The Lagos Chamber of Commerce and Industry (LCCI) has described the new tax revenue recovery strategy being adopted by the Federal Inland Revenue Service (FIRS) to boost collections as not supportive to productive activities in the country.
Specifically, the Director-General of LCCI, Mr. Muda Yusuf, who expressed the organized private sector (OPS) group’s position on the nex tax collection regime characterised by the freezing of customers’ bank accounts based on “disputed tax assessments’’ , said that the approach remained a threat to the growth of the nation’s economy.
Yusuf stated: “The attention of LCCI has been drawn to the recent decision of FIRS to appoint banks as collecting agents and subsequent freezing of the accounts of taxpayers considered to be in default of tax payment. Such an account will be debited to the tune of the alleged tax debt.”
The LCCI boss noted that although the enabling Act in its Section 31 gave power to the Service to appoint collection agents, adopting the approach would subject the tax payer to intimidation and other pressures that will constitute a burden in the long run.
He explained further: “It gives FIRS power to appoint collection agents for the recovery of tax payable by the taxpayer. “Under the provision, such an agent will be mandated to pay any tax payable by the taxpayer from any money held by the agent on behalf of the taxpayer.
“This provision is draconian and can be used as a tool of intimidation, coercion and harassment of taxpayers. It should be invoked with utmost discretion and caution”, Yusuf added.
Similarly, he pointed out that freezing of customers’ account raised concerns on whether the claim of tax liability by the FIRS of the affected investors applies to a final and conclusive assessment as well as concerns on which should be an outcome of an exhaustive engagement between the tax authorities and the taxpayer, among others.
The OPS top shot wondered if ever this has happened in some of the cases to which this provision has been invoked.
Yusuf noted that the disruption to businesses of account holders of a sudden freezing of accounts for reasons of alleged default in tax payment can cause substantial reputation damage to businesses.
In addition, the LCCI boss explained that the move also posed a risk to financial inclusion, as some SMEs might avoid the use of banks for their transactions and might also affect liquidity in the banking system with the attendant adverse implications for investors’ confidence in the economy resulting from a negative perception about tax administration in the country.
He said: “The damage to the economy may be much more than the contemplated revenue. Revenue generation is not an end in itself; it is a means to an end and the ultimate objective is to ensure equity, improve welfare of citizens, create jobs and promote advancement of the economy.”
Yusuf identified some other factors that continued to undermine the growth of the economy as high energy cost, astronomical cost of logistics and multitude of taxes and levies imposed by the state and local governments.
He therefore advised the FIRS and banks to exercise restraint in the adoption of such tax revenue recovery strategy in view of the implications for investors and the economy.
