FIRS, LIRS Partner to Reduce Compliance Costs for Taxpayers

February 7, 2023
compliance costs for taxpayers

By Aduragbemi Omiyale

A partnership aimed to reduce compliance costs for taxpayers in Nigeria has been entered into between the Federal Inland Revenue Service (FIRS) and the Lagos State Inland Revenue Service (LIRS).

Signing the Memorandum of Understanding (MoU) on the exchange of information and implementation of joint tax audit and investigation exercise on Monday, the Executive Chairman of LIRS, Mr Ayodele Subair, noted that the importance of the agreement was to foster greater collaboration between the two agencies.

He said though both tax agencies are not only independent of each other but different in the types of taxes they administer, the collaboration between the tax authorities was to promote the smooth operation of activities not only for the benefit of tax authorities but for improved service delivery for taxpayers.

“Notwithstanding its inclusion as a fundamental obligation of every Nigerian citizen pursuant to Section 24 (f) of the 1999 Constitution as amended, filing of annual income tax returns or payment of tax therefrom is not an issue that citizens are keen on.

“Nonetheless, citizens expect to have the direct benefit of democracy and good governance without remembering that the most reliable and sustainable means of Domestic Resource mobilization for government expenditure is taxation.

“There is no reason to debate the above as it has been established that tax compliance and good governance are expected to co-exist as the undividable social contract that binds citizens and governments anywhere in the world. Therefore, citizens and governments are expected to fulfil their end of the bargain in achieving a balance,” Mr Subair said.

He stated that, “Today’s signing of this Memorandum of Understanding is in furtherance of the above bargain on the part of the tax authorities. While this initiative of a joint audit is not a new one, it is peculiar because it comes at a time when our dear nation struggles with dwindling oil receipts and other economic woes which have affected the tax-to-GDP ratio, which is currently adjudged as the lowest globally, standing at approximately 6 per cent compared with our neighbouring countries which average between 15 per cent and 25 per cent.”

According to the LIRS Chairman, some of the expected achievements from this collaboration between both tax authorities include a reduction of compliance costs for taxpayers; improved transparency in the tax administration process, which will impact tax disputes, incidences and reconciliation; reduced administration costs for both tax authorities; and elimination of hiding place for recalcitrant taxable persons and entities.

In his remarks, the Executive Chairman of FIRS, Mr Muhammad Mamman Nami, said the essence of the collaboration between the FIRS and LIRS was to enable the two agencies to carry out joint projects together.

He also stated that in the course of its investigations, both parties would work as a team and ensure the automatic exchange of information, which would enable the agency to get more extensive data for seamless tax administration.

“We will work together as a team during the investigation and have an automatic exchange of information. With this, we will be able to carry out our mandate seamlessly. As part of the joint operation, we will be able to implement presumptive tax as far as issues of tax administration are concerned,” Mr Nami said.

Business Post gathered that the agreement signing ceremony, which took place at the Lagos State House, Marina, was witnessed by Lagos State Governor, Mr Babajide Sanwo-Olu; the Minister of State for Budget and National Planning, Mr Clement Agba; the Lagos State Commissioner for Finance, Mr Rabiu Olowo; and the Lagos State Attorney-General and Commissioner for Justice, Mr Moyosore Onigbanjo (SAN), among others.

While commenting on the development, Mr Sanwo-Olu disclosed that the conversation for the harmonisation of the two agencies’ mandates started about a year ago, based on the need to forge a common front in widening the tax net to raise the country’s tax to GDP ratio.

The Governor observed that Nigeria had maintained an unimpressive tax-to-GDP ratio of between 6 per cent and 8 per cent despite the yearly record-breaking turnovers by both FIRS and LIRS.

This, he said, has mounted pressure on the nation’s resources and created an imbalance in government expenditure, stressing that Nigeria must operate at the same level as other nations within sub-Saharan Africa, doing between 14 per cent and 15 per cent in tax to GDP ratio in order to support the government’s development programmes and improve accountability.

“We have just witnessed an epoch-making ceremony between the FIRS and the LIRS. This collaboration did not just happen by chance; it is a conversation we started about a year ago with the chairman of FIRS when both parties reviewed their successes and limitations. It was clear there was a need for a relationship to be consummated.

“Both FIRS and LIRS have been breaking records of their tax collection and administration yearly, but this is not enough. We have an unimpressive tax-to-GDP ratio, which ranges between six and eight per cent; this is totally unacceptable.

“Studies have shown that there would be better service delivery to the citizens and improvement in the efficiency of tax collection when the two agencies work together. The cost of tax collection would be reduced, we would see better customer satisfaction, and more resources would be generated for the government to deliver more dividends of democracy.

“For us as a state, we are humbled by this collaborative effort, and we believe our citizens will be the ultimate beneficiaries of this initiative. The MoU is in the best interest of the public, as it affirms the reason why we need to come together and strengthen the cordial working relationship between the two agencies,” he stated.

Dipo Olowookere

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

Mr Olowookere can be reached via [email protected]

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