FCT Residents and Tax Evasion

The FCT-IRS has identified tax evasion as a major challenge to be tackled in its bid to maximise tax filing in the territory and ensure that resources are provided to support public projects, Olawale Ajimotokan reports  

Tax collection is significant to the development of modern economy and any free society. It is a financial charge on income levied by the government on citizens, corporate entities, businesses and possessions that yield revenue and make up a nation and country at large.

It also a mean by the compulsory proportional donations from individuals and property possession, imposed by the government by virtue of its power for the funding of government administration and general public necessities.

Internally Generated Revenue (IGR) in the FCT, including other allocation from the federation account, have supported the FCT in from of provision of social services, such as, education, healthcare, security and infrastructural development, such as roads, water supply and other critical developments across the territory.

However, low tax filing has for years has remained a concerning trend in the Federal Capital Territory for the FCT Internal Revenue Service (FCT IRS).

The Acting Executive Chairman of FCT IRS, Haruna Abdulahi at a recent seminar organized by the Service to sensitize residents of the nation’s capital on the importance of filing income tax return, lamented that over 90 per cent of FCT residents do not file their annual tax returns.

He described the situation as unhelpful to the effort of the authority to shore up its revenue base and implement various projects and other basic amenities in the face of dwindling allocations from the federation account.

He warned that the service was working with the relevant authorities to enforce compliance.

“From our records, the number of tax payers under the Pay As You Earn (PAYE) scheme is about 120,000.

 “Half the figure comprises staff of Federal Government Ministries, Departments and Agencies (MDAs) on the Integrated Personnel Payroll Information System (IPPIS) platform and those working for the Federal Capital Territory Administration (FCTA) and the Area Councils.

“The average number of taxpayers outside those remitting through the PAYE scheme has remained in the region of 4,000 with a significant percentage of stop files,” Abdulahi said.

He decried the practice by some advisors who habitually conduct and routinely encourage tax agents to doctor records.

He also expressed concern over the engagement of unprofessional consultants by some taxpayers to prepare and file returns with seemingly wealthy individuals.

He accused some of the consultants of also indulging wealthy Nigerians to file as low as annual income of N1 million to N2 billion.

The FCT-IRS boss noted the service would continue to probe the activities of these agents and consultants and bring the culprits to book.

Abdulahi said that some 900 tax agents were audited by 65 consultants it engaged when the service embarked on its maiden back-duty audit in 2020. 

While giving perspectives on poor tax filing in the FCT, a tax expert, Mr Afeez Balogun has noted that tax filing is a compliance exercise.

“When it comes to tax filing there is arguably no better track that proclaims compliance. But tax filing is a compliance exercise, really if you look at it. PAYE, which is what is being filed means you must have paid on monthly basis.  And the money is actually being rendered to government. The same thing applies to withholding taxes on a monthly basis, those who you do transactions with must have deducted withholding taxes on you. On monthly basis you are expected to pay that money to FCT IRS.           However, when it comes to tax filing it is about providing tax information of surrounding transactions in details, it is not just enough for government to collect those money they also want to see to the transactions that have been created with the tax revenue. When it comes to application they want to follow up the trail of transactions,” Balogun said. 

Balogun, who is also a chartered accountant, said FCT IRS, like Lagos, Ogun, Rivers and Akwa Abom States can capitalize on technology which is the biggest enabler of tax administration to create robust platforms that will make it very easy for people in the comfort of their homes to log on to their tax profile and remit their returns.

Also the FCT Minister, Mohammed Musa Bello has urged all residents of the FCT to take filing of returns as an obligatory and necessary step towards supporting the socio-infrastructural development of the territory.

He said the global economic downturn induced by the COVID-19 pandemic and the country’s over reliance on oil export which is impacted by an unstable international energy market has contributed immensely to a reduction in revenue accruing to the government negatively.

“You will also agree with me that these factors coupled with a rising inflation index has put a higher than normal financial pressure on the government.

“Invariably, this would eat into any possible surplus funds that can be deployed into the provision of infrastructural and social facilities to meet the increasing needs of our growing

Population,” Bello said.

While commending the FCT IRS for the steady growth of revenue accruing from taxation since its establishment, he said that a lot more needed to be done to optimize this very important source of public finance.

He also described as worrisome reports that only 10 per cent of registered residents of the FCT were contributing to the maintenance and development of the

territory by paying their taxes, saying that apathy needed to change for fairness and entrenchment of the rule of law.

The minister, however, said that authority must begin to treat tax evasion as the

crime that it is, warning high-income individuals, who provide false information on their income should also refrain from doing so.

In response to the minister’s stance that some of the high income individuals that are providing false information on their income should be prosecuted, Balogun said all over the world tax evasion is a crime and it would not be an exception in Nigeria regardless of the number of years where people have nonchalantly failed to pay their taxes.

Balogun said that the recent drive in tax generation witnessed in the country was simply because the other sources of revenue were drying up, making the government to look into tax.

 “But beyond that is the fact that to evade tax is a criminal offence all over the world and in Nigeria it should not be an exception really. It is about the law strictly.

“You will recall that there are countries that exist principally based on tax revenue and the laws are very stringent. You have penalties ranging from imprisonment to fines.  In Nigeria, what you see so far is that the government physically just collect perhaps an interest as the penalty for evasion but the truth is that tax is a criminal offence and the minister is right in his assessment that it must be treated accordingly but again it remains to be seen how that will play out because the culture of not paying tax is a thing that cuts across the entire strata of the society. Everybody gives reason for not wanting to pay tax. But you know it is not very likely that the government will treat it as a criminal offence because it is very pervasive.  How many people do you want to imprison?  It is not likely that will happen in theory,” he said.