First it was posting of non-compliance stickers on the premises of defaulting companies (see our earlier alert here). Now, the FIRS has begun to seal off companies that have failed to comply with their tax obligations.
We spoke to one of the Coordinating Directors of the FIRS who explained that the action is only applied to companies that are clearly in default such as:
- Failure to file VAT returns over an extended period of time. Some of the affected companies are said to have failed to file monthly VAT returns for up to 3 years
- Failure to pay undisputed tax liability whether arising from self assessment or a tax audit
In the event of a tax audit resulting in disputed liabilities, this action will not be taken where the company follows the procedures and timelines for assessments and objections as contained in the law.
Although there is no specific provision of the law that supports the sealing off of a company's premises in this manner, it is clear that these measures are being implemented to improve the low level of tax compliance in Nigeria in order to shore up government's revenues that have fallen by over 40% since 2014 due to sharp decline in crude oil prices.
Other than FIRS, some states such as Lagos have been doing the same thing for some time and have now intensified their efforts.
We recommend that you pay particular attention to your tax obligations both for FIRS and states taxes to avoid the unpleasant experience.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.