Last week, Kaduna State Inland Revenue Service (KADIRS) shut down the business premises off of some banks, over some unpaid taxes amounting to N300 million. Has there been any positive response from the affected banks?
Well, of course, there are positive responses. There is no time that we’ve had to shut down premises of businesses or companies that we would not get a positive response immediately. So, when we shut down the premises of banks we immediately received positive responses. Most of them came and negotiated the liability. When we get to that level of shutting down or distraining business premises, we accept nothing but the entire amount of liability. In some cases where the businesses are so vital because of the demands of the public, we negotiate the amount that is going to be paid immediately, with a commitment that the balance will be paid at a later date. And that is what exactly happened with the four banks.
Some paid 80% of the liability immediately, some paid 50%, while others paid 25%. The least amount we collected immediately was 25% of the entire liability, and they also accompanied the payment with commitment to liquidate the balance within two to three weeks, and a committed to coming to the table, to reconcile whatever outstanding liabilities they have, going forward. So that is how it is done.
Is closing down business premises not counterproductive to Kaduna State Government’s often repeated stance of being ‘pro-business’?
Well, the distraining of business is not something that we started last week, we’ve been on it for more than two years. For you to compel voluntary compliance, you need to deter others from defaulting voluntarily also. With the regime of voluntary compliance in the country, you have to follow the laid-down processes, because taxation is about law. It is not about people’s discretion or anything of that nature. We follow the law as it is and by the time we get to the point of distrainment, we don’t waste time, we act in order to compel people to comply voluntarily–and that is what distrainment is all out to achieve. It is not as if we are after businesses, or as if we don’t like businesses operating in Kaduna.
For your information, we are interested in having more businesses coming into Kaduna. However, inasmuch as you are coming to do business in Kaduna, you have to comply with the laid down rules and procedures of doing businesses. One of those procedures is for you to pay your taxes as and when due. So, we are not open to businesses that would flout the laws and those that do not pay taxes. It is with tax collections that we fund our infrastructural development and provide other social services for the people.
Did KADIRS engage the defaulting banks before applying sanctions on them?
Of course, we did! As I said initially, there are procedures that we follow when a liability is established against a business or an organisation. First, we do give what we call a notification, explaining the amount that has been established against a business entity. The defaulting business has up to 30 days to either object or accept the liability. And upon the expiration of the 30 days, without any response from the business, we send what we call ‘first reminder’. And with that first reminder, we are at liberty by law, to give you either seven days, 14 days, or a month’s grace. So, when the first reminder expires, we can give a second reminder, which is also called second and last reminder. As a tax collection agency, we usually look at the macroeconomics indices; if businesses or the economy is generally down, we also take that into cognizance. In that case, we can give a business entity up to 30 days to be able to liquidate the liability.
So when that second reminder lapses, we are also at liberty to give a final reminder to liquidate the liability, which in most cases, carries only seven days. When you see the service distraining a business premises, it is where we don’t get responses from the taxpayer and we have exhausted all those lifelines extended to them to settle the liability. We don’t just distrain businesses simply because we are interested in doing that. We have to exhaust those procedures. Where a taxpayer fails to comply, we have to compel him or her to comply with the law (laughs). That is what we do.
According to reports, the service acted based on section 104 of the KADIRS Personal Income Tax Act. Is income tax not payable by the headquarters of business entities, why did you shut down branches of banks that are in Kaduna?
Well, as you said, it is section 104 of the Personal Income Tax Act, and section 37 of the Kaduna State Tax Codification and Consolidation Law. I have to make this clear to you that taxation is about residence. There is what you call a residency rule in taxation, where you are domiciled is where you pay taxes. If you have a business that has its head offices, say in Kano and branches here in Kaduna, the workers in the branches are to pay their taxes in Kaduna, not to the head office in Kano. Now that we’re talking about banks that have their head offices in Lagos, with branches scattered across Kaduna state, the employees of those branches are to pay their taxes in Kaduna state, because they reside here. They should not remit their taxes back to Lagos, if they want to comply with the provisions of the Law.
But sometimes, these taxes are deducted at source from headquarters…
So, where the taxes are deducted at source, it is up to the headquarters to take that portion of the residents of a particular jurisdiction, and remit to that state. And where those remittances are not done, the service has all powers to ensure that it is done. And that is why we follow all the laid down procedures to ensure that the amounts are taken back to the state of residency and where that is not done, then the business will pay for it.
Some experts argued that taxes on masts, towers and Very Small Aperture Terminals are supposed to be collected by the Nigerian Communications Commission and not KADIRS. How true is this position?
Well, it is very untrue, because taxes, as I said, is about law, and we are being guided by the constitution and other enabling laws that empower us to do collection. Now, NCC has no place in the taxation architecture. Taxation on the masts and towers that you are talking about, is provided for under relevant section of the Taxes and Approved List of Collection of 1998. I was expecting you to say the amount should be collected by the local government and not NCC. Under that provision of the Taxes and Approved List of Collection of 1998 Law, the three tiers of government have their respective taxing rights.
The federal government has about eight taxes that they can collect, while the state governments have 10 to 11, while the local governments have about 22, or thereabout. So, in that 22 taxable items, that is where mast towers and other apertures that you mentioned are embedded. These are basically collections by local governments, and to some extent, by the state. I said to some extent by the state because where the local governments delegate their powers to the state, then the state does the collections on their behalf. This is the case in Kaduna state. Most of the collections by local governments are actually handled by this service. So, it is actually within our powers to collect taxes on masts, towers and Vey Small Aperture Terminals, not the NCC.
Rivers State has obtained a court judgement, empowering states to collect VAT. Has Kaduna state started collecting this consumption tax?
Well, you know, it is still a case in dispute, there is an appeal by FIRS, the agency of federal government that is responsible for that collection. However, we are watching both sides, Rivers state and the federal government, to see how the whole matter will end. Whichever way, I think we are ready. If the states are going to collect, we will rejig our systems and processes to see what we ought to do to collect those amounts.
Is there any mechanism in place that will enable KADIRS to immediately spring into action with collection, if the court judgement goes in favor of the state?
Well, all we need to do is just to take, maybe, a fresh Bill to Kaduna State House of Assembly to enable us to have those powers that we should have, to enable us to do the collection. The simplest way to do it, is to dust off the VAT Act of the federal government, and do a few amendments, here and there. Because the VAT Act encompasses almost everything we would need to do. So, all we need to do is send it to the Assembly through the state governor. He will then send it to the State Assembly for passage, and that will enable us to do that collection–and that can be done in a matter of a week. We are very conversant with the VAT Act, and we know areas that we need to expunge and areas that we need to add.
Here in Kaduna state, we have what we call Consumption Tax; a law that enables us to do collection from restaurants, hotels, and event centers. So, the Consumption Tax that we have here in Kaduna state is similar to what the federal government has in form of VAT. All we need is just to collapse the two laws into one and see how we can kick start the process. But in terms of the human resource and possibly the platforms, especially, the technological platforms we need to deploy, these are things that we will need looking at–and how we can do that efficiently.
But that all depends on eventualities, need for national cohesion and impact on citizens through the dynamics of macro-economic indices.
–Kaduna State Internal Revenue Service (KADIRS) has automated 85% of its operations and the upscaling is ongoing;
-Tax payers can sit in the comfort of their homes or offices, upload their returns for taxes and also make payments. They can also apply for their tax clearance from the comfort of their homes and offices;
-The motor vehicle registration has been 100% automated. From any oart of the world, anyone can get Kaduna state number without coming to KADIRS office;
-In spite of the Covid-19 pandemic and the attendant lockdown, KADIRS was able to meet its target of N50 billion IGR last year without introducing new taxes;
-In fact, Kaduna State Government gave tax waivers of five to six months to the transport and hospitality sectors, as well as restaurants and events centers, to cushion the effects of the lockdown;
-Private schools also benefitted for about six months without remitting their Pay-As-You Earn (PAYE) taxes.