2019 Audit Report: FG Lost N8.09 Billion in Unremitted or Uncollected Taxes by MDAs

The Federal Government (FG) lost at least N8.09 billion in revenue to Ministries, Agencies, and Departments (MDAs) inefficiencies.

The FG lost this amount because the MDAs either outrightly failed to deduct taxes on their activities or they deducted these taxes but didn’t remit the same to the FG. 

The Auditor-General revealed the loss of revenue to the FG by the MDAs in his 2019 Audit Report.

Paragraphs 234 and 235 of the Financial Regulations mandate the accounting officers of MDAs to fully implement tax laws in awarding contracts on supply and services. By this, they are to ascertain, deduct and remit the amount for Value Added Tax (VAT) and Withholding Tax (WHT) on all contracts awarded. The money is to be remitted to the FG.

Likewise, the Treasury Circular demands that stamp duties be appropriated and collected on all vouchers raised in transactions by MDAs.

VAT is charged at 5% of all contracts awarded on supplies, while WHT is 5% to 10% depending on the contract amount. Stamp duty, however, is 1% on the sum raised on each voucher issued by the MDAs. 

Collection of all these revenues are the duty of the accounting officer of MDAs to deduct and remit to the FG.

However, as noted by the Auditor-General in his report, some MDAs in the country failed to collect or remit the revenue to the government.

A total of 31 MDAs were identified to fail to remit N6.66 billion as taxes collectively. While 12 MDAs deducted N5.8 billion as taxes but they did not remit the amount to the FG. The remaining 19 MDAs failed to deduct N829.67 million in taxes from contracts awarded.

The Office of the Accountant-General of the Federation (OAGF), custodian of the accounts of the federal government and the Government Integrated Financial and Management Information System (GIFMIS) have to account for N650 million. These are monies uploaded for remittance into the system by MDAs that are tagged as “pending”. OAFG is responsible for that platform and so has to account for these payments tagged as “pending”. 

A total of N5.94 billion was deducted as taxes by the MDAs but not remitted to the FG. This sum makes up 73.3% of the total N8.09 billion.

Instances, where the MDAs failed to deduct taxes on contracts awarded amounted to N1.37 billion. This made up 16.9% of the total sum.

Furthermore, it was observed that there exist various irregularities with the collection of taxes by the MDAs. These irregularities amounted to N110.19 million, making up 1.4% of the total.

The remaining N678.13 million is made up of other issues earmarked in the report such as the granting of advances above the threshold limit. This category totaled N678.13 million.

All these resulted in loss of revenue to the FG in the 2019 financial year and contributed to the underperformance of the non-revenue component of the budget.

In most of the instances, there was no response from the management of the MDAs as to why they failed to deduct and remit taxes.

The auditor-general, citing the full effect of the sanction in paragraphs 234 (ii) and 3112 of the Financial Regulations, has recommended that the MDAs furnish reasons why they failed to remit taxes or provide proof of payment of these taxes.

The audit report has exposed many leakages that threaten the country’s finances and most of these leakages are man-made holes. These holes are dug by MDAs with either outright disregard for transparency and accountability or an inability to grasp the impact of their carelessness on the citizens they have been appointed to serve.