The Federal Internal Revenue Service (FIRS) has postponed the freezing of bank accounts of taxpayers who are yet to pay tax. In its letter issued to banks and dated 15 February 2019, FIRS agreed that the suspension was important due to administrative reasons. However, the suspension lasts for 30 days with immediate effect. Earlier, FIRS appointed banks as collection agents of individuals and businesses with outstanding tax payments. Banks were then expected to freeze the bank accounts of the taxpayers thereby restricting access to funds in the accounts. This aroused key questions on FIRS power of substitution and the ease of paying taxes in Nigeria.
Based on the fiduciary relationship between the banks and their customers, the power to freeze the accounts of bank customers for alleged tax liability is inappropriate. Moreover, an unexpected lien on a taxpayer’s bank account could hamper the taxpayer’s business. Taxpayers must get adequate notice and fair hearing to defend their tax position before FIRS places lien on bank accounts.
Nigeria ranks 146 out of 190 countries in the 2019 World Bank’s Ease of Doing Business report. Nine (9) parameters assess government regulation of business. One of the parameters is the ease of paying taxes. Ease of paying taxes checks whether a tax policy is business-friendly. Nigeria occupies the 157th position. Apparently, a taxable person requires 347.4 compliance hours per year to pay taxes. This varies by 37% from the global average of 253.5 compliance hours in a year. Also, Nigeria lags in parameters with high government control such as registering property (184), trading across borders (182) and getting electricity (171). These are key business indices which FIRS should consider in its tax recovery plan. FIRS should also assess the impact of freezing bank accounts of tax debtors on the Nigerian economy. In conclusion, a sound tax administration should follow the principles of equity, fairness, and accountability.
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