The FIRS Cannot Demand Taxes before a Self-Assessment is Filed

The Federal Inland Revenue Service (FIRS) placed a paid advertisement in The Guardian of Thursday February 28, 2013 requesting payment of taxes. That regulation cited section 55 of the Companies Income Tax Act (CITA) 2004 (as amended), Laws of the Federation of Nigeria CAP C21. The section cited stipulates the time within which a company is to file its returns. This is essentially within 6 months of financial year end for an existing business. The FIRS then proceeded to demand payment of taxes beginning from January 2013 and final payment to be made on or before 30th June 2013 for companies whose financial year end is after 31st July 2012.

The discerning tax payer should treat this notice with caution
It is curious to note that the FIRS did not mention the 2011 Tax Administration (Self- Assessment) Regulations. This is the Regulation that the FIRS relies on to demand payment of taxes before filing of returns on Self-Assessment basis. The FIRS relied on Section 61 of the FIRS Establishment Act (FIRS Act), to issue the 2011 Tax Administration (Self Assessment) Regulations in December 2011. The Regulations made specific pronouncements on the Companies Income Tax Act (CITA), the Personal Income Tax Act (PITA), the Petroleum Profits Tax Act (PPTA), and the Value Added Tax Act (VATA) among others.

Section 77 of CITA already makes specific provisions on Time within which tax (including Provisional Tax) is to be paid.  It is queer that the FIRS did not cite this section in the advertisement placed in The Guardian. Indeed this is the right place where the tax payer will find guidance on when to pay his taxes and not FIRS notices. Section 77(5) expressly states that “A company filing self assessment shall pay the tax due within two months from the date of filing the assessment in one lump sum or such number of monthly installments (not being more than six) as may be approved by the Board.” This subsection added two provisos. The first was that the last installment must be paid by 30th November of the year of assessment, and the second is that a request for installment payment must be made in writing.

The 2011 Tax Administration (Self- Assessment) Regulations clearly contradicts the above section which is contained in the principal Act.

We therefore advise discerning tax payers to cautiously treat the Revenue’s notice. The principal Act- CITA can only be amended by an Act of the National Assembly and not by a Regulation enacted by FIRS.

The scope of the Regulation was rather curious for some of us since the principal legislation governing the various taxes, the FIRS, was seeking to make new regulations for already had copious pronouncements on the procedure for self assessment. Some of us immediately smelt a rat from the name of the regulation –Self Assessment Regulations.  However, as wisdom has thought us not to judge a book by its cover, we decided to review the details of this “regulation.” Needless to say, the very first sections of this regulation stank to high heavens.  It was evident that those who have never ventured into doing legitimate business put the regulation together. Clearly the objective was to muzzle businesses and increase cash collection. I keep wondering how long it will take for it to sink into the collective consciousness of our Revenue authorities that you must nurse a business before you seek to tax it.

The principal Act –CITA – recognises the primacy of cash to the survival of a business. This is why in the wisdom of those who enacted the Act, the tax payer is allowed to pay whatever is left of his taxes (since he has paid withholding taxes in advance on most of the income in the cause of business during the year) in 6 monthly installments beginning from when he has filed his returns!

Section 14 of this Self Assessment Regulation specifies the particular instances where the FIRS will grant an application for extension of time to file returns to be; among others, on the death of the taxpayer within the filing period; or on the death of the chairman or company secretary or any principal officer or in the event of a natural disaster. Now a principal officer for the purpose of the regulation is not defined.

Section 18 is the most illegal part of this Regulation. It requires that a tax payer should make installment payments by commencing payment in the relevant year of assessment such that the final installment is made by the due date of filing.  In addition, the taxpayer must apply to exercise the right to file on installments and as well file by the due date. Whoever inserted this section must be taking the taxpayer for granted. Section 61 of the FIRS Establishment Act empowers the FIRS Board, with the Approval of the Minister, to “make rules and regulations as in its opinion are necessary or expedient for giving full effect to the provisions of this Act and for the administration of its provisions and may in particular, make regulations prescribing the form for return and other information required under this Act or any other enactment or law, and….” However, this section does not in any way empower the FIRS to amend express provisions of the relevant laws (CITA inclusive).

The Section clearly stipulates that any rules and regulations made by the Board should be for the purpose of giving full effect to the provisions of the Act or any other enactment or law (CITA inclusive), and not to amend or modify the principal legislation. This is trite law

There are still yet more noxious pronouncements. The FIRS now seeks to have its own register of “accredited tax practitioners.” Now I laugh even louder. The regulation specifies that an accredited agent must be certified by ANAN, CITN or ICAN. These are professional associations empowered by the relevant enabling Act to accredit and register qualified practitioners. The Revenue, in this regulation, has assumed the powers of these bodies and will “assess the competence and professionalism of tax representatives.”

Clearly, everyone wants to enlarge their own coast but please do not thread on me. The Revenue has clearly overreached itself. It does not possess the powers it has adduced in this regulation. More importantly, the provisions would stifle legitimate businesses and drive more people underground.

Eben Akinyemi, an Associate of the Institute of Chartered Accountants of Nigeria, is a Partner at the transactions and tax advisory firm, Stransact Partners.