Federal Inland Revenue Service (FIRS) has recently been issuing Notice of Refusal to Amend (NORA) assessments issued in respect of on-going tax audit exercises. This is notwithstanding that taxpayers have objected such assessment notices or that some of the issues raised by FIRS have been resolved/documented at reconciliation meetings.
In letters issued to some taxpayers, FIRS demanded settlement of the alleged additional tax liabilities within 30 days of issuance of the NORA, irrespective of the level of progress made during the tax audit reconciliation process. FIRS also expressed its intention to commence enforcement actions to recover the alleged tax liabilities where these are not paid within the said timeline.
While Section 69(5) of the Companies Income Tax Act (CITA) empowers FIRS to issue NORA, it only allows FIRS to do so in the event of a stalemate during the reconciliation process. This is distinguishable from FIRS' recent practice of issuing NORA solely on the basis that tax issues have remained unresolved for at least 6 months despite reconciliation. Furthermore, there is no provision in CITA or any other relevant legislation that empowers FIRS to issue NORA only on the basis that reconciliatory processes have spanned more than a defined period.
By this development, FIRS has disregarded all the time and resources invested by itself and taxpayers in resolving such pending tax disputes. Aggrieved taxpayers may consider proceeding to the Tax Appeal Tribunal (TAT) to challenge FIRS' action/decision; thereby increasing the cost of dispute resolution, regulatory compliance and ultimately, inhibiting the ease of doing business in Nigeria.
In enforcing tax compliance, it is essential that tax authorities' actions should not deter voluntary tax compliance. We therefore expect FIRS to revisit its approach and avail taxpayers more time to close out ongoing tax disputes/audit exercises. Also, where FIRS insists on issuing NORA, it should consider issues that have already been resolved during the reconciliation phase and focus only on unresolved tax issues.
In the meantime, we advise taxpayers with ongoing tax audit cases to engage FIRS to reconcile their tax positions in order to prevent any adverse decision of FIRS.
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