The Federal Inland Revenue Services has said the recent changes in the tax landscape in the country were designed to simplify the tax system, broaden the tax base and ensure a fairer distribution of tax responsibilities, admitting that the emerging development presents both challenges and opportunities.
The Executive Chairman of the FIRS, Dr. Zacch Adedeji, made these assertions at a stakeholders session in Lagos on Wednesday.
The forum was LCCI-FIRS private sector stakeholders’ engagement with the theme: “Emerging Tax Matters.”
It was organised by the Lagos Chamber of Commerce and Industry.
Adedeji, who was represented by Oti Olaniyi, FIRS Acting Director, Medium Taxpayers Department, South, highlighted that key reforms include: Finance Acts, explaining that the rise of the digital economy presents a significant challenge to traditional tax frameworks, adding that to address this, Nigeria has implemented new tax policies targeting digital platforms, including the Finance Act’s provisions on VAT for digital services.
Also Read:
- Fence collapses, kills two in Lagos
- Four company staff die in Lagos fire accident
- Ogun workers to receive N77,000 as minimum wage
- Breaking: Again, national grid collapses
- Gombe approves N71,500 minimum wage for workers
According to him, this is a crucial step in ensuring that global tech companies and entities which provide services to remotely contribute fairly to “our economy”.
Another reform is deduction at source (Withholding) regulations 2024, an approach he affirmed was designed to provide government with regular revenue flow and serve as a means of cutting tax evasion.
He recalled over the years as the regime expanded with more transactions, various ambiguities and complications crept in.
Olaniyi stated: “To address these complexities in the 2024 Regulation, is the introduction of a simplified and business friendly tax regime on advanced payment of tax on specified transactions.
“Specifically, the changes include exemption of small businesses from withholding tax compliance, reduced rates for businesses with low margin, exemptions for manufacturers and producers in farming and other measures to curb evasions and minimise tax avoidance.
“Tax incentives are crucial for encouraging investment and economic growth. Nigeria has introduced several incentives to attract foreign investment and support local industries.
“For instance, the Ministry of Finance released a Circular on fiscal incentives for the gas sector.
“This Circular is in line with the Presidential Gas for Growth Initiative which aims to improve the investment climate in Nigeria and to increase the utilisation and supply of gas in the domestic market.
“To this end, a zero percent VAT rate is now applied on Feed Gas for all processed gas, Compressed Natural Gas (CNG), Imported Liquefied petroleum gas (LPG), LPG and CNG equipment components, conversion and installation services and all equipment relating to the expansion of CNG and LPG, including conversion kits.”
The FIRS stressed that as the agency explores various tax incentives to stimulate local industries, “we must emphasise the need for transparency and effectiveness in the implementation of these incentives”, evaluating their impact and ensuring they align with national development goals is critical for maximising their benefits.
Olaniyi noted that the informal sector, which constitutes a large part of the economy, poses unique challenges, adding that many small and micro businesses operate outside the formal tax system.
He said: “To engage this sector effectively, the government is exploring simplified tax regimes and registration incentives.
“The recent restructuring of the FIRS into three operational groups – Small/Emerging Taxpayers, Medium Taxpayers, and Large Taxpayers – allows for a more focused approach in managing and supporting different segments of taxpayers.
“As we move forward, we must continue to innovate and enhance our tax system.
“Soon, we will introduce the FIRS e-Invoice, a digital solution for managing invoices in line with the Tax Administration and Enforcement Act 2007.
“This initiative, as part of our Digital Transformation Strategy, will facilitate real-time transaction validation and storage, benefiting Business-to-Business, Business-to-Consumer, and Business-to-Government transactions.”
FIRS summarised that the emerging tax matters in Nigeria present both challenges and opportunities, affirming that by embracing reform, leveraging technology, and ensuring transparency, the country could develop a tax system that supports sustainable growth and equitable development.
Olaniyi restated that collective efforts would pave the way for a more prosperous and resilient Nigeria.
Moving forward, she encouraged Nigerians to support the new initiatives with constructive feedback and collaboration, adding that by doing so, “we can all build a stronger, more resilient economy that benefits everyone”.
The FIRS emphasised that it is committed to a customer-centric approach aimed at enhancing voluntary compliance and boosting revenue generation, ensuring tax compliance benefits both businesses and the government.
Olaniyi declared that when businesses meet their tax obligations, it translates into increased revenue for the government, which is essential for funding public services and infrastructure development, ultimately driving economic growth and societal well-being.
He added: “Another key area of reform involves leveraging technology to strengthen tax administration. The FIRS has developed a platform called Taxpro Max, which allows taxpayers to file returns and access various tax services online. Our suite of e-services – including e-filing, e-reporting, e-registration, and e-TCC – demonstrates our commitment to facilitating easy and efficient tax management.
“Additionally, we have established a robust data management division to ensure accurate assessments and strategic planning, leveraging data analytics to enhance our tax administration.
“Tax education and public awareness are vital for fostering a culture of tax compliance.
“Taxpayer education campaigns help citizens understand their tax obligations and the benefits of tax revenue.
“Initiatives like our monthly Tax Thursdays and sensitisation exercises in schools aim to enhance public understanding of tax.
“Furthermore, our newly established contact centre ensures that taxpayer inquiries and complaints are addressed promptly, within 48 hours.
“Nigeria is at a crucial juncture in its economic evolution.
“Our tax system, a foundational element of economic policy, is undergoing significant reforms.
“These changes are driven by the need for increased revenue, better compliance, and more equitable economic practices.
“These reforms are essential to meet with emerging tax issues and also commensurate with the fiscal tax reforms being handled by the Presidential Fiscal Policy and Tax Reforms Committee.
“Historically, our tax revenue has not kept pace with the needs of our expanding population and infrastructure demands.
“Our heavy reliance on oil revenues has highlighted the need for diversification.
“Thus, modernising our tax system to address current economic challenges is crucial.”
Dr. Adedeji, according to his representative, stated that FIRS looks forward to continued collaboration in advancing Nigeria’s tax system for the benefit of all its citizens.
In his welcome address at the engagement, the President of LCCI, Gabriel Idahosa, declared that the private sector is indispensable in Nigeria’s economic development and, by extension, its tax base.
He lamented that multiple taxation has continued to pose a significant challenge to businesses, making the Chamber’s committee to have recommended a suspension of certain taxes that disproportionately burden SMEs and the less affluent, a move expected to foster a more conducive environment for business growth and compliance.
Idahosa specified: “There is also a growing need for collaboration between the private sector and government to ensure that tax policies support business innovation and competitiveness.
“For instance, recommending tax breaks for wage increases and removing barriers to foreign currency-denominated transactions can create a more robust investment environment.
“To meet these ambitious revenue goals, improved compliance mechanisms are essential.
“The FIRS has emphasised using technology to automate and streamline tax collection processes.
“The introduction of TaxProMax, which facilitates part-payment of outstanding liabilities, represents a progressive step in addressing taxpayer challenges.
“Moreover, the government is intensifying efforts to curb tax evasion and non-compliance, particularly within the informal sector, which remains significantly under-taxed.”
The LCCI head indicated that as the country moves forward in 2024, its fiscal policy is at a critical juncture, highlighting that the emerging tax meant for discussion at the forum signal opportunities and challenges.
Idahosa advised: “The drive to expand the tax net, streamline the system, and boost compliance is essential for securing Nigeria’s economic future.
“Yet, for these reforms to succeed, the government must foster trust through transparency and fairness, while businesses and citizens must embrace a culture of tax compliance.”
He therefore urged every stakeholder at the engagement, especially, from the OPS, to engage actively on the tax reforms and provide valuable feedback to ensure that the tax system becomes a tool for revenue generation and promoting sustainable economic development.
Under its new leadership, the Federal Inland Revenue Service has set ambitious goals to increase tax collection by 57 percent, targeting a revenue of N19.4 trillion for 2024.
This projection includes N9.96 trillion from oil revenue and N9.45 trillion from non-oil sources, signalling a shift toward non-oil revenue generation to strengthen the economy.
Earlier, Idahosa revealed that Nigeria’s current tax-to-GDP ratio stands at just 10.86 percent, which he stated is far below the African average of about 15 percent to 20 percent.
He disclosed that the government aims to achieve a tax-to-GDP ratio of 18 percent within the next three years through the newly introduced tax reforms, saying that to reach the goal requires a concerted effort from both the public and private sectors, along with targeted reforms aimed at simplifying tax policies and encouraging compliance.
Idahosa recalled that in July 2023, President Bola Tinubu inaugurated the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Taiwo Oyedele.
The committee’s mandate he recapped was to overhaul Nigeria’s fiscal and tax policies to enhance revenue collection, reduce multiple taxation, and streamline tax administration.
Several key recommendations have emerged from this committee, with both immediate and long-term objectives designed to modernise Nigeria’s tax system.
The committee’s key recommendations include: leveraging technology through the “Data4Tax” initiative to expand the tax base, providing tax relief for low-income earners and employers who raise wages, and simplifying tax compliance, particularly for SMEs.
Additionally, the government seeks to reduce fiscal leakages by reassessing over N6 trillion lost annually due to incentives and waivers, with the view of discontinuing them to boost revenue.
Idahosa listed other fundamental changes, which include: reduced WHT rates for various services such as professional and construction services, and new WHT rates for non-resident entertainers, lottery winnings, and directors’ fees.
“These reforms, driven by the Presidential Fiscal Policy and Tax Reforms Committee, aim to modernise tax administration and create a more equitable tax system,” he added.
