The Federal Inland Revenue Service (FIRS) and some state internal revenue services (SIRS) have recently issued letters to banks, appointing them as agents to collect taxes due from alleged non-payers.
Based on the letters, the banks were instructed to abolish the amount of tax due from the bank accounts of the alleged insolvent taxpayers, transfer to the accounts of the relevant tax authorities (RTS) for taxpayers' credit all or part of the settlement of tax debts and inform the RTA of any transaction, that is, the transfer of funds on the shelf or locally at the expense of the taxpayer and obtaining permission from the RTA prior to the transaction.
However, pursuant to the provisions of Section 31 of the FIRSA, Section 49 of the CITA and Section 50 of the PITA, the RTA has the authority to appoint any person to be an agent of a taxable person with a view to recovering tax debt or tax payable from such a taxable person.
An agent appointed by the agent may demand payment of any tax that is payable by the taxable person from funds held by the agent on behalf of or because of the taxable person. The RTA may also require the agent to provide information about the assets / funds held by the insolvent taxpayer.
Deloitte analyst said that the directive and the underlying legal bases seem to allow the RTA to appoint an agent and request payment, but they raise a lot of problems, especially from banks and taxpayers regarding the following, to the potential violation of banks "obligations of confidentiality and confidentiality. It is here that the RTS directives are affected by banks and can lead to breach of confidentiality obligations to customers. He said that this obligation is to exclude actual legal requirements, so it becomes important to clarify the extent of the authority of the RTA in this regard.
In addition, the consequences of directives on business operations of banks and taxpayers can lead to business disruption, subsequent damage to businesses, other regulatory requirements and, possibly, lawsuits.
According to him, this is especially since the alleged insolvent taxpayer may not be aware of any pending liability until the appointment of the bank as a collection agent.
As a result, the analyst suggested that taxpayers are encouraged to review their reports and timely repay all outstanding tax liabilities.