Collective Reasoning

What is the mandate of FIRS?

The country needs revenue both at the federal and state levels, especially with the program that the federal government has in place. Each of our three tiers of government has the legal prerogative and backing to collect revenue to fund their tier. The federal government has key mandate issues to deliver that require huge amounts of money, and revenue that accrues to the federal account is shared among the states and local governments. To ensure that the states and local government can function properly, the federal government has to be in a position, through FIRS, to provide the required revenue, and this is where we come in. We are working together with State Boards of Internal Revenue (SBIR), as all of SBIR are members of the Joint Tax Board. We have exchanged information with 30 states so far, and have been able to establish close to 110,000 corporate organizations within these 30 states that were not on the database of FIRS. Now that we have identified these gaps, we should see an increase in revenue within 1H2016. VAT has not been adequately tapped; there are many organizations that have been collecting VAT without remitting to FIRS or to the federal government, and we are working together with the State Inland Revenue Services on this. Our target is to increase VAT collections in 2016 by around NGN1 trillion.

How is FIRS investing in technology to improve payment collection systems?

FIRS has a lot of technology behind it, and the only way we can actually increase revenue is by leveraging this technology. We have ongoing process to link up with federal government ministries, departments, and agencies (MDAs) so that at the point of payments, the taxes due to the federal or state government will be deducted immediately. When MDAs want to make payments to contractors, the VAT and tax elements could be deducted at the same time they are making electronic payments to their vendors. We are also in discussion with private sector organizations in power and telecom, while the aviation sectors have already taken off, with some companies signing up and agreeing that there will be direct VAT deduction when they sell airline tickets. The strategy is to approach these changes sector by sector, and we have a target within the next six months to link to the major organizations so that when they make payments, and WHT is deducted and remitted immediately without having to wait till the end of the month to make manual returns.

What is your outlook on Nigeria’s current tax code? Is it in need of revision or it is adequate in its current state?

We have to work together with the Joint Tax Board to expose and remove any illegal charges that the general public believe are taxes. The existing laws are clearly defined, so the challenge is in adhering to the laws, and making amendments where necessary. Online trading and electronic purchases across borders is an aspect with which even developed countries have issues with when it comes to taxes. In the informal sector, we have been able to work around this and we have come up with a presumptive tax, although that will apply mainly to the States Internal Revenue Services; FIRS will also expect those agencies businesses to pay VAT. We are going to ensure that VAT actually serves the purpose for which it was created. Nigeria is now a trade-oriented nation, and we believe that in the near future a lot of internal capacity will come into play. While we are still very much an import-oriented organization, we believe the right amount of taxes should be paid so government can at least use the money to invest and ensure that it creates a conducive environment for internal production.