OAuGF seeks recovery of N13 billion unapproved capital allowance to taxpayers

* Banks dominate beneficiary list

The Office of Auditor General for the Federation (OAuGF) has charged the Federal Inland Revenue Service (FIRS) to immediately recover N12.97 billion from 10 taxpayers it granted capital allowance without Certificates of Allowance for Fixed Assets (CAFA).

A capital allowance is a tax deduction allowed on qualifying capital expenditures incurred by a business or individual. It is a way to claim a portion of the cost of assets, such as buildings, equipment or vehicles, against taxable income over their useful life.

The OAuGF in its Revenue Assurance Audit Report 2021, which provides an overview of activities of the FIRS on tax assessment, collection and remittance to the federation account for 2018 to 2022, observed that the taxpayers claimed capital allowances without CAFA.

The report said that this has denied the federal government revenue that should have gone into the federation account for disbursement among the tiers of government.

According to the report, 10 sampled taxpayers enjoyed capital allowance without evidence of CAFA in the financial years. It noted also that a total of N43.22 billion was capital allowance enjoyed by the 10 sampled taxpayers.

It, however, noted that the total capital allowance enjoyed by the sampled taxpayers without evidence of CAFA resulted in a revenue loss of N12.97 billion as company income tax (CIT).

Of the sampled companies, Access Bank enjoyed the highest capital allowance of N36.5 billion, followed by Stanbic IBTC Pension Manager with N1.78 billion and Citibank Limited with N1.23 billion.

Others are NPF Microfinance Bank Plc (N1.02 billion, System Spec Limited (N985.8 million), Greenwich Merchant Bank Limited, (N671.35 million), Zenith Pension Custodian Limited, N546.89 million. AIICO Insurance Plc, Interswitch Financial Inclusion Services and Peninsula Microfinance Limited are also beneficiaries

However, in response to the audit query, the management of FIRS explained that taxpayers usually experience delays in obtaining CAFA from the Federal Ministry of Trade and Industry.

Hence, it said, it becomes difficult to disallow their claims on capital allowance. It also appealed to the OAuGF to help in facilitating the early release of CAFA by the Ministry of Trade and Industry to taxpayers.

The audit also uncovered that N66.67 billion was liabilities established through self-assessments, desk review assessments and special audit assessments of the sampled taxpayers for 2018, 2019, 2020 and 2021 without any evidence of recovery.

Of this amount, N52.17 billion was CIT and withholding tax (WHT); N11.07 was a value-added tax (VAT). The Education Development Tax was N99.1 million (EDT) while the National Information Technology Development Fund Levy (NITDEF) was N13.34 million.