April 9, 2019
In 2018, the Federal Inland Revenue Service (FIRS) reported that it collected N5.32trillion in tax revenue. This was as a result of the increased drive for tax collection and must have given the FIRS, the confidence to set a very ambitious tax revenue target of N8trillion for 2019. This drive for improved tax collection is also seen at the sub national level where most State Internal Revenue Services (SIRS) are aggressively engaging taxpayers in a bid to raise revenue. Given the plan to approve the national minimum wage of ₦30,000 and the resultant increase in Government expenditure, it is expected that the tax authorities will become even more aggressive in their effort to shore up tax revenues.
In the past year, the FIRS embarked on several initiatives aimed at expanding the tax net and raising revenue. As part of the FIRS’ efforts, it gathered huge data on potential taxpayers and their business activities. The data was then processed to profile potential taxpayers who hitherto had not paid their taxes. This resulted in the issuance of back duty tax assessments to ensure recovery of unpaid taxes. For many taxpayers who received such back duty tax assessments for the first time, it was evident that they were not aware of the stipulated timelines for responding to such back duty assessments and the implications of missing the deadlines for objection.
Where the taxpayer disputes the assessments, the tax laws allow taxpayers to object the additional assessment within a specified timeline1, stating the specific grounds of objection. Failure to object within the specified period may make the additional liabilities final and conclusive.
This article seeks to review the issues around final and conclusive tax assessments and addresses common pitfalls that lead to unfavorable tax assessments issued to taxpayers.
Generally, a tax assessment is final and conclusive when a taxpayer agrees with the tax liability raised in the assessment notice following an objection or an appeal. Another reason may be due to failure to respond to an assessment within the specified deadline as provided within the tax laws. With respect to Companies Income Tax (CIT), Section 76 of CIT Act (CITA) provides that:
“Where no valid objection or appeal has been lodged within the time limited by Section 69, 72 or 75 of this Act as the case may be, against an assessment as regards the amount of the total profits assessed thereby, or where the amount of the total profits has been agreed to under Section 69 (5) of this Act, or where the amount of such total profits has been determined on objection, revision under the proviso to Section 69 (5) of this Act, or on appeal, the assessment as made, agreed to, revised or determined on appeal, as the case may be, shall be final and conclusive for all purposes of the Act as regards the amount of such total profits; and if the full amount of the tax in respect of any such final and conclusive assessment is not paid within the appropriate period or periods prescribed in this Act, the provisions thereof relating to the recovery of tax, and to any penalty under section 85 of this Act, shall apply to the collection and recovery thereof…”
Based on the foregoing, a final and conclusive assessment may be the high note of a tax dispute where the taxpayer agrees to the assessment and settles the tax liability. A problem only arises where the assessment is inconsistent with the taxpayer’s position and the tax authority has considered the assessment as final. In this scenario, the FIRS may issue a Notice of Refusal to Amend (NORA) and the next avenue to seek redress will be through litigation. Most taxpayers are usually not willing to explore this option due to cost implication and protracted nature of most cases.