The Federal Inland Revenue Service recently issued a circular calling on corporate organisations to “commence payment of their annual returns earlier than their due dates, apart from their normal monthly obligations.”
According to that circular, dated 22 April, 2020 and titled Update on Palliative Measures to Cushion Effect of COVID-19 on Taxpayers, the federal tax collector sad that this appeal “has become necessary in order to ease some of the cashflow gaps being experienced by governments at this critical time.”
The circular went on to rationalize this call thus: “As is currently obvious, the economic downturn that resulted from the global shutdown occasioned largely by the COVID-19 pandemic has continued to put pressure on revenue generating agencies including the FIRS, thereby straining governments to bridge budget funding gaps.”
Muhammad Nami, the executive chairman of the agency, who personally signed the circular, said the directive is specifically addressed to the operators in select sectors, that, according to him, are experiencing a boom as a result of the effects of the pandemic.
According to him, “we wish to acknowledge that some sectors such as telcos, financial institutions, e-commerce, supermarkets, manufacturers/processors of certain products etc are experiencing a boom due to the increased transactions as a result of the lockdown or even despite the pandemic.”
Knowing the way our government and its agencies work, we know that it is just a matter of time before this appeal, according to the circular, becomes a directive, order or an edict that will seek to criminalize and punish any corporate body that fails to comply with it. But before we even get there, let us critically examine this appeal by the FIRS.
To begin with, these corporate bodies, as is even acknowledged by the circular, already have their monthly filings that they do to the FIRS, and this is not affected by the COVID-19 pandemic realities. What the agency is saying is that these monthly returns are no longer enough for it and so needs some more. One of the issues with this circular is how can the FIRS enforce this so-called appeal? The law has already stipulated the time that these corporate bodies must do their filings and any effort put at trying to coax these corporates, even if the agency enacts an edict to that end, would surely be resisted by these companies, and I see a long tortuous litigation as a result.
Again, the circular displayed some kind of ignorance on the interconnectivity of sectors in an economy. When the economy is booming all sectors experience a boom and when it is at a standstill or semi-standstill, hardly does any sector, formal or informal, get exonerated. All sectors and players in this economy feel the gloom occasioned by the COVID-19 lockdown so, one may ask, where is the increased earnings that the FIRS is talking about, coming from?
Let us take the financial sector for instance. The banks may be doing more transactions – ATMs, transfers, POS payments etc – now but to what amount? People, at lockdown, are making more online payments but they are mostly for food, groceries and other essentials, which are mostly minute purchases. Is FIRS telling us that there are people still buying and paying for lands and cars or building houses, or taking chieftaincy titles today?
If you take a look outside your window, you may have noticed an increase in traffic of delivery men on our roads during this lockdown and this may make you think that the e-commerce companies are making a killing this period. After reading this piece, take another look at the delivery men and you would see that they are mostly delivering food, groceries and other essentials. The fact is that e-commerce is much more than groceries and this category of trade does not make up to five percent of the e-commerce players revenue.
Even the groceries and other essentials are not even exclusive on the e-commerce portals as markets, supermarkets and pharmacies are open in all neighbourhoods and take a substantial part of the food and groceries business. Suppliers, most of whom do not have exemption letters, find it impossible to move even groceries and food items to the e-commerce warehouses as security agents do not let them move around. The e-commerce operators and their logistics partners are not even allowed to move around things like electronics, gadgets and other non-essential goods that used to make up the bulk of their earnings.
How can these companies even compute their taxes in advance since the company tax is determined by the aggregate income less all costs for the year? Are they supposed to guestimate these figures to arrive at an amount payable to FIRS? What if their guestimate short-changes them? We all know that it is not the speed that the FIRS comes for the balance in case of an underpayment that it uses in refunding an excess.
Let us even examine the reason for this ‘appeal’ as canvassed by the FIRS “to ease some of the cash flow gaps being experienced by governments.” The circular admits that the governments are experiencing the cash crunch effects of the lockdown. The question here is why do the governments look towards the companies in dealing with cash flow gaps instead of looking inwards on how to cut governance costs?
How can the government allow our elected public officers to be living in obscene wealth, moving about in convoys of expensive cars, appointing hundreds of aides, throwing expensive birthday parties in Dubai and London, and earning millions in allowances at a time that the global and national economies are experiencing a downturn? At a time, Nigerian government is appealing for support in the fight against the COVID-19 pandemic, the same government, for example, is importing the 2020 model of Toyota Camry for each of the 360 members of the House of Representatives. Instead of cutting the cost of governance, the government is sending the FIRS to snuff out the little air that is sustaining the companies that are already gasping for breath.
It is a pity that while governments, the world over, are looking for ways of cushioning the effects of COVID-19 pandemic for corporates, the Nigerian government, through its agencies, are adding to the burden of these companies. The government should better ask the Federal Inland Revenue Service to rescind its appeal for advance payment of the company tax, and look for ways to cut the cost of governance in its quest to bridge the prevailing budget funding gaps.
Moruff Adenekan, a Public Relations Consultant writes from Lagos.