On Thursday, February 20, 2014, the Presidency announced the suspension of the Governor of the Central Bank of Nigeria, Mr. Sanusi Lamido Sanusi, for what was described as financial recklessness in the management of apex bank. Few hours later, a detailed listing of the governor’s offences was released.
On Thursday, February 20, 2014, the Presidency announced the suspension of the Governor of the Central Bank of Nigeria, Mr. Sanusi Lamido Sanusi, for what was described as financial recklessness in the management of apex bank. Few hours later, a detailed listing of the governor’s offences was released.
Few days later, Premium Times, an online news site, also uploaded the full report of the Financial Reporting Council of Nigeria (FRCN) that recommended that the CBN boss and his deputies be relieved of their job. The allegations in the report are ones that are prima facie weighty, but the combative tone almost gives it away as a hack job. One would have expected a body of accountants to be more professional in their language, even if it is the report of an investigation.
googletag.cmd.push(function() { googletag.display('content1'); });
A blogger, Akin Oyebode, in an article published in several online and offline media (including BusinessDay of February 26, 2014) did a good job of articulating why some of the allegations may be a case of working from answer to question. Two cases in point: FRCN (and Presidency relying on this) alleged that what was reported by CBN as cost of printing money was more than the turnover of the Nigeria Security Printing and Minting Company in the year, oblivious of the fact that CBN also uses foreign companies to print notes. Another gaffe by FRCN and the Presidency is confusing Emirate Touch Airways and Emirate Airlines. I refer readers to google the article and read.
As an accountant with specialization in taxation, another point which was not addressed by Oyebode but caught my attention in the list was the alleged collusion of Sanusi in evading the Personal Income Tax (paid through Pay-As-You-Earn mechanism) by CBN employees. Let me restate the allegation verbatim:
(D) The CBN has failed or refused to implement the provisions of the Personal Income Tax (Amendment) Act 2007. Accordingly the Pay-As-You-Earn (PAYE) deductions of its staff are still being computed in accordance with the defunct Personal Income Tax Act 2004, thus effectively assisting its staff to evade tax despite the generous wage package in the CBN, relative to other sectors of the economy.
googletag.cmd.push(function() { googletag.display('content2'); });
First, the amendment that affected the computation of PAYE took place in 2011, not 2007. Second, the wording would presuppose that CBN short-changed government by underpaying PAYE for CBN employees. In actual fact, the application of PITA 2004 would most likely have led to the overpayment of tax to government, not underpayment, as the change in rates and bands in the 2011 amendment leaves personal income tax of many tax payers either unchanged or paying lower taxes.
This in no way justifies the continuous application of PITA 2004 in 2012 where there had been an amendment the prior year. But there is still an issue here: The 2011 amended PITA was officially gazetted on 31 January 2012, and effective date backdated to 14 June 2011, when many companies would have computed and paid their employees’ 2011 PAYE. Even in 2012, many companies struggled with complying with the new PITA because there were dark cloud around implementation, as would happen anytime there was a major change in any law. Some companies that had had their softwares/ERP systems programmed to compute PAYE under the old regime also struggled to adjust to the new laws. Nigerian companies generally struggled to implement this in 2012, the first full year of implementation.
There is also the question of responsibility. It is clear that the Directors of a company are responsible for the content of financial statements, and indeed the accounting and tax processes of the company, it is fool-hardy to expect the CEO of CBN, with bigger external issues and principal object, to be the one to know whether the new amended PITA had been implemented in his organization or not. Truth is, most CEOs don’t bother themselves with such little internal details. It is like asking, extempore, the CEO of a multinational whether his company has paid employees’ PAYE for a month. Some Finance Manager or officer down the ladder is in charge of such operational details. Unfortunately for the CEO (and the Directors) he is statutorily required to take responsibility for such lower level failing.
The FRC may decide to carry out audit of 2012 accounts of all government agencies and let us know how many of them implemented 2011 amended PITA in 2012. They should not be surprised if some are still using flat arbitrary rate of 5% or even lower, which is not founded even in 2004 PITA.
Finally, while all these do not validate the non-implementation of the 2011 PITA in 2012 by any organization, it is necessary to read this complicity in tax evasion charge against Sanusi in broader context.
Oyewale, a chartered accountant, is the founder of Jarushub.com, a portal on career and management
The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of SaharaReporters
googletag.cmd.push(function() { googletag.display('comments'); });