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CBN Drags SMEs into the Corporate Tax Net

Category: Regulators


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CBN Drags SMEs into the Corporate Tax Net

 

 

July 21, 2011 by Kunle Aderinokun and Obinna Chima
For long, small and medium scale enterprises (SMEs) have been doing business in the country without paying tax.
But with effect from September 13, 2011, their bank accounts may be frozen except they provide their taxpayer identification number (TIN) to the financial institutions.
The Central Bank of Nigeria (CBN) has fixed the deadline for all corporate organisations to provide a TIN for them to continue operating bank accounts.
The apex bank also said that the TIN was now a prerequisite to open a corporate account.
THISDAY gathered Wednesday that the apex bank had issued the directive as part of its collaboration with the Federal Inland Revenue Service (FIRS) to enforce tax compliance as well as to drag more Nigerians into the tax net.
Attempts to confirm the development from the banking sector watchdog proved abortive as its officials declined to comment.
But some senior officials of commercial banks confirmed the development.
Commercial banks in fact have directed their corporate customers to submit their TIN to their branches on or before the deadline.
“The CBN has directed that all corporate entities must provide a TIN to open or continue operating a bank account in any Nigerian bank. In line with this new banking requirement, we would like you to submit your TIN at the branch where your account is currently domiciled, on or before the CBN deadline of September 13, 2011,” a mail from a commercial bank to a customer stated.
The TIN is a 14-digit sequential number generated electronically as part of the tax registration process and assigned to all taxpayers - company, enterprise or individual - for identification. It can be obtained from any tax office.
TIN is already a requirement for transacting business with government agencies, but small and big companies that do business in the private sector are required to provide TIN.
The FIRS had directed banks to submit the list of their corporate customers to enable the revenue body to generate TIN for all such taxpayers.
Responding to THISDAY’s enquiries on actions to be taken against any corporate organisation that fails to beat the deadline, a bank official who pleaded anonymity said: “We would definitely wait for the CBN directive.” 
But the FIRS had threatened to disable commercial banks from its Pay Direct portal if they failed to supply FIRS with a list of their corporate customers to enable the body to generate TIN for the remainder of all their customers.
The FIRS had also said that TIN shall be required from each taxpayer when tax payments such as: Petroleum Profit Tax (PPT), Companies Income Tax (CIT), Capital Gains Tax, Education Tax, Value Added Tax (VAT), Withholding on corporate bodies, Stamp Duties for companies, National Information Technology Development Fund Levy and Personal Income Tax are made to banks.
FIRS Executive Chairman, Mrs. Ifueko Omoigui-Okauru, had explained that without a clear knowledge of the taxpayers and their profiles, it would be difficult to have any articulate plan or strategy for effective tax administration.
“This would be further enhanced with the institutionalisation of the unique taxpayer identification system as is practised in other developed tax jurisdictions. With TIN, every taxpayer would be assigned a unique identification number which should be inserted in every documented transaction (sales, purchases, payment of bills among others). This will enable tracking for tax purposes as is the practice in several tax jurisdictions, where tax number is used on driving licences, passports and other personal documentation,” she had explained.
However, some corporate organisations yesterday bemoaned the banking watchdog’s directive saying that the policy was ill-timed. They based their arguments on the recent directive for the update on all bank accounts.
The apex in January directed all bank customers to update their bank account information. On Tuesday, members of the House of Representatives summoned the Governor of CBN, Malam Sanusi Lamido Sanusi, over the controversy surrounding the proposed policy of the apex bank to limit daily cash withdrawals by bank customers to N150,000 for individuals and N1 million for corporate organisations and the introduction of non-interest banking in the country.
Source: Thisday


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