ICAN 49th Annual Accountants’ Conference Points Way Forward for FIRS’ Power of Substitution.

One of the major issues that was examined during the just concluded 49th Annual Accountants’ Conference which may help strengthen the nation’s fiscal environment is how the tax authority extracts obedience from taxable individuals and corporate bodies.

While the conference recognized that the Federal Inland Revenue Service (FIRS) was mandated by law to collect taxes from taxable persons and corporate bodies, it suggested that this must be done within the ambit of the law.

Participants such as Mr. Wole Obayomi, Head of Tax, KPMG in Africa and Mrs. Igonikon Adekunle a legal practitioner insisted that FIRS must respect and follow due process in exercising the power of substitution which allows it to go after organizations and individuals owing tax.

She wondered whether the power of substitution empowers the FIRS to place lien on the bank accounts of suspected tax defaulters without a valid court order. According to her, the power of substitution does not override the use of due process and she pointed out that placing a lien on an account for failure to pay tax may be an excessive measure as the business is technically suspended.

In his submission Mr. Obayomi explained that tax payers are not meant to be taken by surprise, implying that they must be given ample time to contest their tax liabilities if they chose to do so before the FIRS could invoke the power of substitution.

For government to pursue an alleged tax offender, a specific amount must have been assessed and must be due for payment, he argued, pointing out that where a specific tax liability has not been established, it might amount to jumping the gun if the power of substitution is exercised by the FIRS.

Speaking further he said that tax is not payable until due process is exhausted and agreed with Mrs. Adekunle that this includes the right to contest the assessed amount.

He advised FIRS to ensure that it uses the power of substitution for tax payers whose liabilities have been established and called for the amendment of the law to allow the agency to go after those that have not filed tax returns.

In his response the Executive Chairman FIRS Mr. Babatunde Fowler said the FIRS invokes the power when tax becomes payable but the payer refuses to pay and an agent is appointed in place of the tax payer. He said the tax authority has been able to double the number of payers in the tax net from about ten million to a little over twenty million.

He explained that the agency uses the power of substitution only when tax payers become recalcitrant but that when mistakes are found to have been made FIRS apologizes, corrects such mistakes and makes refund as appropriate.

The Conference condemned tax evasion but whilst acknowledging the powers of the FIRS to recover taxes payable, advised FIRS to follow due process and respect the rights of taxpayers in its strategic drive at increasing revenue.

It recognized that FIRS, by the Letters of Substitution, intended to improve government’s tax revenues by increasing the base of tax-paying entities in Nigeria and thereby limiting the high incidence of tax evasion in the country.