Banks operating in Lagos, but found liable in the non-remittance of withholding taxes and other statutory charges to the state government, are being threatened with a shutdown of their headquarters. The state government claimed that the WHTs collected by the banks spanned a 10-year period. It is incredible that such illegality was allowed to endure, whereas the business of governance is driven solely by taxes paid by the public. Other corporate bodies are also involved in the dual practice of tax evasion and appropriation of public funds.
These activities are frowned upon by Nigeria’s extant laws. Lagos State, through its Commissioner for Finance, Akinyemi Ashade, had on November 11 issued a statement giving all the affected banks and other culprits about two weeks grace period to comply with the law, or default and face the consequences. He had rightly noted: “Prompt payment of tax will enable the government to provide the necessary infrastructure and improve the standard of living of the people.”
Withholding tax is a 10 per cent charge on interests, dividends and rents that companies collect on behalf of the government. According to the law, it is filed within 21 days after it has been deducted; and failure to do so attracts a penalty of 10 per cent of the amount not remitted, or deducted in a transaction.
Since Lagos is the country’s business and financial capital, the amount banks owe the state in this regard could be staggering. From its present monthly internally generated revenue of N30 billion, the state plans to hit N50 billion in 2018. With its aspiration to be the third largest economy on the continent – when ranked with the Gross Domestic Product of African countries – this remiss is definitely how not to go about it. The slack in the revenue collection mechanism that led to the banks’ abuse should be critically re-examined. The recovery should not be limited to the principal sum, but include the 10 per cent penalty.
The state’s financial position seems robust; but it pales into insignificance when viewed within the context of its $1.38 billion foreign debt, a local component of N311.7 billion and the gap in infrastructure, which it is battling to fix. It is the most indebted among Nigeria’s 36 states. Exposure to such huge debt stock could be narrowed with massive deployment of sophisticated technology in tracking its revenues.
It is not only Lagos that is denied the WHTs by commercial banks, Osun and Nasarawa states, among others, are also affected; and have taken drastic steps to recover them. In September, 10 branches of three banks were shut in Nasarawa. The Chairman of the Nasarawa State Inland Revenue Service, Usman Okposhi, said each time his agency demanded documents to review their level of compliance, the banks refused. “In the matter at hand, banks are not our taxpayers. The customers in the banks are our taxpayers. They (banks) are withholding tax on dividends, withholding tax on fixed deposits and other relevant taxes.” Without question, the situation is a dysfunctional corporate environment that requires strict enforcement of the law to reverse.
As the states fume, so does the Federal Government. Banks have refused to remit more than N7 trillion stamp duty taxes, according to a petition by the School of Banking Honour. This is money they collected on behalf of the government on electronic cashless transactions introduced in the wake of the recession. The Senate has mandated its Committee on Finance and Banking to investigate this abuse, based on the petition.
What is more, seven banks have in their custody $793.2 million belonging to Ministries, Departments and Agencies, which they failed to remit to the Treasury Single Account in line with the government’s policy. Incensed by their intransigence, in July 2017, the Attorney-General of the Federation, Abubakar Malami, filed a suit in court and secured a judgement in government’s favour. Three agencies alone, according to the court papers, had $367.4 million hidden in one of the banks; another covered up $277.9 million and so on.
Despite the court declaration, however, the situation remains tacky. Therefore, the Accountant-General of the Federation decided to bring forbearance and tact to bear on the recovery as the two parties are undergoing a series of reconciliations in order to amicably resolve the issue. The TSA is a fiscal policy introduced to block leakages, instil accountability and transparency into public finance management. Funds in the account are warehoused at the Central Bank of Nigeria.
Banks seriously lobby to be appointed public debt collectors. It is now apparent why they do so: to collect and convert such revenues to their own use. The funds earn them enormous returns; given their very high interest rates to business operators. Yet, states have public utilities such as roads, healthcare delivery and education to fix. In fact, their deficit level in the country is very embarrassing.
However, an end to the impunities committed by banks is far-fetched amid apparent weakness by their chief regulator – the CBN. But states and the government should not whinge about banks’ infractions when the law is on their side. It is an arsenal developed economies have deployed to maximum effect. For instance, the role US banks played in the 2008 global financial meltdown collectively earned them $204 billion fines, according to a 2015 CNBC report.
This is the only path to tread, when Nigerian banks unabashedly integrate unethical practices into their business codes. To indulge them under any guise is to promote rogue banking; and in the process destroy the economy.
