The world has gone digital in many ways but our tax system seems to be stuck in the Stone Age. Tax compliance rate is very low and one area where there is a high prevalence of evasion is VAT.
The FIRS recently implemented a platform for auto tracking and remittance of VAT known as FIRS VAT-Collect. Some of the intended users of the system are domestic airlines for instant remittance of VAT on their ticket sales.
We understand that some airlines are yet to enrol on the platform and so the FIRS issued a public notice last week threatening the airlines of significant disruption to their business and advised the public to refrain from purchasing flight tickets from the airlines.
There is no doubt that the rate of tax compliance is very low and everyone should support any and all initiatives designed to improve compliance and plug leakages. However, such initiatives must be in accordance with the law and must be implemented in line with due process. There is no law which compels a taxpayer to enrol into any digital platform neither is there a provision that empowers the FIRS to disrupt a taxpayer's business as sanction for non-compliance. It should be noted that the law provides for up to 21 days after the month of transaction for a taxpayer to remit VAT. While instant remittance is not outside the law, compelling anyone to do so clearly is. The approach should be collaborative not apprehensive, and if some taxpayers are unwilling to cooperate, there is nothing stopping the FIRS from conducting audits with appropriate sanctions imposed for non compliance as prescribed in the existing law.
Even if it was wrong for the airlines not to enroll, it is also wrong for the FIRS to adopt such a draconian approach, two wrongs they say do not make a right.
Download FIRS Notice re VAT Compliance by Airlines
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