September 29 (THEWILL) – The adoption of strong technology-driven reforms by the Federal Inland Revenue Service (FIRS) provides evidence to ensure the growth trajectory of the country’s tax revenue seen over the past five years.
This must have further strengthened the confidence underlying the FIRS leadership’s position that FIRS will collect a record tax revenue of N20 trillion in 2024.
FIRS Chairman Zak Adeji recently said the federal government is promoting technology-driven initiatives aimed at addressing deficiencies in tax collection and is on track to meet its 2024 revenue target of NOK 19.4 trillion. He said that he is progressing.
Adeji noted that this year’s increased crude oil production and increased focus on tax compliance are helping to reverse the previous downward trend. However, industry experts say it is important to maintain the tempo of technology-driven reforms to ease tax collection and compliance, which goes hand-in-hand with widening the tax net and increasing tax revenue. I’m emphasizing.
According to the FIRS chairman, FIRS plans to increase tax efficiency by overhauling outdated tax laws such as the Stamp Duty Act, which was enacted in 1939 before internet connectivity and the functioning of modern society existed. It is said that there is.
“We have set a target of N19.4 trillion for this year. We are almost in the third quarter of this year and looking at the numbers so far, we can say that we are on track to achieve the target.” he said.
Industry experts who spoke to THEWILL said the Revenue Service’s focus on the use of technology will help it achieve the tax compliance and widen the tax net needed to meet FIRS’ revenue target of about N20 trillion. He pointed out that this is the most reliable way to do so.
“The world is moving towards technology. If taxpayers are willing to adopt technology along the way, they will be happy to demonstrate compliance and help governments increase tax revenue,” says tax expert Desmond. Omojola said.
He pointed out that this was the main reason why the federal government established the Fiscal and Tax Reform Commission in 2023. The committee, chaired by renowned tax expert Taiwo Oyedele, came up with several fiscal measures, including tax exemptions for manufacturers and farmers. and those who earn below a certain monetary threshold.
The commission had submitted a comprehensive report to the president covering measures to streamline tax collection, reduce the number of about 60 taxes to a single digit, and digitize tax collection across multiple industries.
FIRS announced that the country’s tax revenue recorded N3.94 trillion in the first quarter of 2024, an increase of 56.7 percent compared to the same period last year.
Omojola said the Taiwo Oyedele Commission was focused on technology-driven reforms to achieve its goals because “in this technological age, we cannot make progress by doing things the old way.” said.
In October 2022, FIRS published a public notice announcing its intention to introduce the Sentinal National Payment Gateway (“Sentinal” or “Gateway”) developed by e-Technologies Global, a UK-based fintech company . Sentinal is a technology system that provides FIRS with the ability to collect taxes on gaming transactions in real time. This will improve tax compliance for companies providing online gaming services.
According to reports, Sentinal will enable integrated payment service providers to deduct taxes at transaction points and remit them directly to government treasuries. Although there is no cost to the government, Sentinal usage fees may be deducted from online gaming operators’ payments and the additional costs may be passed on to customers.
To achieve this, FIRS will require all Nigerian and non-resident companies (NRCs) that provide online gaming services to customers in Nigeria to connect to the gateway by December 31, 2022, and will Companies that are subject to such regulations are ordered to comply with the requirements and face penalties if they do not. If you fail to do so in accordance with relevant laws;
“Although Sentinal can be deployed to collect taxes at source in real-time from the e-commerce industry, FIRS has limited deployment to online gaming for now. This may change in the future. There is.
“FIRS’s attempts to bring online gaming transactions into the tax net and ensure tax compliance for companies operating in the industry are not surprising given the industry’s significant growth and expansion in recent years.
“Efforts to simplify industry tax compliance and point-of-transaction tax collection will take time as Nigeria’s revenue is challenged, as outlined in the 2023 Budget.” Renowned tax and advisory services firm KPMG said in a note.
Recently, FIRS announced plans to introduce a digital solution called “FIRS e-Invoice” aimed at improving tax administration and compliance in Nigeria.
According to Adedeji, the initiative, in line with the Tax Administration and Enforcement Act, 2007, is part of FIRS’ ongoing digital transformation strategy.
He pointed out that e-invoicing systems facilitate real-time verification and storage of business-to-business, business-to-consumer, and business-to-government transactions.
An electronic invoice or e-invoice is a document exchanged between a buyer and a supplier in the form of structured data. E-invoices can be processed automatically and electronically and remain digital throughout their lifecycle.
The introduction of e-invoicing, among other initiatives, is seen as an important step towards modernizing Nigeria’s tax system and ensuring greater efficiency, transparency and compliance.
Mr. Adeji said the evolving tax environment presents both challenges and opportunities, and leveraging technology is essential to creating a more sustainable and fair tax system.
“Our collective efforts will pave the way for a more prosperous and resilient Nigeria. As we move forward, we ask that you support these efforts with constructive feedback and collaboration. Recommended.
“In doing so, we can all build a stronger, more resilient economy that benefits everyone,” he said.
Nigeria is facing its deepest cost of living crisis in decades, with inflation reaching 33.4%, according to the National Bureau of Statistics (NBS).
Despite the country’s dense population and large youth population, the country continues to face revenue shortfalls due to low economic output and widespread unemployment. \
Nigeria’s revenue-to-GDP ratio is the lowest in Africa, contributing only 10.8% to GDP.
Amid the recent significant decline in oil revenues, the Federal Accounting Allocation Committee (FAAC) recorded an increase in revenue due to improved tax collection.
According to FIRS data, tax collections by the Revenue Service increased from a paltry 4.9 trillion naira in 2020 to 12.37 trillion naira in 2023 and 3.94 trillion naira in the first quarter of 2024. .
