The Federal Inland Revenue Service (FIRS) towards the end of last year, sent out letters to certain commercial banks appointing them as agents of tax collections for taxes considered as payable by tax defaulters. In doing this, the agents have been charged with the responsibility of freezing the accounts of taxable persons to prevent them from drawing money from the taxable accounts, setting aside the tax amount due from the bank accounts of the alleged tax evaders, remitting same to the accounts of the relevant tax authorities (RTAs) to the credit of the taxpayers, in full or partial settlement of the tax debts.

By the provision of Section 31 of the FIRS (Establishment) Act, 2007 (FIRSEA) RTAs have the powers to appoint any person to be the agent of a taxable person for the purpose of recovering tax debts or tax payable from such taxable person. This provision was reiterated in Section 49 of Company Income Tax Act 2004 (CITA), Section 50 of Personal Income Tax Act 2004 (PITA) and Section 41 of Value Added Tax Act 2007 (VATA). The agent appointed may be required to pay any tax payable by the taxable person from any money held by the agent on behalf of or due to the taxable person on the failure of the appointed agent to deduct and remit the tax due. The RTAs may also require an agent to give information on monies or assets held by the defaulting taxpayer.

From the relevant provisions of the Law, this power of RTAs to appoint a tax agent is only exercisable when there is tax payable by the taxpayer and the taxpayer has defaulted in paying. It is important to note that section 50 of CITA goes further to indemnify the agent from liability, stating that the agent will not be responsible, where the agent takes reasonable measures to establish that the tax is payable and such agent is acting under the appointment of the FIRS.

The implication of the new FIRS directive is that given the fiduciary and contractual relationship between banks and their customers, alleged unpaid taxes stated by FIRS are deductible without the consent of the taxpayers or a court order requesting the banks to make such deductions. Since it is well-known that non-payment of tax is a crime, it is unsettling that the ostensible fiat granted by Section 44 (1) & (2) (a) of the 1999 Constitution of Nigeria may appear to justify the deprivation of a person of his or her monies or property on account of a supposed debt.

Taxpayers are however permitted to object to assessments or decisions of RTAs by the provisions of Section 49 (3) of the CITA and Section 31(5) of the FIRS (Establishment) Act 2007, and taxes may not be due until such assessment is final and conclusive. Hence, the right of banks and taxpayers to object to the appointment of the agent, and to appeal and challenge such notices from the RTA at the Tax Appeal Tribunal, provides a necessary safeguard for the protection of individuals and corporate organisations.