Effective and efficient tax collection is at the forefront of economic recoveries, especially in economies where tax receipts contribute a substantial chunk of the nation’s income. The Nigerian tax question has lingered for ages with many entities evading tax due to weak tax legislations and a rather lackluster attitude towards enshrining global best practices.
The Nigerian tax environment has existed in that mediocre level for ages as the nation lost trillions of naira to tax evasion amidst a chocking economy defined only by crude oil exports. It certainly makes no sense whatsoever to even imagine that Nigeria, with her sheer size and population will be returning such meager tax receipts over the years. It was clear to everyone that the Nigerian tax regime must face a drastic revolution if it was to be capable of matching up to the very lofty standards possible.
Thankfully, the Federal Inland Revenue Service, FIRS, has said that it is deploying emerging technologies to improve taxpayer experience, strengthen the institution, and increase its revenue generation capability and ultimately economic development of Nigeria.
FIRS also admitted that the use of technology has helped it to block some of the gaps in the agency’s establishment Act.
The work started with Babatunde Fowler, credited with the turnaround of the tax fortunes of Lagos state, but it was under the current head of FIRS, Muhammad Nami, that the real ground works for a sustainable tax model began to take firm footing. Beginning with the strengthening of the tax legal framework, headlined by the Company Income Tax Act (CITA) 2021, the FIRS has continued to break new grounds in tax collection as it strives to improve the overall tax experience of Nigerians, while also daring the elements by taking on innovative ways of improving tax receipts.
In his statement, following the amendment of section 10 of the Value Added Tax (VAT) Act by the Financial Act 2021, the FIRS boss noted that “we will implement the published Guidelines on the Simplified Compliance Regime on VAT for Non-Resident Suppliers, to collect VAT on digital supply of services and intangibles to Nigeria”. This was to ensure that all entities doing business with Nigeria and Nigerians regardless of whether they have a physical presence in the nation or not are not spared from paying the taxes that should accrue to the country.
While speaking as the special guest at the Pedabo 2022 Annual Public Private Sector Engagement, Nami noted that by virtue of the amendment to Section 25 of the FIRS (Establishment) Act in the 2021 Finance Act, any person who fails to grant the Service access to its information technology systems to connect to its automated tax administration solution is liable to certain penalties under the law. It is pursuant to this that the tax digitisation model has been unveiled for implementation.
To elaborate how delicate the digitisation procedure can be, the Group Lead, Digital and Innovation Support Group, Mrs Chiaka Ben-Obi, while speaking on the theme “Digital Transformation: Striking the Right Balance, the FIRS Experience” at the Information Systems Audit and Control Association, ISACA, Abuja Chapter pre-conference 14th annual general meeting highlighted the agency’s track record and its impact on other organisations to implement and also champion more digital transformation. The group lead recalled that in the past, before the agency implemented the tax pro-max system and the portal, it had the tax controllers and some of “our taxpayer schedule officers and others come to the head office to collect or submit one report or the other”.
Ben-Obi assured the public that the FIRS is not ready to be left behind in this wave of transformation owing to digital innovation.
This is as it expressed readiness to partner with ministries, departments, agencies (MDAs), as well technology companies for the eGovernment initiatives to increase tax compliance, generate more revenues and accelerate the nation’s economic growth. Indeed, Nami’s tax experience evolution has delivered a great deal of goods to the Nigerian economy.
In 2021, FIRS collected a total of N6.405 trillion in both oil (2. 008 trillion) and non-oil (4.396 trillion) against a target of N6.401 trillion. Most remarkable is the fact that non-oil revenue accounted for over 60% of the tax income. Without doubt, the deployment of a new automated tax administration system the “TaxProMax” in June 2021 was a game changer. The solution enabled taxpayers to experience ease of registration, reporting, payment and issuance of Tax Clearance Certificates while the service experienced greater efficiency in the deployment of resources thereby leading to improved revenue collection.
Nami’s FIRS has indeed upped the ante in tax administration. The agency is growing into an era of improved efficiency and Nigeria can only be better for it, especially as oil income receipts are becoming more and more unreliable due to activities of oil thieves and massive investment in renewable energy.
Khalid writes from Abuja.
