Investigation: Lagos Tax Agency In Secret Operations, Protects Tax Evaders

Investigation: Lagos Tax Agency In Secret Operations, Protects Tax Evaders

The Lagos tax agency, which claims it has sealed about 40 companies for tax evasion of over N350 million in the last four months, has refused to name the affected companies.

Investigation: Lagos Tax Agency In Secret Operations, Protects Tax Evaders

The Lagos Internal Revenue Service, LIRS, in official reports published by only one government medium, the News Agency of Nigeria, NAN, claimed it sealed 24 companies in September, and another 15 in November for tax evasion.

The Service said it sealed 24 companies in Lagos in September for evading state tax of over N320 million.

Again at different times in November, the agency claimed it sealed another 15 companies for evading tax of about N50 million.

The Head of the Distrain Unit of the Service, Folasade Coker-Afolayan, was quoted by NAN as saying that the companies were shut for not remitting personal income taxes of workers to the state government.

She said that the state government was being owed taxes ranging from one to three years. She added that it is unconstitutional for any company to withhold personal income taxes and that it is also a criminal offence for anyone to reopen sealed companies without authorisation from the government.

The LIRS is the major funding arm of the Government and has taken on the challenge of increasing the Internally Generated Revenue of Lagos State through the adoption and implementation of various strategies on revenue generation collection. At the introduction of the new board in November 2005, the position of the chairman of the service was upgraded to that of a permanent secretary, reporting directly to the Executive Governor.

In cases where the Service mentioned the closure of companies for tax evasion, it refused to mention the names and locations of the companies it sealed as well as the specific amount the companies owe.

Hiding information

The secretive nature of the distraining activities of the LIRS has, however, called to question, its motive and agenda.

Several efforts made by PREMIUM TIMES to secure the details of the distrain were unsuccessful as LIRS officials preferred to keep mum.

Like most Nigerian public organisations, the LIRS said it prefers to work with selected media friends, journalists who would not ask basic and critical questions of the agency.

Distrain, a legal term, sometimes referred to as distress, is the seizure of someone’s property in order to obtain payment of rent or other money owed, especially in common law countries. It can also be referred to as the act or process whereby a person, the distrainor, conventionally even without prior court approval seizes the personal property of another located upon the distrainor’s property in fulfillment of a claim as a pledge for performance of a responsibility.

Choosing pliable journalists

When PREMIUM TIMES approached the management of the agency, our reporter was directed to Bimpe Oluwa-Badmus, the Board Secretary of the LIRS.

Ms. Oluwa-Badmus would, however, not volunteer any information about LIRS activities on the true status of the closed companies.

“We already have the news correspondents we work with” she said, adding that other reporters can take quotes from whatever the other journalists report.

The Board Secretary asked for an official letter if our reporter was interested in further enquiries.

The letter was sent as requested stating inquiries on the updates of the LIRS activities and the procedure and processes of the organisation.

About a week later, Ms. Oluwa-Badmus said the inquiries were not specific and that that PREMIUM TIMES need not show interest in the true state of the ‘shut’ companies.

“There is no reason to follow up on these companies, because it is going to be quite tedious.

“It is our job. It’s a routine, like a cycle. It’s just like saying how many companies have issues, how many companies we have issued letters to and all that,” she said.

We are transparent

Even though the board secretary would not provide any meaningful information regarding it’s distrain activities, Ms. Oluwa-Badmus said the agency was not “doing anything hidden.”

“We follow the law,” she claimed. “All what we do is according to the law. Before any operation we go for, we get orders from the court, we go through all the processes we need to. Even on those days, the companies we go to, don’t know that we are coming, that is why we try to keep the whole process private, because they are delicate issues.”

The Head of Distrain, Ms. Coker-Afolayan, earlier said the agency’s action is derived from an order of the State High Court and in accordance with the Personal Income Tax Amendment Act of 2011. She said the new law provided for the tax authority to apply to the court for warrant to close the premises of defaulting tax payers.

The LIRS board secretary, however, said there was no need for members of the public to get updates on the true and present state of the closed companies.

“I don’t think that is what they (the public) would be worried about or wanting to know”, she said, adding that nothing much happens after they have been closed.

We don’t announce re-opening

Ms. Oluwa-Badmus also claimed that some of the companies are re-opened after they pay their appropriate tax. She, again, said her agency would not release details of those she claimed had paid and been re-opened.

“After the companies have paid up, there is no need for us to announce that we have re-opened some companies or that closed companies have been permitted to resume business as usual,” she said. “I don’t think there is any need for that. The companies affected may not even like it.”

She also said some of the closed companies are taken to court for their refusal to pay appropriate dues.

“Once the companies are closed, nothing much happens after that. They know they have to pay up. Some pay up in weeks after they have been closed, and for some, it could take months to pay up as some may have to run around to raise the money.

“We iron out the remaining of the payment and re-opening process in court,” she said.

Why we won’t disclose information

Despite claiming to secure court injunctions before enforcing the distrain, the LIRS board secretary claimed she could not divulge the name of companies involved because it is a confidential matter.

“Finance and tax issues of companies are confidential. We cannot give the names of affected companies, even when they have paid us, because they can decide to sue us for that. The court is already involved and the issue is delicate” she said.

Mrs. Oluwa-Badmus said that the LIRS did not really embark on distraining operations in the earlier part of the year as it had to smoothen out some of its policies legally.

“You would notice that most of the operations you came across this year are towards the latter part of the year. We just started some months ago because we had to address some issues” she said.

LIRS claim is baseless

Lagos based lawyers and financial analysts have, however, faulted the claims of the LIRS that it cannot disclose the details of the affected companies for legal reasons.

A Lagos based lawyer, Jiti Ogunye, said the tax agency’s claim of confidentiality is spurious and not tenable.

“No, it is not right for the LIRS to say that they cannot give information on the progress of the companies they have closed down,” Mr. Ogunye said. “It is a body established by law not only to enforce taxation laws but also to enlighten the public on the need to pay taxes. They have been doing this; including using actors/actresses to carry the message for people to voluntarily pay their taxes.”

The lawyer said further that “if you announce that some companies have been closed down, when they are opened; they ought to put out the information to the public.”

“The public has a right to know. The reason why that is important is that, first, these companies are corporate citizens,” he said.

A financial analyst and former member of the National Economic Management Team, Olusoji Salako, also faulted the logic of the LIRS.

“If announcing the reopening of closed companies that defaulted in taxes is infringing on their legal rights, then the organisation should not announce when they close down these companies” he said.

Mr. Salako said the many companies in Lagos were suffering from multiple taxation as a result of agencies like the LIRS.

“A lot of companies are complaining of multiple taxation. There are tax requirements that come from local, state and federal government,” he said.


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