By Embuka Anna

Before the advent of the Europeans, Nigerians willingly paid their taxes in kind by rendering free services such as clearing of bush and fallow farmlands, digging pit toilets, wells, etc. for the benefit of the community as a whole. Properties were usually seized whenever there was a default and such properties might be reclaimed on payment of money.

Today, the voluntary payment of taxes in Nigeria has systematically deteriorated as few taxpayers enjoy paying taxes voluntarily, although many regard it as a public duty to pay tax as required by government and law, which of course comes back to them in the form of social services. However, some citizens perform this duty but do not see what benefit they derive from it; others still have the simple mentality that the tax collector is a public enemy to be outsmarted by all possible means.

In an attempt to ensure that taxpayers pay their taxes as and when due, the federal government in the late 1970s, introduced the issuance of the Tax Clearance Certificate (TCC) as a tool to enhance revenue collection. This was especially necessary in order to enable governments and other related third parties to, at a glance, confirm that the holder of the certificate had in the  three preceding years of the date of the issuance of the TCC, paid his or her  taxes. The logical obverse is that persons that do not have a TCC are deemed not to have paid their taxes.

The best description on what a TCC is can be found in the statutory provision of Section 101(1) of the Companies Income Tax Act (CITA) as amended, which provides that ‘Whenever the Board is of the opinion that tax assessed on profits or income of a person has been fully paid or that no tax is due on such profits or income, it shall issue a tax clearance certificate to the person within two weeks of the demand for such certificate by that person, or, if not, give reasons for the denial’. Reference to the Board in this provision is the Federal Board of Inland Revenue now the Federal Inland Revenue Service (FIRS).

A tax clearance certificate must disclose, with respect to the three preceding years of assessment, of the mentioned taxpayer, the total profits or chargeable income of the taxpayer, the tax payable, the tax actually paid and alternatively, a statement that no tax is due for payment.

Section 101(2) & 101(4) of CITA, as amended, further elucidated that it is a mandatory statutory requirement that all departments of government and commercial banks must demand for the TCC, for the three preceding years, of any person with whom they intend to have any dealing in the areas of applications for government loans, contracts and other businesses, registration of motor vehicles, applications for firearms license, foreign exchange transactions or the remittance of funds outside Nigeria, applications for certificate of occupancy of land, building plans, transfer of legal title to land, applications for plot of land, export or import licenses, pools or gaming licenses, distributorship, registration of a limited liability company or a business name, allocation of market stalls, etc.

A point of contention with regard to tax assessments and TCC has always been whether they are by themselves final and conclusive tax documents. Section 76 of CITA, as amended provides that where no valid objection or appeal has been lodged within the time provided in the relevant tax law against a tax assessment, or where the total profit and the tax payable on such profit of a company has been determined after an objection or an appeal, the determined assessment shall be final and conclusive for all purposes of compliance with the tax provisions of CITA, as amended.

There is however no specific Section or provision in the Act or in any tax circular which makes the issuance of a TCC a final and conclusive evidence of the tax paid or payable for the stated period. The professional view in this regard is that many TCC are generally issued based on the tax returns which are filed under the self-assessment procedure.

However, should the tax authority detect any under-payment of tax or fraud in the payment or non-payment of tax, the various tax legislations allow the FIRS to undertake a tax audit and/or issue further tax assessments based on the audited accounts filed with the self-assessment forms, or apply the best-of-judgment principle or other methods allowed under the tax laws to raise further tax assessment. Therefore, the amount of tax paid and indicated as such in a TCC will be final and conclusive only where it has been adjudicated upon and or finally determined by a judicial authority.

So, whenever you plan to apply for a government loan or contract, firearms license, foreign exchange transaction, certificate of occupancy of land, building plans, transfer of legal title to land, plot of land, export or import licenses, pools or gaming licenses, distributorship, registration of a limited liability company or a business name, allocation of market stalls or the remittance of funds outside Nigeria etc, be sure you are tax certified with the TCC.