FIRS hunts down 700,000 firms in tax crackdown to offset oil slump

The Federal Inland Revenue Service has hunted down 700,000 firms that have never paid taxes as the country seeks new revenue sources to offset low oil prices that has pushed the economy into its first recession in more than 20 years.

Tunde Fowler, executive chairman of the Federal Inland Revenue Service (FIRS), said in a rare interview that he also expected 10 million individuals to be discovered by December and made to pay taxes for the first time.

The government, struggling to fund a record 6.06 trillion naira ($18.6 billion) 2016 budget that aims to stimulate growth by tripling capital expenditure, set FIRS a target of raising 4.95 trillion naira in taxes, up from 3.73 trillion last year.

“We collected a little over 2.3 trillion, so far – from January to 31 August. It is almost at par with last year but take into consideration that the economy is going through a little slowdown,” said Fowler.

He said revenue from value-added tax (VAT) had increased by 25 percent year-on-year and corporate income tax held steady over the same period but petroleum profit tax was expected to have halved, mainly due to low oil prices.

Fowler who was appointed last year said the FIRS expects to generate 5.2 trillion naira in 2017.

He said tougher enforcement would be combined with a planned waiver on interest and penalties covering the period from 2012 to 2015 under which people and businesses would only be asked to pay the principal amount of tax liabilities due.

“We will give them a 45-day window to come forward and register and that will make them eligible for that waiver,” said Fowler of the proposal, which was submitted to the finance minister this week to check she was in agreement even though FIRS has the legal authority to enforce the change.

“A lot of people who are not in the tax net are a bit jittery or afraid to come and register thinking that we might go back two or three years and the amounts might be considerable,” he said.

But he warned that those who failed to register for the scheme — which he said could be rolled out as soon as October 3 — would face stiff penalties.

People or businesses that did not come forward voluntarily would be asked to pay back taxes plus interest and penalties, he said.

“We will also consider criminal prosecution of chief executive officers or board members,” Fowler said.

He was cautious on the idea of an increase in VAT rates which, at 5 percent, is among the lowest in the world.

Fowler said it was part of the government’s remit to “take a decision” on VAT but he thought “the economy is not ready for a VAT increase right now”.

“The level of compliance was too low so that if we increased the rate of VAT it would be a punishment and unfair on those who are collecting and remitting VAT,” he said.