Construction Industry Players Seek Refund of N36bn Excess Withholding Tax

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Ndubuisi Francis in Abuja

Operators in the construction industry under the aegis of Federation of Construction Industry (FOCI) have appealed to Federal Inland Revenue Service (FIRS) to work out modalities that will guarantee a seamless refund of excess Withholding Tax (WHT) and Value Added Tax( VAT) to the industry.

FOCI stated that over N36 billion WHT credit notes belonging to its members are pending with the FIRS.
The President of FOCI, Nasiru Dantata made the appeal over the weekend when he led his team on a courtesy visit to FIRS Executive Chairman, Mr. Tunde Fowler.

He stated that the pending WHT credit notes have constrained FOCI members from applying for tax settlement.
The body therefore appealed to FIRS to work out modalities that will guarantee a hitch- free refund of excess WHT and VAT in the construction industry

According to the FOCI President, the current economic situation in the construction industry does not support any increase in Withholding tax rate.

FOCI drew the attention of FIRS Chairman to inconsistency in WTH rate, adding that it was initially fixed at 5 per cent, thereafter reviewed down to 3.5 per cent, then 2.5 per cent, noting that this had made planning for business difficult.

“An issue that is bothering us is the rate of withholding tax. Sometimes ago the 5 per cent was reduced to 3.5 per cent and later reverted to 5 per cent. Like you know, the industry is suffering from a lot of delayed payment from both federal and state governments.

“This is not new and it has nothing to do with this office. As you are aware, cash position of our companies is greatly affected by the rate of withholding. Our prayer today is, if you can commission a committee to look into this issue within the industry.

“Perhaps, the first time this decision was made, may the window is still large, a lot of people took the advantage to go for 2.5% for federal projects or state projects. I think if companies are going for refunds, I think there is reason to look at the rate,” he said.

Dantata told the FIRS Chairman that the economic downturn occasioned by recession adversely affected the profit margin in the industry, leading to a lower corporate income tax assessments.
He also unveiled other problems confronting FOCI, especially with regards to tax laws and their impact on construction firms.

The delay in paying completed construction projects mostly by Ministries, Department and Agencies (MDAs) of government, he noted, was weighing down on construction industry, adding that “both Withholding tax and VAT are deducted at source by clients who are mostly the MDAs.

” Credit note issuance continues to be a challenge. In our industry where over N36 billion pending with FIRS as Withholding tax credit note not yet collected and hence cannot be applied for tax settlement, there is need for a definite procedural paper from FIRS to MDAs on issuance and collection of credit Notes , giving details of time frame. A mechanism should also be put in place by FIRS where defaults could easily be reported and addressed”.

“The Construction industry currently does not receive an incentive from the government in form of a concessionary interest rate. However, FOCI members pay high interest on money borrowed to do business ( awaiting payment from the government) as well as unremitted refund on WHT and VAT,” Dantata said.

Responding, FIRS Executive Chairman, Fowler commended FOCI for their faith in the Nigerian economy, noting that the record at his disposal revealed that members of the group do not default in tax payment.

“Your sector is a major player in terms of economic activities of the country and you play a very vital role. As tax administrators, we understand your fears and we have put certain things in place, a number of issues have been raised by your members.

“I know a number of you who work for federal government’s agencies and state encounter a number of issues that need to be resolved. Issues like, withholding tax credit not remitted on time.

“If any of you have evidence that state government or federal government’s agencies don’t remit your withholding tax, we take it up on your behalf and it will not stop you from getting your tax clearance certificate”, Fowler assured FOCI.