The NTP requires tax authorities to create conducive tax environments that would enhance taxpayers' confidence at all levels of government. Although this seems like an enormous task - considering Nigeria's inherent challenges (legal, administrative, policy and institutional framework), FIRS has made big strides towards achieving this objective.
In 2002, the Federal Government of Nigeria set up a study group to examine the Nigerian tax system and make appropriate recommendations towards an improved tax system. One major recommendation put forward by the study group is the development of a National Tax Policy (NTP), which is aimed, amongst others, at addressing inherent problems in the Nigerian tax system. It was therefore not a surprise when the Bill to establish the Federal Inland Revenue Service Establishment Act ("the Act") was passed by the National Assembly in 2007 and signed by the President.
The Act provides for the establishment of the Federal Inland Revenue Service (FIRS) as a body corporate with perpetual succession, common seal, ability to sue and be sued and the capacity to acquire, hold or dispose property for the purpose of carrying out any of its functions as contained in the Act. In addition to the powers conferred on it by the Act, FIRS was provided the much needed platform to drive efficiency and effectiveness in tax administration. How has FIRS fared since its liberalization?
FIRS as constituted under the Act, has made huge strides in tax administration since it was granted autonomy in 2007. For instance, FIRS has leveraged the immense capabilities of information and communication technology in automating processes. A case in point is the automation of revenue collection which was hitherto a conduit pipe for revenue leakage.
There have been significant efforts at eliminating the bottlenecks associated with the old system (e.g. the issuing of new regulations, the shift from manual to a semi-automated mode of issuing receipts, withholding tax credit notes etc.). Special recognition must also be given to FIRS for its role in sensitizing the public on tax matters through adverts and workshops. Notable achievements in this regard in the last 30 months include the following:
Integrated Tax Administration System (ITAS)
In July 2013, FIRS, through the Modernization Group (MOG), announced its intention to launch the Integrated Tax Administration System (ITAS) – a system that is intended to enable taxpayers complete and file tax returns online. Although, no specific date was indicated for the transition to ITAS, it is expected that FIRS would initially allow ITAS run concurrently with the current manual filing process until there is some comfort with the system's functionality. This is to ensure seamless transition to the electronic platform. Taxes covered by ITAS are companies income tax, capital gains tax, petroleum profit tax and value added tax.
Self-assessment regulation
The legal framework for self-assessment has generated divergent opinions among taxpayers, tax practitioners and relevant tax authorities in Nigeria. This resulted in inconsistencies in the self-assessment practices in Nigeria. To address this, FIRS issued a Self-Assessment Regulation ("the Regulation") in 2012. The Regulation provides standard guidelines for implementation of the established self-assessment regime in support of an established tax administration system in Nigeria. It sets out the processes and procedures for self- assessment practice by taxpayers and tax authorities.
The key issues covered in the Regulation include the official recognition of the use of tax agents, extension of time for making returns, due dates for filing returns, installment payment, administrative assessment and the appeal procedure under the administrative assessment regime, etc. The Regulation applies to Companies Income Tax Act (CITA), Personal Income Tax Act (PITA), Petroleum Profits Tax Act (PPTA), Value Added Tax Act (VATA) etc.
Sensitization programs
FIRS have conducted various stakeholder meetings whose aims, amongst others, include: obtaining feedback on tax practices; enlightening taxpayers on controversial regulations; and informing practitioners on proposed initiatives. It is noteworthy that FIRS has been able to provide clarity to taxpayers (who were hitherto in the dark about their obligations – thereby being at the mercy of the FIRS), as well as shape a better tax administration through an 'all inclusive government' through these forums.
The NTP requires tax authorities to create conducive tax environments that would enhance taxpayers' confidence at all levels of government. Although this seems like an enormous task - considering Nigeria's inherent challenges (legal, administrative, policy and institutional framework), FIRS has made big strides towards achieving this objective. This is evidenced by the increased number of 'known' taxpayers and 'visible' income streams available to FIRS. On this backdrop, one need not look too far to see why revenue collection has attained an average growth rate of 22% in the last 8 years (Courtesy: Planning, Reporting and Statistics Department of FIRS).
There is still a lot to be done by FIRS vis-à-vis improving tax administration in Nigeria. To this end, FIRS needs to be encouraged to continue its upward shift. Hence, the Federal Government should provide FIRS with the much needed impetus to build a formidable taxing institution.
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