by its Executive Chairman, Muhammad Nami, where 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, reports Daily Independent.

A statement by the Special Assistant to the Executive Chairman, Johannes Oluwa­tobi Wojuola, indicated that the notice, highlighting rele­vant portions of the Compa­nies Income Tax Act (CITA) and the Value Added Tax Act (VATA), 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.

It further stated that most states and local governments have failed to comply with these provisions of the law, despite appeals from the FIRS.

“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.

“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.”

FIRS stated that it will con­sequently advise the Federal Government and the Minister of Finance, to henceforth de­cline approval of any request for the issuance of state bonds or other securities in the capi­tal market; as well as requests 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.

The tax authority said it would also publicly name and shame the defaulting states and local governments while publishing the amounts owed in unremitted tax deductions.

It 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.

The FIRS called on all de­faulting states and local gov­ernments to promptly remit all unremitted tax deductions within 30 days of the publi­cation of the notice to avoid it taking these enforcement actions.


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