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FIRS adopts new strategies to recover unpaid taxes

By on August 10, 2015

As the current administration plots better ways of boosting its revenue generation through improved yields from taxation, Acting Chairman of the Federal Inland Revenue Services (FIRS), Mr. Sunday Ogungbesan,  said  his agency had decided to adopt a persuasive approach because closing down premises of tax defaulting companies had been counterproductive to the economy.
He disclosed that out of about 450,000 registered corporate entities in Nigeria, only 125,000 of them, (amounting to 27.7 per cent) pay taxes.
Ogungbesan, who described the other 72.3 per cent of the defaulting registered companies as comprising majorly of suitcase companies, however, expressed the determination of the tax agency which he superintends to significantly increase tax yields by January 2016 through negotiation and persuasion.
But the FIRS chief executive said in spite of the appalling level of compliance, the tax agency is not likely to adopt the policy of naming and shaming of tax defaulters or shutting down business premises to enforce payment of tax, saying previous attempts resulted in serious strains on the overall economy.
Ogungbesan, who addressed business editors of major national newspapers at the weekend, said experience had shown that it was futile to attempt to embarrass Nigerians in order to force them to meet their obligations.
He said: “One day, we decided to embarrass tax defaulters. In order to do this, we engaged an orchestra, and determined that anywhere we saw tax payers that were not complying; we would go to their offices and start beating drums to shame them. We stole that idea from India. In India, if you are a tax defaulter and they come to your front yard to start beating the drum, it is a pathetic thing. Nobody will take you serious again. I’m telling you in all honesty, when we did that here in Nigeria, those we wanted to embarrass came out and started dancing seriously. We wasted our money. We will never try that again because it was a wrong strategy because Nigerians love to dance.”
He said similar effort to publish the names of defaulters in newspapers did not work as well.
“We did a due diligence and went to Corporate Affairs Commission to clear the names of the companies before we put them in newspapers. Some of them came back and say, why are you embarrassing us. Look at the results, I have been paying. It means we didn’t do due diligence properly. It has its costs. So why do I have to publish your name when I know I can engage you. I want to make friends. I don’t want to fight with anyone,” he said.
On why the FIRS also decided to be less confrontational, Ogungbesan said business closure would be counterproductive because of the immediate effects of such a measure on the affected organisations, their employees, the services they render and to the nation’s Gross Domestic Product (GDP).
He disclosed that there was a time the agency decided to clamp down on some airlines but that decision did not go well with some foreign affiliates of such airlines as there were threats by the foreign partners to severe relationship with the local operators.
According to the FIRS chief, closing companies over tax issues will amount to loss of manpower and labour. “It will affect the GDP. When I was appointed the chairman, I was thinking it is our responsibility to seal up companies that fail to pay tax. But we sat down and say if we seal up a company, what will happen to manpower and their services? Then we were cautioned because it will affect the GDP, it will affect people who are working in that organisation. You will be denying the public the value of the good. That was when we said,  no don’t let us go that way. This is a modern environment even if our people are not complying let us find other ways of doing it. That is why we started to engage these taxpayers,” he explained.
Ogungbesan said the FIRS had bent down to a large extent to allow tax payers pay by instalments, saying collecting the payment in bits is far better than non-payment. He said: “You can pay in instalments. Many things have been introduced. The law allows you to pay in a maximum of six instalments but I’m ready to allow the companies pay even in 20 instalments and we will make sure that we eventually recover our money. You cannot kill their businesses but if we are forced to use force, we won’t hesitate.”
FIRS, according to him, is implementing various initiatives aimed at mitigating the drop in government revenue occasioned by fall in global oil prices.
The initiatives include automation, which manifests through the introduction of the Integrated Tax Administration System (ITAS); automation of taxpayer registration and issuance of Tax Identification Number to about 1,189,722 corporate and individual taxpayers and the introduction of an   automated system for tracking and remittance of Value Added Tax from key sectors.
FIRS has also introduced e-tax pay platform, which is an online electronic system of tax payment, which enables online payment and monitoring in real-time.
The agency is also said to be collaborating with Office of the Accountant General of the Federation to ensure source deduction and remittance of taxes from government contracts and of employees’ emoluments, among others.