The Lagos State Internal Revenue Service (LIRS) has constantly been on the move to increase taxpayers' database with a view of increasing its tax revenue. The most recent effort in this direction is the Public Notice issued by the LIRS on 4 June 2019, informing the public of its intention to integrate the existing Taxpayers Identification Digit (PID) into the nationwide Tax Identification Number (TIN) system with the Joint Tax Board. The PID is a taxpayer's identity code issued by the LIRS to taxpayers in Lagos State.

To achieve this, the LIRS intends to leverage on Bank Verification Number (BVN) of taxpayers. Consequently, every self-employed person is required to provide their BVN to the LIRS for creation of their unique PID, while corporate institutions are to ensure that their employees provide their BVNs for processing of their Tax Clearance Certificates (TCCs).

Valid concerns have been raised in various quarters in relation to the Notice. The question on the minds of many taxpayers is: "Does the LIRS really have the power to make BVN a requisite parameter for registration and tax compliance? What mechanisms will be put in place to protect and guard the privacy of taxpayers?"

Another concern that has been raised is how businesspeople should organize their affairs going forward such that minimal tax footprints is created, in the light of the above. This is a significant issue especially in the informal sector where there is little or no separation between personal and business affairs of taxpayers. No transaction, personal or business, will now escape the all-seeing eyes of the taxman, it seems.

Rationale and Legal Basis for the Newly Introduced Taxpayers Identification System

The effect of the Public Notice mentioned above is that BVN will be required to access all LIRS' electronic platforms including taxpayer registration, creation of Payer ID, payment of taxes and validation of taxpayers' profile. Interestingly, the authority to make such request is embedded in Section 48(4) of the Personal Income Tax Act as Amended (PITAM), which empowers the State tax authority to give notice to any person to deliver the information including a name and an address specified therein within the time limited for the purpose of obtaining information in respect of the income or personal circumstances of any individual.

This then leads to the question of the LIRS' particular interest in BVN. Why not National ID? The LIRS is of the view that the BVN is generally the most credible identity management database with the widest coverage available within the country. According to the LIRS, creation of multiple tax IDs in the past was as a result of non-application of biometrics in the creation of Payer IDs. With continuous application of technology, various agencies have adopted biometrics as a unique identifier. BVN which is based on biometrics will serve as a veritable tool for elimination of multiple tax IDs.

Download full article here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.