Why Nigeria’s tax administration remains ineffective, by stakeholders
The inability of government to address bureaucracies in tax administration as well as lack of accountability in the utilisation of tax proceeds may be major bottlenecks in advocating tax compliance among individuals and corporate entities, stakeholders in the revenue industry have said.
According to the stakeholders, issues of multiple taxation, numerous levies on businesses, tax laws and regulations, tax compliance and modes of enforcement, remain major challenges limiting effective tax administration.
Specifically, the stakeholders, comprising the Lagos Chamber of Commerce and Industry (LCCI), Pricewaterhousecoopers (PWC) and the Federal Inland Revenue Service (FIRS) emphasized the need for an effective tax administration to boost the nation’s economic revenue base, considering the dwindling economic revenue as a result of the sharp reduction in global oil prices.
According to reports from PWC, tax revenue collected by the federal and state revenue services in fiscal 2014 was ₦ 6.399bn which declined to about ₦ 5.327bn in 2015 as a result of the dwindling oil price.
The President, LCCI, Dr. Nike Akande, stated that an effective tax administration is an effective mechanism to deploy in order to boost the nation’s revenue.
Akande during a taxation round table organized by the chamber, added that taxation has been a major source of revenue for the nation in the past decades, maintaining that it has become necessary to bring stakeholders together to share perspective on the current status of the Nigerian tax system as well as educate and enlighten business owners on proper documentation for taxation.
“We would be exchanging ideas on issues of multiple taxation, numerous levies on businesses, tax laws and regulations; tax compliance and modes of enforcement. We will also situate the current drive for tax revenue and Internally Generated Revenue (IGR) by the State governments in the context of current investment environment challenges,” she said.
Also speaking at the event, the Partner, Tax and Regulatory Services, Taiwo Oyedele, represented by the Associate Director, PWC, Moshood Olajide, said for States to achieve a fiscal sustainability they must set realistic and achievable targets to improve IGR, and implement the targets, implement Treasury Single Account (TSA), share database of companies within each state with the FIRS, introduce a system for immediate issue of Value Added Tax (VAT)/ withholding tax certificates on payment of invoices and review all revenue related laws and update obsolete rates/tariffs.
He said Nigeria’s tax to Gross Domestic Product (GDP) ratio of three per cent is one of the lowest in the world, saying that to improve the percentage, the government must focus on growing non-oil revenue through partnerships and collaboration with stakeholders at all levels, deploy the use of technology for tax collection and remittance at source and operate the Tax Appeal Tribunal (TAT) to achieve speedy prosecution of tax cases.
He said, the best strategy for dealing with potential tax exposures is to ensure that before the audit, there is need to conduct a comprehensive tax health check to better understand the company’s current tax compliance status and identify potential weakness, implement immediate and necessary actions to rectify issues identified, check for availability of proper documentation and justification for transactions and tax treatments in readiness for the audit.
The Executive Chairman, Lagos Internal Revenue Service (LIRS), Olufolarin Ogunsanwo, said Nigeria is currently ranked 169th out of 189 in the recently released World Bank ease of doing business index, saying that of particular concern to the LIRS is Nigeria is ranked 181 of 189 countries on the ease of paying taxes index.
He said according to analysts the major drawbacks responsible for this poor rating is an ineffective tax administration in the country, stating that LIRS have recently introduced different initiatives to achieve a seamless tax payment structure.
“We have revised our tax form A from the existing 6-page to a 2-page form which is now used for both direct and self assessment. The agency has also activated the provision of 1 per cent incentives for self assessment in accordance with section 45 of PITA 2004 as amended,” he said.
He added that the agency has also introduced new payment platforms leveraging on multi-modal payment portals including but not limited to POS, online to complement the traditional payment portals at the banks and has commenced the design of a robust tax calculation platform which will be made available before the end of the year to enable tax payers estimate the amount of tax payable.