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Tax substitution as double taxation (2)

Continued from last week…

By Omuli Iwere

Though Value Added Tax, VAT is within the remit of the FIRS, the Value Added Tax Act 2004 stipulates certain goods and services such as medical goods and services, sales of books and educational materials, sales of basic food items and baby products, and all export goods and services which are exempted from VAT, meaning any business involved in such goods and services do not pay VAT. The current action by the FIRS through the banks did not seek to distinguish Business Names operating within the exempted space.


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Also, the only mention of a recognised number for the payment of VAT, is in section 6 of the Value Added Tax (Amendment) Act 2007, which refers to VAT registration number. This clearly shows that upon registering with the FIRS, one is automatically issued with a VAT registration number. So, why do the Banks insist on Business Names acquiring a TIN from FIRS, rather than a VAT Registration Number? Why does the FIRS issue TIN number to Business Names, instead of VAT registration numbers knowing it has no power to administer tax on Business Names?

A T.I.N ERROR: CBN AND FIRS: The Central Bank of Nigeria, CBN is saddled with the responsibility of making policies and guidelines which regulate the banking sector of Nigeria and stipulate the various requirements for opening an account with any bank in Nigeria. After the implementation of the AML/CFT Regulation of 2009 and given that financial inclusion is of high importance to the CBN; bearing in mind the need to ease the opening of bank accounts by socially and financially disadvantaged persons, the CBN in a circular FPR/DIR/CIR/GEN/02/001 of January18, 2013 published its three-tiered KYC requirements for opening various bank accounts in Nigeria.

This document makes no mention of TIN as one of those requirements. However, in its circular with Ref No. FPR/DIR/GEN/CIR/01/004 dated February 24, 2014, the CBN felt the need to harmonise the forms used by banks for customer due diligence, so introduced a Form B (Account Opening Form for Incorporated and Non-Incorporated Entities). It was this Form B which introduced TIN amongst other new requirements.

It is not clear if the inclusion of TIN in the form was a request from the FIRS, as one is quite uncertain why the CBN proposed same forms for both Companies and Business Names knowing that both have different legal personalities and that the income taxes of Business Names are paid by the proprietors through Direct Assessment. It was this Form B which lead to the one size fits all approach of the banks, as a more useful approach would have been to request for TINs for companies and VAT Reg. numbers for Business Names.

Interestingly, Form A which was also issued by the CBN for opening accounts for Individuals, also contains a provision for TIN, but the banks have never insisted on having individual tax numbers before opening a bank account for an individual, making it obvious that the Tax Identification Number requested by the banks in Form A are those issued by FIRS.

It is obvious that the legal personalities created by law cannot be subverted by the Banks, CBN or the FIRS. Regulatory action must stay within the confine of established laws. The practice of requesting that Business Names obtain TIN from the FIRS is wrong.  If identification is required for tax purposes by banks, the Payer ID issued to Business Name proprietor(s) for purposes of Direct Assessment by State revenue authorities should suffice. If the CBN is interested in capturing the appropriate taxes due from Business Names to FIRS, then Form B should be amended to include VAT registration number, as that is the only tax due to FIRS from a Business Name.

In 2017, the CBN in its circular with ref number: BPS/DIR/GEN/CIR/04/005 dated July 3, 2017, introduced the Bank Verification Number, BVN which collects identification data from all banks on their customers, thereby ensuring effectiveness of Know Your Customer, KYC. This rather elaborate verification is sufficient customer due diligence or KYC identification and unless there are other peculiar reasons why TINs are required to open a bank account, they should be removed from the CBN Form B, as the Bank is not a tax authority.

While the action of restricting accounts without proper legal authorisation flies in the face of due process and should be challenged with heavy damages imposed on banks allowing themselves to be so used, it is important that the regulatory bodies clarify the position on Business Names. This category allows many small and medium scale businesses enter the formal sector. This group requires protection and not to be used as battered ram in double taxation.

The FIRS and the CBN as a matter of importance should stop issuing TIN to Business Names or requiring that they have one to open bank accounts.


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