The Federal Inland Revenue Service (FIRS) has announced that it will begin deducting state and local governments’ unpaid Value-Added Tax (VAT) and Withholding Tax (WHT) from monthly FAAC allocations.
Muhammad Nami, the executive chairman of the Federal Inland Revenue Service (FIRS), said in a statement issued yesterday that the agency had resorted to the punitive action after all attempts to collect the money had failed.
He stated, “By the terms of the applicable legislation, states and local governments are required, as agents of collection, to deduct taxes at the source and remit them to the Service within twenty-one days.
Nami explained, “However, it is disappointing to see that the majority of states and local governments have failed to repay WHT and VAT deducted from payments given to contractors and service providers as required by law.”
Nami advised the federal government and the minister of finance to decline approval of any request for issuance of state bonds/other securities in the capital market, request for external borrowing, and approval for domestic loans from commercial banks/other financial institutions. It stated that the action has resulted in enormous tax debts owed by the states and local governments.
“We will also publicly identify defaulting states and local governments with the amount of unremitted tax deductions to ensure the restitution of the established unremitted tax deductions by the defaulting states and local governments,” he said.