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VAT: States, LGs to lose access to foreign, domestic loans, amid FIRS face-off

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2 years ago

June 2, 2022

The Federal Inland Revenue Service (FIRS) has threatened to prevent states and local governments from obtaining loans due to their failure to remit Withholding Tax and Value Added Tax (VAT) to the tax agency.

The unremitted tax are from contractors and service providers, which the FIRS said the law mandates states to remit into the coffers of the tax administration, but the states rejected implementation of the e-payment platform.

According to a statement released on Tuesday, signed by its Executive Chairman, Muhammad Nami, to enforce the tax deduction, FIRS said it would compel the Federal Government against accepting states and local governments requests for the issuance of bonds or other securities.

FIRS also plans to sanction the defaulting states and local governments by blocking their request for external loans, and application for domestic loans from commercial banks.

Part of the tax administrators effort to recover the tax debt includes plan to deduct unremitted tax from the monthly Federation Account Allocation Committee (FAAC), as well as name and shame the states and local governments owing tax to FIRS.

In the statement by Nami, it was stated that FIRS will “invoke provision of Section 24 of its Establishment Act, which empowers the Accountant General of the Federation to deduct at source, unremitted taxes due from any government agency from the monthly federation account allocation committee (FAAC), and, to thereafter, transfer such deductions to the federation account and notify the tax authority”.

Recall that the state governments and the FIRS have been at loggerheads over VAT, taking the Federal tax agency to court over which tier of government has the power to hold the VAT.

It had been judged unconstitutional, by the Federal High Court in Port Harcourt, Rivers State, for the FIRS to receive VAT and personal income tax in Rivers State, which affects other states in Nigeria.

In order to get ahead of the unfavourable judgement, the Minister of Finance and National Planning, Zainab Ahmed, told Channels TV, in November, that the FG was considering an out-of-court settlement.

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