KPMG welcomes directive to unfreeze tax defaulters’ accounts for 30 days

Tax advisory services company KPMG Nigeria has commended the Federal Inland Revenue Service (FIRS) for directing banks to suspend its lien on bank accounts of alleged tax defaulters for a period of 30 days with immediate effect.

The directive  through its letter dated February 15, 2019 became necessary to allow the affected large number of taxpayers with frozen bank accounts to regularise their tax positions and alleviate the inconveniences they are going through.

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FIRS however, made the announcement in a statement posted on its official Twitter account Friday night.

The agency explained that it issued the directive because of the large number of taxpayers, who have besieged its offices in their bid to regularize their tax positions and the inconveniences they are going through.

The firm said this is a welcome development as the suspension should allow the banks to notify their customers of the directive so that they can engage with the FIRS to resolve their outstanding tax issues, and enable a positive outcome for all the parties. “While it is doubtful that the 30-day window would be sufficient to resolve the disputes involving the acknowledged large number of affected taxpayers, it is a positive response by the FIRS to complaints from taxpayers and other stakeholders, and a demonstration of its willingness to engage with them when occasions demand.

“It is expected that the FIRS will use the opportunity of the break to refine the process of exercising its statutory power of substitution in a manner that respects taxpayers’ rights and ensures that the sanctity of bank-customer relationship is not jeopardized.

“Doing this will repair any damage that might have been done, and thereby revamp the credibility of the Nigerian tax system and restore investors’ confidence in the economy,” KPMG stated in a note to clients.

It should be remembered that the FIRS recently issued Letters of Substitution, pursuant to Section 49 of the Companies Income Tax Act (CITA) 2004 and Section 31 of the Federal Inland Revenue Service Establishment Act (FIRSEA) 2007, to banks in Nigeria, appointing them as tax collecting agents for certain listed customers maintaining bank accounts with such banks.

The FIRS, in the said Letters of Substitution, alleged that the affected companies have breached their tax obligations by failing to pay tax to the FIRS, as and when due, and provided the SBs with an indication of a specific amount owed by each said company. The SBs were directed to set aside the indicated sums and pay such over to the FIRS in full or partial payment of the alleged tax debt.

KPMG advisory services had on Thursday stated that FIRS has gone draconian by giving fiats to banks to freeze accounts of suspected tax defaulters.

It had regretted that the practice whereby the FIRS issues fiats to freeze taxpayers’ bank accounts generally and to demand that banks pay alleged outstanding tax liabilities from customers’ bank balances without recourse to affected persons, is draconian.

This will cast doubt on the Federal Government’s drive to improve the ease of doing business in Nigeria, diminish the credibility of the Nigerian tax system, and erode investors’ confidence in the Nigerian economy,” the for wrote in a an explanatory note.

It however stated that taxpayers must also ensure that they fulfil their civic obligations by paying the right amount of taxes and filing relevant tax returns with the tax authorities, as and when due.