The House of Representatives has launched investigation into the accounting procedures of the Federal Inland Revenue Service (FIRS) with a view to ensuring adherence to constitutional and statutory provisions by the organization in relation to release of Tax Refund to various individuals, companies and government establishments, who have either applied for or have benefited from the refund between 2012 and 2015.
Though the total amount of tax refund payments by the FIRS within the period under investigation could not be established as at time of filing this report, the committee clerk, Barrister Jide Funmilayo, however confirmed that the amount involved was “very much”.
The decision of the House is coming after its resolution of Tuesday, August 11, 2015 where it mandated an Ad-Hoc committee to carry out the assignment.
As stated by the committee’s documents, 58 entities including both local and foreign companies and government establishments have so far benefitted from the FIRS tax refunds payments within the period under review.
Also, there are 59 companies both local and foreign, on the list of audited/verified approved tax refund cases awaiting payment as at June 30, 2014.
In addition, a total of 235 entities have applied for tax refunds, which are at different stages of processing, according to the documents.
Based on what was gathered, the committee had requested all the organizations and individuals concerned to furnish its secretariat with documents or information on Tuesday, January 12, 2016, which will assist it to evaluate and further appreciate the performance of FIRS statutory functions in relation to the release of tax refund.
It was further gathered that the House panel seeks to determine the ground or reason for tax refund; evidence of application for tax refund; evidence of payment of the tax from which refund is required; evidence of approval by FIRS for the tax refund; tax payer registration with the tax office from which the fund is required; and type of tax paid for which the refund is required.
Investigation revealed that prior to 2007, tax refund in Nigeria was not practicable apparently because the tax laws did not stipulate modalities for such practice.
But pursuant to the Federal Inland Revenue Service (Establishment) Act of 2007, a dedicated account from which tax refunds could be made was created.
Tax refund monies as may be approved by the National Assembly had thenceforth been credited to this account from the federation account, in line with the annual tax refund budgets prepared by the FIRS.
A prerequisite for approval of tax refund claims is the performance of tax audit by FIRS to verify the basis of claim.
Reasons for tax refund may include but not limited to overstatement of tax amounts remitted online into the tax accounts by the collecting banks; tax remittances made with mistaken Tax Identification Numbers (TIN); outstanding input Value Added Tax (VAT) claim resulting from zero rated VAT supplies, supplies to oil and gas companies or government agencies and supplies to enterprises operating within the free trade zones; taxes deducted or paid on the supplies aspect of a split contract arrangement; excessive tax payments arising from errors or mistakes on the part of the taxpayer in assessing or filing tax returns, or errors arising from wrong bases of tax calculations except where such calculations were based on generally prevailing practice of the FIRS at the time of filing the tax returns; and excess of utilisable withholding tax (WHT) credits over current and projected tax liabilities.