GTCO Directed to Refund VAT Commissions Collected Over 8 Years
The House of Representatives Public Accounts Committee (PAC) has directed Guaranty Trust Bank (GTB) to remit to the federal government all Value Added Tax (VAT) commissions it collected from Remita transactions between 2015 and 2022. This directive followed an investigative hearing into alleged revenue leakages through the REMITA platform, as well as non-compliance with standard operating procedures.
At the resumed hearing, which took place on Thursday, PAC Chairman, Rep. Bamidele Salam, ordered the bank to calculate the VAT on commission fees and deposit the owed amount into the federal government’s recovery account.
The inquiry primarily focused on two issues: the remittance of VAT from Remita collections and the collection of fees under the first regime of the Remita transaction. GTB, along with several other banks including Keystone, Zenith, Sterling, Polaris, FCMB, Ecobank, and Wema, appeared before the committee to address these concerns.
In a statement during the session, GTB’s Executive Director, Ahmed Liman, admitted that the bank had not remitted VAT for the eight-year period. “We believe that Remita is saddled with the responsibility of sharing the commission fees between the payment receiving parties. In our mind, we think Remita has done the needful before sharing the fees between the parties,” Liman explained, attributing the omission to a misunderstanding of the responsibilities involved.
Further probing revealed that GTB had charged a 0.75% fee on all payers using the Remita platform, accumulating significant amounts over the years. Liman disclosed that the bank had received ₦254,489,013 from the Office of the Accountant General through Remita in 2018 alone, a sum that highlighted the financial magnitude of the transaction fees in question.
Following Liman’s submission, the committee issued a firm directive for GTB to calculate and refund the VAT on these commissions from 2015 to 2022. The refund will be made to the Central Bank of Nigeria (CBN), where the federal government’s recovery accounts are domiciled.
The committee’s decision is part of a broader effort to address revenue leakages and ensure compliance with financial regulations in Nigeria’s banking sector. Other banks implicated in similar discrepancies were referred to the PAC’s reconciliation sub-committee, where they are expected to rectify any inconsistencies in their financial records before their next appearance.
Unveiling a Complex Revenue Leakage
This case sheds light on the intricate operations of the Nigerian financial system and highlights a significant loophole in VAT remittance practices. The involvement of several top-tier banks, including GTB, in these revenue leakages suggests a systemic issue in the way commissions are managed on platforms like Remita.
For eight years, the failure to remit VAT on commissions collected raises serious concerns about the oversight and regulatory frameworks governing financial transactions in Nigeria. While GTB argued that the responsibility fell to Remita, this confusion underscores a lack of clarity in contractual obligations between financial institutions and payment platforms.
At its core, this issue speaks to a broader problem within Nigeria’s financial ecosystem — the under-reporting and non-compliance with tax laws that could significantly impact the country’s revenue generation. With ₦254 million received by just one bank in 2018, the cumulative amount across all banks and over the years could run into billions, a figure that might have otherwise contributed to Nigeria’s economic development.
The investigation by the House of Representatives Public Accounts Committee is a positive step toward improving financial accountability. However, it also calls for stricter monitoring and enforcement mechanisms to prevent similar occurrences in the future. The reconciliation process for other banks is likely to uncover more discrepancies, making it critical for financial regulators to tighten supervision and ensure that banks adhere to tax and remittance obligations moving forward.
As the probe continues, the banking sector will be under greater scrutiny, and the government will seek to recover the funds lost through these revenue leakages. The outcome of this investigation could lead to new regulations that will significantly alter how banks handle fees and VAT remittances, potentially reshaping the landscape of Nigeria’s financial services industry.
