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Property valuation not backed by any law or within FIRS mandate—-OPS stresses
Indications have emerged showing that the ongoing aggressive moves by the Federal Inland Revenue Service (FIRS) to raise money for the federal government from taxation are beginning to veer out the extant laws in Nigeria.
Discoveries by members of the Organised Private Sector (OPS) now show that some of the current drive by the agency have no backing of any known tax law and are far away from the mandate of the Service.
One of the latest moves by FIRS that generated disquiet amongst the OPS members is the property valuation/assessment being undertaken by the agency which they say is a clear from of double taxation.
In Nigeria, OPS membership cut across the Manufacturers Association of Nigeria, the Nigerian Association of Small and Medium Enterprises, Nigeria Employers’ Consultative Association, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Nigerian Association of Small Scale Industrialists and several other manufacturing unions.
A terse communiqué issued at the end of their recent luncheon, the OPS argued that the “Section 30 of the Companies Income Tax Act from where the FIRS purportedly derived its power for the exercise is no longer in force, pursuant to its deletion by section 12 of Companies Income Tax (Amendment) Act 2007.
According to the group, “The FIRS is very much aware that as a fundamental principle of our tax jurisprudence, the power to impose any tax on a citizen must be derived from an enabling legislation.
“There already exists a plethora of property valuation-based taxes in Nigeria. The Land Use Charge payable in Lagos State, which is being replicated across the country, is based on property valuation. The governor’s consent fees payable on alienation of interest in property across the country is based on property valuation. Capital Gains Tax payable on disposal of property is somehow influenced by property valuation. Rent payable on lease of real estate property is subject to withholding tax deduction.”
Besides, OPS stressed that the properties of its member companies were also subjected to valuation pursuant to the provisions of the Companies and Allied Matters Act Cap C20 Laws of the federation for the purposes of companies’ annual accounts leading to payment of tax on their profits.
The document endorsed by the Director-General of MAN, Segun Osidipe, made it clear that member companies of the association paid huge sums of money to state governments under the above heads of taxation, “which we believe the states are utilising efficiently for the benefit of all.”
“Using the value of the property housing the offices of companies to generate figures that will be charged as Company Income Tax is wrong as some companies are tenants in their buildings.”
OPS also noted that “The FIRS’ intention to value and assess the same property for tax purposes expressly negates the Federal Government’s objective of improving the ease of doing business recently initiated.
“It is capable of discouraging new private investments and will place existing companies in precarious situation, which may lead to their closing down their businesses.
“As companies close down, government’s tax revenue will be adversely affected. Already, the ratio of Nigeria’s tax-to-Gross Domestic Product is abysmally small at six per cent. This will further dip.”
The group therefore declared that “From the foregoing, we therefore see the FIRS’ initiatives as unlawful, impracticable and an economic misadventure, which will not benefit the economy, government, companies and households as the country will be the ultimate loser.”
Another key point made by the group in the issued Communiqué read thus: “It is important that any measure to increase the IGR of government must be in line with provision of extant tax law and global best practices. The FIRS in this circumstance has no legal right to assess company’s property for tax purpose.
“We would however advise the FIRS to device a legal framework that will bring the numerous non-tax paying organisations into the tax net rather than pursuing a non-justifiable measure that will end up crowding out existing tax-compliant organisations and thereby throwing the country into chaos.”