By Kayode Taiwo

The topic of agency arrangement cannot be discussed without stating what agency itself entails.  The free dictionary.com defines agency as follows:

A consensual relationship created by contract or by law where one party, the principal, grants authority for another party, the agent, to act on behalf of and under the control of the principal to deal with a third party. An agency relationship is fiduciary in nature, and the actions and words of an agent exchanged with a third party bind the principal. An agreement creating an agency relationship may be express or implied, and both the agent and principal may be either an individual or an entity, such as a corporation or partnership.

The law of agency allows one person to employ another to do his or her work, sell his or her goods, and acquire property on his or her behalf as if the employer were present and acting in person. The principal may authorize the agent to perform a variety of tasks or may restrict the agent to specific functions, but regardless of the amount, or scope, of authority given to the agent, the agent represents the principal and is subject to the principal’s control. More important, the principal is liable for the consequences of acts that the agent has been directed to perform.

History of Agency Collection of Tax In Nigeria

•In the 1961 Act dividend income was the only one subject to withholding tax (WHT) and the rate was the applicable income tax rate at that time

•Decree 1979 included the following other income sources: interest, management fee and royalties. The applicable rate was 45%.

•    Decree 4 of 1985 expanded WHT scope in the country. It extended it to cover:  All investment income such as dividend, rent, interest and royalty and services

The Federal Inland Revenue Service (FIRS) noticed that the Major oil companies were so dilligent in deducting and remitting the WHT from their contractors and customers.  This efficiency made FIRS to issue a circular in January 1999 to all government departments to deduct WHT and VAT from the invoices of their contractors.  It is also made clear in that circular that the government agencies do not bear the burden of payment but their contractors.

From 1999 to date it has been disocvered in FIRS that there has an been increase in the collection of taxes from government ministries and parastatals.  It was as a result of this increase that the government business tax department was created in November 2012.

RESPONSIBILTIES OF AGENTS OF TAX COLLECTION

In the administration of WHT, VAT and PAYE under the Nigerian tax system, the role of agents is very important in collecting taxes from taxable person. It is important to mention here that the newly created Government Business Tax Offices in FIRS depends majorly on the effectiveness and efficiency of the government ministries and Parastatals who act as agent in the collection of WHT, VAT and PAYE from the relevant taxpayer. Section 9 (1) provided that “Every government ministry, statutory body and other agency of Government shall register as agents of the Board for the purpose of collection of tax under under this Act.

Tax Collection Agents are stated below:

1.1    Tax authorities

1.2    taxpayers

1.3    Ministries, departments and agencies (MDAs), Federal ,state and local government

1.4    Oil and gas companies

1.5    Banks;

1.6    Central bank of Nigeria

2.0  Roles  and Responsibilities

a. Role of Taxpayers

•All taxpayers must ensure they pay the correct taxes as and when due.

•Taxpayers should also ensure they provide relevant information of taxes paid showing the date, tax type and amount paid

•Taxpayers are also required to prepare proper books of accounts so that appropriate taxes are collected and paid through the collecting agents

•Taxpayers should ensure that they collect e-tickets as soon as payment is made.

•Taxpayers are also expected to comply with the following provisions.

Ensure that WHT are deducted and remitted correctly and promptly in line with the provisions of Sections 78 to 85 of CITA LFN 2004 (as amended).

•Taxpayers are required to attach details of the beneficiaries of the WHT deducted so that credit notes can be issued to each beneficiary to be used to offset future taxes.

•Taxpayers are also expected to raise tax invoice and include VAT in all invoices raised. Taxpayers are further required to remit that VAT portion to the VAT Pool Account through the collecting banks. (These exclude MDAs and Oil and gas companies).

•They are expected to provide evidences of VAT paid on demand.

•Taxpayers are expected to provide relevant information to tax audtors/investigators when required

•Ensure that there is proper narration of the transaction for WHT purposes.

b.Role of the Tax Authorities

They are to ensure that they provide information on the amount of tax due from the tax payer;

•-Assess, collect and account for taxes collected.

-Publish / disclose taxes collected.

-Timely posting all tax payments of the taxpayers to their appropriate account to reduce or clear to the taxpayer liabilities.

-They are to ensure that they provide evidence of payment to the taxpayers e.g e-tickets/receipts of taxes paid.

-Address tax payer complaints.

-Conduct tax audit and investigation.

-Tax authorities should not disclose or divulge taxpayer information to anyone other than the authorised persons.

c. Role of ministries, departments and agencies (MDAs), federal , state and local governments as Agent of Collection

•MDAs are required to deduct VAT at source from all contracts/transactions and remit to the VAT pool accounts in line with the provisions of section 9 of the VAT Act 1993 ( amended).

•MDAs are expected to attach schedules of the beneficiaries of the VAT deducted when making payments.

•MDAs are also required to deduct WHT at source from all contracts and transactions and remit to the federation account in line with the provisions of sections 78 to 82 of CITA LFN 2004.

•MDAs are expected to attach schedules of the beneficiaries of the WHT deducted when making payments.

•MDAs are expected to keep data base of all beneficiaries of the tax deducted.

•They are expected to account for all taxes deducted at source (VAT or WHT).

•To provide information on the beneficiaries to the tax authority when required.

d. Accountant General of the Federation as Agent of Collection

Section 83 of CITA LFN 2004 and Section 24 of FIRS Establishment Act 2007 appoints the Accountant General of the Federation as an agent tax collection. These sections gives the Board power to authorise the Accountant-General of the Federation in writing to deduct the allocation of MDAs of federal, state and local government if they fail to deduct taxes at source (WHT & VAT) from all contracts in line with the provisions of section 78 to 85  of CITA LFN 2004 ( as amended).

e. Roles of Banks as Agent of Tax Collection

Nigerian Banks play vital roles in tax collection. FIRS usually appoints banks as collecting banks after fulfilling basic criteria for appointment. The banks are expected to abide by the agreement of both parties and carry out the following roles:

·Ensure that there is a customised payment teller for different tax types.

·Banks are to ensure that the payment teller are pre-numbered and taxpayers friendly.

•Banks are also to ensure that as soon as the taxpayer make his payments, the account of the FIRS is credited immediately

•Banks are to issue an e-ticket to the tax payer after making payment. If the tax payer pays tax through a cheque, a pro-forma payment acknowledgement slip will be issued indicating when the amount will clear before a confirmed e-ticket would be issued.

•As soon as the amount is cleared and e-ticket issued the banks are expected to sweep all payments within 24 hours to Central Bank of Nigeria. As consumers of goods and services, ministries, parastatals and other agencies of government pay VAT on their consumption in addition to the contract price of the item consumed by them and, for the contractor to render monthly returns, government agencies must obtain receipts from FIRS for the VAT paid on behalf of the contractors. The FIRS will issue the receipt in the name of the government agency which will in turn issue its own receipt along with a photocopy of receipt received from FIRS to the contractor.