If you are embattled in a tax tussle over defaults in payment with the Federal Inland Revenue Service, FIRS, and plan to seek redress in a court of law, you may want to have a rethink or prepare for a tougher ride due to the new initiative implemented by the agency.

By this initiative which took effect from May 31, 2021, tax defaulters planning to go legal will as a matter of compulsion pay 50 percent of the disputed amount into an interest-yielding account of the Federal High Court. Failure to do so now means no hearing.

The rule contained in a recent practice direction issued by Justice John Terhemba Tsoho, the Chief Judge of the Federal High Court, Abuja, under Order 57 rule 3 of the Federal High Court (civil procedure) rules, 2019 now makes this payment a major prerequisite before hearing.

FIRS and Federal House of Representatives reiterates tax reforms

This new direction found its way into the public domain through a recent statement by the agency’s boss, Muhammad Nami during his recent visit to the House of Representative’s Committee on Public Accounts, coming on the heels of investigating revenue leakages arising from tax waivers and incentives to foreign companies granted pioneer status.

Further reforms

Following this initiative, the FIRS has also resolved to kick start the process for a Memorandum of Understanding (MoU) with critical stakeholders to handle information sharing and amendments to the relevant laws.

In recent amendments to the Nation’s tax law, companies operating in the free trade zones are now expected to file tax returns on their operations to the FIRS to check the activities of taxpayers currently taking advantage of identified loopholes in the extant tax laws and fiscal policy by situating their companies in these tax-free zones.

How these free trade zone companies shortchange the country

Nami further revealed that a key reason why these companies deliberately migrate to these free trade zones is so they can produce goods meant for export and then sell the goods to the customs zone, making it impossible for the companies in the area to operate competitively with them.

Other matters Arising

Tax evasion and tax avoidance according to the FIRS are global phenomena relating to fiscal policy issues that can only be solved with the amendment of the relevant tax laws, making it almost impossible for these companies to exploit loopholes in extant tax laws.

The FIRS boss in this light has called for legislation to address grey areas around waivers as taxes not paid to Nigeria or waived by the Nigerian government are returned to the treasury of the defaulting company’s home country even though they operate in Nigeria.

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