You Can’t Freeze Bank Accounts of Tax Defaulters, LCCI Tells FIRS

The Lagos Chamber of Commerce and Industry (LCCI) has described the decision of the Federal Inland Revenue Service (FIRS) to freeze accounts of taxpayers, considered to be in default of tax payment, as an act of intimidation and draconian action.

FIRS had written to select banks as collecting agents with a mandate to subsequently freeze the accounts of defaulters.  Such accounts will be debited to the tune of the alleged tax debt.

Reacting to this development, the LCCI, through its Director General, Muda Yusuf, told journalists on Thursday that tax administration should be in consonance with the basic tenets of the rule of law and the fundamental principles of a good tax system. 

It added that tax administration should be consistent with the basic principles of equity, fairness, legality and accountability.

According to Yusuf, “The LCCI is concerned about the recent turn of events, especially the freezing of accounts of bank customers based on tax assessments that are in dispute. This provision is draconian and could be used as a tool of intimidation, coercion and harassment of taxpayers.  It should be invoked with utmost discretion and caution.”

The Chamber raised a number of key concerns which included: “Whether the claim of tax liability by the FIRS of the affected investors applies to a final and conclusive assessment which should be an outcome of an exhaustive engagement between the tax authorities and the taxpayer.

“The propriety of appointing banks as ‘collecting agents’ by the FIRS, given the strategic and catalytic role of the banking system in business operations, financial intermediation and transactions among economic players is also an area of concern.

“The legality of freezing the accounts of bank customers by the banks on the directive of FIRS for alleged tax liability, given the contractual relationship between the banks and their customers is quite unfair and unacceptable.

 “Disrupting businesses of account holders of a sudden freezing their accounts for reasons of alleged default in tax payment could cause an irreparable reputational damage to businesses.

“Also, the risk to financial inclusion as SMEs may avoid the use of banks for their transactions if FIRS goes ahead with such action.”

LCCI, however, urged FIRS and the banks to exercise utmost restraint in the adoption of this tax revenue recovery strategy because of the grave implications for investors and the economy. The damage to the economy may be much more than the contemplated revenue.

 “These are not the best of times for investors in the economy.  Many businesses are reeling under a huge burden of high cost of doing businesses.  They are grappling with high energy cost, astronomical cost of logistics, huge regulatory compliance cost, exorbitant property tax, outrageous cost of funds, multitude of taxes and levies imposed by the states and local governments, high import duty, excruciating conditions at the Lagos Ports and the challenges of corruption.  These are critical contextual issues that should be taken into account.

“Revenue generation is not an end in itself, it is a means to an end.  The ultimate objective is to ensure equity, improve welfare of citizens, create jobs and promote the advancement of the economy.  The activities of agencies of government 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).”