Top-tier professional services consultancy, Andersen, has cautioned that a provision in the new Tax Appeal Tribunal (TAT) rules may be a recipe for corruption among officials of tax authorities and cause damage to businesses. The firm made its view known in its analysis of Order 3 Rule 6 of the TAT Procedure Rules published on its official website. The new rules were recently approved by the Finance Minister, Mrs. Zainab Ahmed.
According to Andersen, the provision prescribes that a taxpayer contending an assessment by a tax authority must pay 50 per cent of the disputed tax bill before it could be entitled to file an appeal at the TAT.
“It can further empower tax officers to become arbitrary in raising additional tax assessments and push taxpayers to settle such arbitrary assessments with tax officers rather than appeal to the tribunal or Federal High Court.
“Such practices can easily thrive because taxpayers may opt for cheaper, albeit, off-the-table options to resolve their tax disputes.
“Arbitrary assessments can also arise because of the need for tax authorities to meet revenue targets, whether the assessments are valid or not as long as the taxpayer can be made to pay,” the company cautioned.
The firm also warned that the provision carries potentially dire consequences for businesses as well as those involved in transactions with them. These, it said, are possible through cash flow difficulties, which may arise in the event of huge payments of deposits on yet-to-be determined assessments and lead to the collapse of such businesses as well as causing massive job cuts.
“One possible impact that the new rule will have is that it may negatively affect the cash flow of businesses that are assessed to additional tax, if they have to pay half of the assessed amount prior to an appeal, whether the assessment is valid or not.
“For any business, and especially those with low margins and weak cashflow, it can lead to immediate shock and possible collapse of the business depending on the quantum of tax assessed.
“This in turn can lead to job losses and closure of the business, with adverse social impact on other companies that have linkages to such businesses, including banks, financial institutions and investors that may have provided loans or invested in such businesses,” Andersen warned.
The firm equally observed that taxpayers, who record successful appeals, may find it tough to get their deposits back in view of the fact that the provision fails to state how such are retrievable.
In addition, it warned that the implementation of the new rule may cost the country in terms of local and foreign investment and adversely affect her ease of doing business credentials.
It counselled against its blanket implementation, stating that there should be a deposit limit of between 10 to 20 percent of the disputed tax bill and the creation of an avenue for a taxpayer to appeal the decision of the tribunal on the rate.