Government agencies as tax evaders

Some of the disincentives come from perception that government officials embezzle much of the taxes they collect, and the benefits are not felt in infrastructure development.  The low rate of payment and collection of taxes is mainly due to government’s reliance on revenue from oil sales.  Because a tax clearance certificate is only required when […]

Some of the disincentives come from perception that government officials embezzle much of the taxes they collect, and the benefits are not felt in infrastructure development.  The low rate of payment and collection of taxes is mainly due to government’s reliance on revenue from oil sales.  Because a tax clearance certificate is only required when doing business with government, majority of the population regard paying taxes as something that should be done by those who enjoy government patronage.   Even if this is the motivation for private individuals not to pay their taxes, there is no excuse for government agencies to do likewise. One of the most consistent accusations levelled against government agencies is the frequent neglect of their financial obligations. Virtually every organization doing business with government complains of huge debts owed them. Paradoxically, among the biggest debtors to government is government itself. This was highlighted by claim by the Federal Inland Revenue Service (FIRS) that such agencies frequently abuse tax laws in their contract awarding processes. At a stakeholders’ forum in Abuja, FIRS acting chairman Alhaji Kabiru Mashi accused the government agencies of engaging in illegal acts to circumvent financial regulations, particularly as they relate to tax clearance certificates. The chairman also noted that FIRS was losing huge revenue through agencies that award contracts to companies without a tax identification number (TIN), so that deductions made for withholding tax or value added tax (VAT) and remitted through banks, are not transferred to the FIRS.  These problems are not new but non-remittances of withholding tax and value added tax are generally considered as means by which agencies reimburse their petty cash accounts.
One area of concern that Mr Mashi failed to highlight in his address is the well-known issue of corrupt practices of some staff members of the FIRS, which hinder its effectiveness. Instead of complaining, the FIRS should be pursuing the collection of taxes vigorously.  The non-payment of taxes should be considered a very serious crime and be dealt with as such. The simple process of conducting random sampling of registered companies, and inspecting their books, will enable the FIRS snare many defaulters. Registering owners of massive estates and luxury buildings across the nation, and bringing them into the tax net and enforcing compliance will surely yield results in tax collection. The Due Process Office, which issues clearance before any contract is awarded, should liaise with the FIRS on any income expected from any agency whenever a contract is awarded. It should not be too difficult in these days of information technology to do away with the cumbersome mode of providing tax clearance certificates for the conduct of government business, and to establish a verification platform on which enquiries can be made directly to the FIRS in real time.
The complaint about consistent non-remittance of monies collected by banks is not tenable. In these days of online banking, it should not be a problem tracking and penalizing any bank that does not transfer due tax remittance to FIRs within 24 hours. The FIRS should also seek powers to investigate bank accounts and verify that the owners have paid the applicable tax. The FIRS should also be proactive in investigating and prosecuting accounting officers of government agencies who connive with their heads to divert funds meant for payment of taxes.