The Federal Inland Revenue Service (FIRS) has started writing to banks to freeze the accounts of tax defaulters to prevent affected parties from withdrawing from such accounts.
Section 31 of the FIRS Act allows the tax administrator appoint collection agents of taxpayers considered to be in default of tax payments.
Commenting on the directive, Muda Yusuf, director general of the Lagos Chamber of Commerce and Industry (LCCI), said the directive is damaging to the economy.
“The attention of LCCI has been drawn to the recent decision of FIRS to appoint banks as collecting agents and subsequent freezing of the accounts of taxpayers considered to be in default of tax payment,” NAN quoted him to have said.
“Such an account will be debited to the tune of the alleged tax debt. It gives FIRS power to appoint collection agents for the recovery of tax payable by the taxpayer.
“Under the provision, such an agent will be mandated to pay any tax payable by the taxpayer from any money held by the agent on behalf of the taxpayer.
“This provision is draconian and can be used as a tool of intimidation, coercion and harassment of taxpayers.
“It should be invoked with utmost discretion and caution.”
Yusuf said that the freezing of customers’ account raised concerns on whether the claim of tax liability by the FIRS of the affected investors applies to a final and conclusive assessment.
According to him, it also raises concern on which should be an outcome of an exhaustive engagement between the tax authorities and the taxpayer, among others.
“There is no evidence that this has happened in some of the cases to which this provision has been invoked,” Yusuf said.
“The disruption to businesses of account holders of a sudden freezing of accounts for reasons of alleged default in tax payment can cause an irreparable reputation damage to businesses.
Yusuf said that the move also posed a risk to financial inclusion, as some SMEs might avoid the use of banks for their transactions and might also affect liquidity in the banking system.
He noted that the timing is wrong as many investors are reeling under the huge burden of the high cost of doing businesses.
Yusuf identified other factors as grappling with high energy cost, astronomical cost of logistics and multitude of taxes and levies imposed by the state and local governments.
He urged FIRS and banks to exercise utmost restraint in the adoption of such tax revenue recovery strategy, warning of the grave implications for investors and the economy.
Yusuf said the activities of government agencies should be in tandem with the Ease of Doing Business Agenda of government and the promotion of the ideals of the Economic Recovery and Growth Plan (ERGP).