Barrister Francis Danladi Kozah, Board Secretary/Legal Adviser, Kaduna State Internal Revenue Service Board, in this interview with Emmanuel Ado, spoke on the achievements of the Service and why it resorts to sealing up businesses over PAYE and the expectations of the service in 2020.
Question: Congratulations to the entire staff and management of the Kaduna State Internal Revenue Service(KADIRS) for unprecedented feat the service achieved in 2019 taking the service from a paltry 12billion yearly to 44billion is no mean feat…
FDK: Thank you very much. We are grateful to be of service to the good people of Kaduna State and we are assuring them that we will be more dedicated to our work in the year 2020.
Question: If I understand your statement, does that mean a more aggressive tax drive? Because 44b is history now.
FDK: As you know, everybody wants to grow to improve on whatever he has achieved and for us in KADIRS, we are looking forward to more achievements. We are looking to build on the 44 billion we collected last year. For us, that is just a foundation, which will help us achieve our target for 2020. We do look forward to better achievements, which is possible with more dedication to service.
Question: So the companies and every taxable adult should expect more rigorous compliance enforcement. Can you also let us into the secret of your achievement….how did you achieve this unprecedented feat?
FDK: What we simply did was to dust our books and luckily we have operated the Kaduna State Tax (Codification and consolidation) Law, 2016 for over four years now. we have come to appreciate and understand the law better. We exploited the areas that were hitherto unexploited. We capitalized on it and exploited the situation to the advantage of the state which is in dire need of money to fund projects. That is part of the secret. We studied the law, we understood the law better. And since taxation is purely legal, we were better positioned to enforce the law in 2019 following the experiences of the last four years.
Question: You talked about the law and the fact that the service went through reforms and of course the prohibition of cash collection was that a game changer?
FDK: The provisions of that law practically positioned us to do better. When you have done something for four years, there is that tendency that you will appreciate it much better to achieve results. Secondly, the staff that we hired have proved invaluable, they have a good understanding of our mandate through several orientation programmes that they went through. The kudos goes to the staff who have implemented the law and the law itself; if the law wasn’t there we wouldn’t have been able to do it.
Question: But you must talk about your governor Mallam Nasir El-Rufai. Last year, you were able to get 9.4 billion from the Ahmadu Bello University, Zaria and Kaduna Polytechnic in backlog of taxes. He refused to succumb to pressure from those institutions to get you off their backs was that political support critical?
FDK: The Chief Tax Officer of the state is the governor, so whatever success we achieve is attributed to him because without his support we wouldn’t have achieved it. El- Rufai has given us the autonomy to operate. He has refused to interfere in our activities and we have leveraged on that to do what we want, of course within the ambit of the law.
Question: Is this a kind of notice to the companies and people, not to count on him for any sort of support?
FDK: The Governor is somebody who has bluntly refused to interfere in our internal affairs. When the ABU matter came up, he simply told us to go ahead and do the right thing and that was what we did. Anybody who thinks he or she can go to the Governor or any Government official to interfere will be wasting precious time. Your best option remains to talk to us.
Question: Having operated this law, the Codification Law 2016, are there areas you want to be amended and are you already talking with the State Government because this would further help in your collection?
FDK: Certainly, it’s a man-made law, it is subject to some errors here and there, some amendments, improvements here and there to perfect it. We are working on it, we have made recommendations to the government on the areas we will like to see amended, which will hopefully expand the horizon, especially in the area of betting and gaming… like the popular Naijabet and we want to explore that potential. We have met with the Deputy Governor on the need for them to encompass it into the law. There are other laws, other provisions that we have also recommended to the government to strengthen our enforcement mechanism and to also encourage voluntary compliance and the taxpayers will benefit from that voluntary compliance. They are studying our proposals very soon we expect the House of Assembly to hold a public hearing to allow people to make their input. There are already several engagements on the issue, because we operate an open door policy.
Question: Why do you think you deserve to get a bite of Naijabet?
FDK: People are making a lot of money from it and the law is very clear, that whatever income you make is taxable, whatever business you do, at the end of the day you are expected to declare your income. We are exploring that potential and we believe that in 2020 we will make a good chunk of money from that.
Question: Do you have a figure?
FDK: Our projection is over 2billion all things being equal. Lagos state is already making a lot of money from taxing winnings. We have had people from South Africa who have opened our eyes to the huge potential.
Question: Let’s talk about the 44billion. How has that affected the atmosphere in the service, the morale of your staff and is that also the source of the chairman’s confidence that the service can do 60billion and above in 2020?
FDK: The staff is definitely very happy that they have surpassed the 2019 target. They feel fulfilled that they have contributed their own little quota to the development of Kaduna State. I think that will spur us all to greater performance in the year 2020 by God’s grace.
Question: So is the N60 billion achievable?
FDK: It’s attainable and surpassable with support from Government and relevant stake holders.
Question: Are you being over ambitious?
FDK: We are not, because the opportunities are there.
Question: Quite clearly KADIRS means business. Early this year the service sealed of two commercial banks – FCMB and Keystone Banks, for refusing to remit backlog of PAYEE taxes. Before this you had equally restrained Access Bank, can you take me through the process from tax audit and why you are compelled to eventually take the steps you took?
FDK: Taxation is purely a legal matter. When we discover that somebody is owing us – either a corporate or an individual, we conduct a tax audit on that person …we look at the books of that organization or person and issue a report …after the tax audit is conducted. This tax audit could be back duty, by back duty I mean past years of your activities which can either be Pay As You Earn, withholding taxes, e.t.c. so it’s always a back duty thing. The problem most times is the refusal to remit, or failure to remit the correct amount. If the organization or individual remitted what they ought to we shake hands, but if they haven’t we send out a demand notice, which will clearly state what is being owed and the period. By law the taxpayer is expected to respond in either of two ways; he agrees or challenges the figures. And the reasons are clearly stated. A Tax Administration Reconciliation Meeting (TAR meeting) will be held to reconcile any differences. tax consultants, accountants, lawyers are allowed to represent any taxpayer. The issues will be thrashed out and final figures agreed. At the end of the day if there is the need for a reassessment, we reassess considering the facts, but once a decision is taken the taxpayer is expected within 30 days to settle or challenge the final assessment at the Tax Appeal Tribunal or to the High Court. We only resort to enforcement if after 30 days the taxpayer didn’t pay you or challenge that final assessment, it’s then and only then that the service resorts to what is clearly the last option. And there is a process, first, we approach the court for an order to levy restraint and once the order is obtained and we levy restraint the taxpayer must pay up to have his premises reopened. But the service is not interested in sealing up any business premises, so we are always patient.
Question: So are you saying FCMB, keystone and Access banks when you issued them with demand notice that they did not take any step whatsoever?
FDK: They took steps, we discussed and held several meetings with them and we arrived at what they were owed. it was their failure to pay that led to enforcement.
Unknown to many taxpayers is the fact that the tax process is special, it’s Swiss Genesis…..it’s not a normal legal process. It is a special process meant to govern tax administration. Section 104 sub section 3 and 4 of the Personal Income Tax Act, it gives us the power to go to court once the assessment is final via an Ex Parte Application. all we need do is show the court that we have followed the process, that the taxpayer has been served and the taxpayer hasn’t responded either by paying or by challenging the assessment. We have a duty to convince the court that we have followed the due process and once we have ….the court will grant us the order. That was what happened in the case of the banks that were retrained. We endeavor to satisfy the requirements of the law before enforcement. We are not happy sealing up any premises.
Question: Can we talk about the tax table?
FDK: The tax table is simply how taxes are assessed especially PAYE. The table states how taxes must be assessed. Most taxpayers and organizations don’t apply the tax table correctly. They should hire professionals to guide them. The problem is that most people and organizations want to cut corners by refusing to pay the correct amount. This is why we have a backlog of taxes, especially when we apply it correctly. Tax audits will always reveal whether a company is shortchanging government or not. we have a duty to collect the outstanding once we establish a liability. a taxpayer who failed to pay his taxes in full is not entitled to tax clearance certificate because it (TCC) envisage that you must have paid your taxes in full. Tax tables as envisaged by the law….must be applicable 100% and once it is done taxpayer doesn’t have any problem.
Question: Have things changed? Have organizations realized that your service is serious about the application of the correct table?
FDK: Certainly, because of our resolve. To foster a good working relationship we have made it a point of duty to hold workshops to sensitize taxpayers and organizations on the correct table. I must say that there have been improvements.
Question: Prior to 2015 most certainly Kaduna State must have lost more than N100billion in the last 10 years?
FDK: Kaduna State most certainly lost more than that, especially the staff of the then board was doing whatever they wanted. The refused to apply the law, arbitrariness was the order of the day and as a result, the Kaduna State Government lost huge revenue. The difference between what they collected and what we are collecting is first as a result of the application of the correct table and secondly because the law prohibits cash collection.
Question: What is the exact problem when it comes to PAYE backlog, how come these organizations end up with the backlog because PAYE is supposed to be deducted at source, what is the problem, is it remittance?
FDK: The problem isn’t just remittance but the application of the law correctly….that’s the problem with the backlog. It’s the failure to assess the employees correctly. Organizations must come to terms with the fact that they are not doing their staff any favour. Institutions have the mandate to deduct the correct taxes and to promptly remit the same. If you don’t assess your staff correctly and we conduct a tax audit on you, we will not pursue the staff but the organization…so in the long run the organization loses. The law made organizations the collector and as such they must collect and remit. It is a statutory or legal obligation to deduct the correct amount and remit. If you fail to deduct or you deduct partly, you bear the brunet. You will bare the burden when a tax audit is conducted and liability is discovered, it will be on the organization’s burden to bear. The statutory burden of deducting the money is on the employer, and there are some consequences for the principal officers of these organizations.
Question: Why exactly do taxpayers and organizations have PAYE backlog problems, because PAYE is supposed to be deducted at source, is the problem remittance?
FDK: The problem is not just about remittance but also wrong assessment, by applying the law wrongly, that is the big problem. They willfully refuse to assess their employees correctly and they fail to realize that the statutory burden of deducting the money is on the employer and that the consequences of failure rest squarely on the principal officers of the organization, the Managing Director of the company, the Vice-Chancellor if it is an institution, the Registrar, Etc. They can be prosecuted or fined personally apart from having to pay the correct backlog. They are, without mincing words, criminally liable in their personal capacity.
Question: So in a sense, KADIRS has been very generous in going for the backlog?
FDK: Most certainly, We have deliberately not pursued the criminal element, because we are a humane organization. Moreover, once we write to these organizations, they promptly respond. We will continue with the enlightenment programme, which we started. And we intend to involve professional bodies, because every one of them have ethics, We are addressing the issue from that angle and we will not hesitate to report them to their professional bodies if they continue to behave in a very unprofessional manner.
Question: So they are aware that you have the backing of the law and that they can be prosecuted?
FDK: Certainly they know that we have the backing of the law.
Question: Because we are still talking about those you have been forced to distrain, the latest being FCMB and Keystone Banks. Have they paid off?
FDK: Yes. We appreciate that they have paid, but we hope they won’t force us to go through that route again.
Question: What triggers a tax audit. Do you have whistle blowers who alert you and then you go in?
FDK: In the service, we have recruited Intelligence Officers, who have the duty of gathering information on taxpayers for us. Secondly unknown to taxpayers is that the law gives us the power to dig into their financial affairs. Banks have a Statutory obligation to give us information on any taxpayer without recourse to them. Again we access annual reports published by organizations. These are all sources of information that we have and when we have this information we analyze them.
Question: There is no hiding place anymore.
FDK: Absolutely…so the best thing for taxpayers is to come clean, do the right thing and you will be very happy.
Question: Do these organizations understand your zero tolerance, that it is no longer business as usual and that refusal, delay to remit will always be at a huge cost.
FDK: I believe they now understand.
Question: Apart from distraining business premises of defaulting organizations what other penalties are there?
FDK: Kaduna State Internal Revenue Service allows organizations and taxpayers to assess themselves…voluntary compliance. this is what we always encourage our taxpayers to do- go to the bank and pay. We have tried as much as possible to automate our processes so that a taxpayer doesn’t even need to come to us. You can do everything from the comfort of your house and payment within the comfort of your room, even our Tax Clearance Certificate has been fully automated. Once you pay you can apply for your tax certificate online and print from the comfort of your home. Our motor-vehicle department has been fully automated, you don’t need to physically go to any of our offices to pay for the renewal of your vehicle particulars or get new number plates for your vehicles, you can do that online. We continued to ensure that in line with the ease of doing business of this present government that we reduce the time you spend to enjoy our services. So because the taxpayer is king we have provided comfort for them, so they have no justification whatsoever not to pay because we are treating our taxpayers as Kings.
Question: Is that why the Kaduna Inland Revenue Service celebrates Alhaji Lema Jubril?
FDK: Alhaji Lema Jibril is an exceptional gentleman as far as tax matters is concerned…he pays his taxes when due voluntarily. He is a model for people to copy and that is why we honoured him. We encourage everybody in Kaduna state to emulate him.
Question: What are the advantages of voluntary compliance?
FDK: Simple, you know the process you assess yourself, you go and pay and nobody disturbs you. Once you do that you have some relief that the law says we can give you. It is very good, very comfortable convenient, nobody disturbs you and we appreciate you and we give you relief.
Question: So that’s one advantage that the voluntary taxpayer stands to gain. And for you it saves you the cost of having to run after him, so your overhead is reduced..are you passing on some of your gains to the taxpayer?
FDK: Yes it’s true when a taxpayer does that we are very happy that the taxpayer becomes our friend it’s a symbiotic relationship isn’t it- give me I give you, we pat each other on the back.
Question: Your mandate is to generate revenue for the state government and of course the law permits you to go after tax defaulters. You’ve been forced to seal up businesses but the state is desirous of attracting investors. How are you managing the delicate relationship?
FDK: You know there is nowhere in the world that you don’t pay tax. Like I said earlier Kaduna State taxes are the lowest. So that’s an incentive for people to come and invest here. The State also gives tax holidays for new companies that are coming. We are conscious of that fact, which is why we ensure that our very action is guided by the law. Kaduna State has eliminated double taxation. So our actions do not in any way inhibit business…rather they encourage people to come because we have a congenial business atmosphere. Our laws are codified and consolidated. And because the laws are available, they can be easily appreciated by investors because their tax obligations are in black and white.
Question: I am intrigued by the point you made that Kaduna State taxes are the lowest. Are you saying that the feat you have consistently recorded since Mallam Nasir Ahmad El-Rufai came that you have not introduced new taxes?
FDK: There has been no new tax, What we have done is to eliminate leakages to the barest minimum. Number two, we also strengthened our enforcement mechanism and compliance. Thirdly, we have looked at backlog…PAYE arrears and we have effectively collected these arrears and we apply the law as it is. So these are the things we have done that have helped to achieve these results.
Question: So assuming you raise taxes or you introduce new tax lines you will comfortably collect 100 billion Naira?
FDK: Yes, but we don’t want to burden taxpayers in Kaduna state. Just pay the minimum, there is no need to do that for now.
Question: Are you going to embark on more aggressive enlightenment programmes?
FDK: Certainly, we have started more enlightenment programmes this year. I am assuring you that the service is going to embark on more vigorous sensitization and enlightenment programmes
Question: Are you happy with professionals like doctors, lawyers….we hear of huge legal bills for instance paid by Litigants to lawyers and the picture we always get is that they pay little or nothing. How would you be encouraging these categories of people to pay what is appropriate?
FDK: I’m a professional lawyer and I am not happy with the response of professionals as far as their tax obligation to the state is concerned. Some of them are doing very well but the majority of them are not living up to expectations and we have had cause to talk to them at their meetings. I have had cause to talk to my colleagues- lawyers, I have had cause to talk to doctors during their meetings and so on and so forth. So we are trying to enlighten them and bring them on board. One of our key objectives in 2020 is to bring professionals into the tax net, and we are already taking the necessary steps. We are going to be very strict, very decisive as far as professionals are concerned in Kaduna state. Taxes are not so onerous, they are based on your earnings. I pay taxes on a monthly basis, the cleaners pay their taxes, the lowest paid staff in the Kaduna state government pay their taxes every month so I don’t see any reason why those who earn professional fees should not pay taxes. They should, because we are giving them from now till March to voluntarily pay. After March it will be on full enforcement of the law and we already have enough financial information about them, we are analyzing them.
Question: They should be encouraged-the Urban Renewal Projects, people can see what the government is doing with your collection…
FDK: The government is working, the government is performing. There are projects here and there. There has never been such a massive development in the state …which is gulping a lot of money and we all know what the State is getting from the Federation account.
Question: And the New minimum wage is taking an additional N1billion…
FDK: Kaduna State like you know pays its workers on or before the 25th of every month. And it was the first to start paying the new wage…add the massive development of urban renewal programs…I think every Kaduna State resident should reciprocate by doing the needful …by paying up. To further generate more money this year 2020, we intend to embark on a collection of N500 development Levy. It is the law so people should try and comply. Paying the money will show support for the government. And once you pay, you have every right to ask questions about how the government spends your tax. But I must say this…Nasir El- Rufai has been very accountable.
Question: Let me ask you, your Executive Chairman, Dr. Zaid Abubakar has been very particular about professionalism. I see a lot of ICT Innovations that will most certainly aid your operations. So the e-tax management platform, that’s what you were talking about earlier on, is it fully deployed?
FDK: it’s fully deployed. Just last week Thursday Zamfara state Revenue Board came to Kaduna State Inland Revenue Service to understudy our automation process, just like many other states have been coming to Kaduna Inland Revenue Service to understudy our operations. Our auto-vehicle automation is perfect so we encourage people to make use of these facilities.
Question: Can you expatiate more about the Development Levy of 500Naira for every taxable adult. How much are you looking at from that tax line?
FDK: About 7million Naira. Everybody, even the Traditional rulers have keyed into the levy. We are working hard to ensure compliance.
Question: Is the presumptive tax working?
FDK: Yes, presumptive tax is working. What it simply means is that those who don’t keep a former record of their revenue -shop owners and so on and so forth…will be assessed based on presumptive tax. More importantly, for us is that people are being brought into the tax-net. We have a unit that is responsible for presumptive tax and they have been going round the local governments.
Question: Is it a good tax line that will bring money in?
FDK: Yes it is a big tax line, a lot of people are not paying, a lot of people don’t keep records -small businesses don’t keep a record, they will be captured under the presumptive tax regime.
Question: And they will pay as low as how much?
FDK: Well it depends on their assessment because there are some that are macro, big, small and so on and so forth, it all depends on what you do. The bean cake seller will not pay the same amount with the person operating a supermarket…. even though they don’t keep a record, it all depends on the industry or sector, the law provides the rates.
