Ecobank Ordered To Pay N1.6Billion To FIRS For Evading Tax

Posted by Thandiubani on Thu 27th Feb, 2020 - tori.ng

Ecobank Nigeria Limited has been ordered to pay a whopping N1.6 billion to FIRS for evading tax.

Ecobank

The Tax Appeal Tribunal, Lagos Zone, has ordered Ecobank Nigeria Limited to pay N1,663,500,000 to the FIRS as Company Income Tax (CIT) for the year 2016.

The bank had claimed it made no taxable profit and declared losses from its banking operation.

Federal Inland Revenue Service (FIRS) Director of Communication, Abdullahi Ahmad, in a statement on Wednesday, said the Tribunal ruled on February 20, 2020 in Appeal No. TAT/LZ/CIT/024/2018.

The Tribunal headed by Prof. A.B. Ahmed ordered Ecobank to pay N1,663,500,000 to the FIRS as Company Income Tax (CIT) for year 2016.

Ecobank had sued the FIRS after it was asked to pay its excess dividend tax liability of N2,079,375,000, inclusive of interest and penalty for the Year of Assessment (YOA).

The bank argued that the dividend it paid out was tax exempt as N4,372,244,556 out of the total sum was “profit from bonds and treasury bills”, which was not taxable based on the provisions of the Company Income Tax (Exemption of Bonds and Short-Term Government Securities) Order, 2011.

Ecobank insisted it made N1,172755,444 “trading profits” from other business sources and paid N351,826,663 tax to the FIRS.

Ecobank asked the Tribunal to determine whether the FIRS “was correct to assess the Appellant to tax under Section 19 of CITA” when the income earned was “from Bonds, Treasury Bills and other Government Securities”; whether the FIRS “misdirected itself by failing to take into account the CIT paid by the Appellant”; and “whether by the rules of Interpretation of Statutes, the Respondent has erred in law in its application of Section 19 of CITA”.

But the Tribunal held that: “Companies that invest in bonds will, by virtue of the tax exemption, become liable to pay excess dividend tax on their profits.”

“If the tax exemption granted by the order (Company Income Tax (Exemption of Bonds and Short-Term Government Securities) Order, 2011) creates an excess dividend situation” Ecobank or any other company “should be liable to pay excess dividend tax on the same income that otherwise would have been exempted from tax.

“A liability to pay excess dividend tax arises where a company that seeks to pay dividend has no taxable profit as in the instant case but has distributable profit that is higher than the taxable profit.”

The Tribunal said it was proper that the FIRS took, “into account the sum already settled by the Appellant (Ecobank) in its total assessment of N1,663,500,000.”

The Tribunal stated that the FIRS did not err in its application of Section 19 of CITA that was enacted to address the “mischief” corporate entities resort to as tax avoidance schemes under which they twisted, “The law to suit their own ends”, especially to “prevent shareholders from sharing dividend without payment of tax for whatever reason.”