CBN’s penalty on cash lodgement will frustrate Finance Act 2020, CITN warns
by Razaq Ayinla
As part of measures to ensure the effective operations of some sections of Finance Act 2020, the Chartered Institute of Taxation of Nigeria (CITN) has advised the Federal Government and Central Bank of Nigeria (CBN) to cancel penalty placed on certain cash deposits and withdrawals in order to allow more deposits of cash at banks and to be able to tax individuals and businesses appropriately.
BusinessDay reports that Central Bank of Nigeria has placed 3% and 2% respectively on N500,000 and above withdrawal and deposit on individual accounts and 5% and 3% respectively on N500,000 and above withdrawal and deposit on the corporate accounts in all commercial banks across the country which tax practitioners and administrators argue that it will affect tax compliance in the long run.
The Chartered Institute of tax practitioners and administrators noted that the penalty placed on cash withdrawals and deposits by the Central Bank of Nigeria may prevent further deposit and withdrawal from both individuals and corporate organisations which could also prevent the Federal Inland Revenue Service (FIRS) to have access to true position of bank statements of many account holders.
Consequently, lots of funds will be lost to tax evasion and tax avoidance as lots of account holders – individuals and corporate entities, will hide under exemption granted by Finance Act 2020 wherein any business that earns below threshold of N25 million annual turnover will be exempted from both Company Income Tax (CIT) and Value Added Tax (VAT) on goods and services offered for sales.
Speaking at the Year 2020 Tax Week of the Chartered Institute of Taxation of Nigeria, Abeokuta and District, tagged, “Taxation: Key Factor to Economic Recovery and Social Development”, held in Abeokuta on Wednesday, Gbenga Adeoye, said that the contradictory policies of both Central Bank of Nigeria for penalty on huge cash deposit and FIRS’s search and quest to drag more people into the tax net would cause people to evade and avoid tax which he explained, would frustrate 2020 Finance Act if not checked.
Adeoye, who delivered a keynote paper in company of Olalekan Kolawole, FIRS tax controller and Oluseun Olajube, Chairman, Abeokuta and District of CITN, noted that Godwin Emefiele, Governor and Monetary Policy Committee of the Central Bank of Nigeria as well as Federal Inland Revenue Service (FIRS) should go back to a round- table and work on these discrepancies if there will be effective operations of 2020 Finance Act, appreciable level of financial inclusion and effective tax compliance.
He said, “Anti-tax monitoring policy of government which is penalty for cash lodgement, and people don’t pay their proceeds into bank accounts; there is no way you will know if they (individuals and corporate organisations) had made more than N25 million, there are the issues.
“Part of the advice is that, we need to synchronise our policies; somebody is dragging to the left, another is dragging to the right. If you want to catch people who are under-declaring income then you must insist that everybody pays the proceeds of their sales into bank accounts, and you can’t be penalizing people for paying cash and at the same time, you want to catch people that are under-declaring.
“So, these are contradictory, Emefiele is being called at their meeting to think about this lodgement penalty, once that is removed, it gives FIRS the room to say, look, bring your bank statements, we will be able to determine if you are within the threshold of N25 million or not, but if that penalty is there, people will not be encouraged to pay money into their accounts.”