Audit report indicts FIRS over N12.9b unapproved capital allowance to taxpayers

The Auditor General for the Federation has charged the Federal Inland Revenue Service (FIRS) to immediately recover the sum of N12,965,763,608.85 from 10 taxpayers it granted capital allowance without a Certificate 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 Auditor General, in his Revenue Assurance Audit Report 2021, which provides an overview of the 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.

According to the report, 10 sampled taxpayers enjoyed capital allowance without evidence of a Certificate of Acceptance of Capital Assets (CAFA) in files for the financial years.

It also noted that a total of N43,219,212,029.51 was the 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 N12,965,763,608.85 as Company Income Tax.

Of the sampled companies, Access Bank enjoyed the highest capital allowance with the sum of N36,518,694,981, followed by Stanbic IBTC Pension Manager with N1,783,531,004 and Citibank Limited with N1,229,136,141.

Others are NPF Microfinance Bank Plc, N1,018,021,903; System Spec Limited, N985,812,050.70; Greenwich Merchant Bank Limited, N671,351,254.81; Zenith Pension Custodian Limited, N546,887,214;

AIICO Insurance Plc, N455,986,718; Interswitch Financial Inclusion Services, N7,654,550; and Peninsula Microfinance Limited, N2,136,213.

However, responding 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 becomes difficult to disallow their claims on Capital Allowance. They also appealed to the Auditor General to help in facilitating the early release of CAFA by the Federal Ministry of Trade and Industry to taxpayers.

The audit also uncovered that N66,667,638,701.25 was liabilities established through self-assessments, desk review assessments, and special audit assessments of the sampled taxpayers for the financial year-ends of December 2018, 2019, 2020, and 2021 without any evidence of recovery.

Of this amount, N52,168,654,418.43 is company income tax (CIT) and withholding tax (WHT), N11,067,820,669.17 is value-added tax (VAT), N99,143,699.03 is education development tax (EDT), N13,373,261.89 is National Information Technology Development Fund Levy (NITDEF), N29,306,763.00 is for Capital Gain Tax (CGT), while N3,289,339,889.73 is for Stamp Duty Tax (SDT).

It, however, frowned upon the fact that though these discoveries were made by the revenue house, there is no evidence of recovery.