Probing banks for non-remittance of taxes

Written by the Editorial Board of The Guardian Newspaper

Following what seemed a successful probing of a sample of branches of banks for non-remittance of tax revenues they collected on behalf of the Federal Government from 2008-2012, a decision was reportedly taken by the National Economic Council (NEC) to further the probe and ascertain the amount of revenue banks collected and failed to remit to government coffers within the period, July 2012-December 2015. According to the report, the concluded sample probe indicated that banks failed to remit to government “over N12 billion” between 2008 and 2012.

This huge amount, which gives an annual average of about N2.4 billion in the five years probed, is enough incentive for a revenue-hungry government to probe further. It should however, be a surprise if the government is not considering probing all the bank branches that were not included in the sample exercise of the period 2008-2012 before going ahead with a new exercise covering an entire new period.

If, indeed, the sample probe revealed and it is confirmed that N12 billion was not remitted to the government, it will be wise for the government to extend the probe to bank branches that were not included in the initial sample. And beyond the branches, the banks’ head offices should also be screened. It is only when all branches and head offices of the banks have been screened for the 2008-2012 period that the exercise can objectively be extended to a new period. If this is not done, it can suggest that some elements of corruption may have been involved in restricting the coverage.

That stated, it certainly will not be good enough to accept the report of the consultants without giving banks the opportunity to defend themselves. So, banks must be given opportunities to review the reports of the consultants that handled the probe on behalf of the government. That will enable both parties to smoothen edges that may result into disagreements and for banks to defend themselves. It will also be justice in practice. This is even more imperative given the report that the consultants “would be paid 15 per cent of whatever they unraveled as unremitted funds from the books of the banks in the belief that this form of remuneration would encourage them to do a thorough job.”

The flip side is that the promised remuneration may also encourage the consultants to corruptively pad whatever short-remittances they may discover in order to enhance their take. This is another good reason the banks deserve to be given the opportunity to agree or disagree with and harmonise figures of the consultants. But in the process of harmonisation of figures from both parties, honesty and objectivity are required to ensure that the final outcome represents reality and not what serves some ulterior and selfish motives or interest of any of the parties.

If banks are found to have withheld government revenue, it means they were doing their business with such funds. In doing so, they directly or indirectly borrowed the funds from the government, invested same, perhaps, in government financial instruments such as Treasury Bills and Bonds. No doubt, they also earned huge income from investing the withheld large sums of money.To ensure they pay back in full, the affected banks should also be required to refund the income they derived from unauthorised use of government funds, at appropriate ruling rates of interest.

Apart from this requirement being equity at play, it will send desirable signal that corporate malfeasance cannot be supported or tolerated in the country. That will also be in line with the on-going war against graft. However, if the government really wants to serve a deterrent warning, the responsible bank officials for the non-remittances may be sanctioned either directly or through their professional bodies, that is, if government will be bold to report them to such bodies with incontrovertible evidence. Furthermore, nothing can prevent the government from prosecuting the banks in the law courts.

Perhaps, what should worry all Nigerians the most given the outcome of the reported probe is the apparent failure of regulatory oversight. The Central Bank of Nigeria (CBN) as the regulatory body for banks is reputed for reports of its examinations and stress-testing of banks. How come that in all of its series of examinations in the five (5) years, 2008-2012, it did not discover that the banks were not remitting all the funds they collected on behalf of the government? Failure of regulatory oversight in the banking system portends great danger to the system and indeed, the economy especially with rising cases of money laundering and terrorist financing. The outcome of the probe also raises questions on the effectiveness of banks’ compliance managers, internal and external auditors. If these officials had diligently performed their functions, the aberration of collected funds not being remitted to the beneficiary would not in any form, have escaped their attention.

The probe findings are even weighty on the confidence or lack of it that shareholders and other stakeholders in the banks and other corporate organisations would place on unqualified certification of banks’ statement of financial affairs which is exclusively carried out by external auditors. By implication the professional accounting bodies whose members were the auditors of any culprit bank must reflect on the import of this development on the teaching, learning, practice and discipline of their members. Thus, in order to prevent a repeat of such evident professional failure, appropriate actions should be taken.

It may be hard to explain what could have made it possible for banks not to remit to government the revenues collected on its behalf but the truth is that either the responsible agencies and officials which should have made such a situation impossible failed to do their work properly or colluded with other person(s) to short-change the government for personal benefits. This situation is evidence that the machinery of corporate management and quality assurance has become grossly suspect and needs to be re-examined.

In the meantime, all banks found culpable in that and other future probes, must be made to refund the withheld amounts with interest and their names should be made public to reap public shame. Government agencies and officials charged with the responsibility of monitoring revenue accretion and accumulation to government should be diligent in performing their assignments. Finally, it must be appreciated that if organisations and individuals found to have perpetrated and perhaps, perpetuated this problem are not severely sanctioned, the guarantee is that others will in future indulge in similar practices believing that it pays not to remit to government its funds in their possession.