Olukolade Ehinmosan1 Oluwabusayo Ayinde2
2023 MOU ON COLLABORATION AND EXCHANGE OF INFORMATION TO DRIVE TAX COMPLIANCE BETWEEN THE FIRS AND THE LIRS
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INTRODUCTION |
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On 6th February 2023, the Federal Inland Revenue Service ("FIRS") signed a Memorandum of Understanding ("MoU") with the Lagos State Internal Revenue Service ("LIRS").3 By the MoU, tax audits, investigations, and other administrative actions conducted by either or both tax agencies will feature more seamless exchange of information. |
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INITIATIVES OF THE MOU |
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The MoU introduces the following initiatives: |
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Creation of a centralised and robust database which gives both tax agencies automatic and reciprocal access to information available to each. |
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Establishment of a Joint Audit/Investigation Team referred to as FIRS/LSBIR JAIT ("JAIT"). The creation of the JAIT is also aimed at timeous and effective conclusion of tax audits. |
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Improved tax efficiencies occasioned by a reduction in tax administration costs, cost-efficient data mining on tax compliance practices, continuous introduction of more seamless tax compliance mechanisms, and an overall boost in the ease of doing business. |
1. IMPLICATION OF THE FIRS/LIRS
COLLABORATION
Nigeria operates a voluntary tax compliance system featuring self-assessment and remittance of applicable tax liabilities. With this collaboration in place, the FIRS and LIRS are better equipped to effectively combat tax evasion and avoidance, and to bring a larger swath of individuals and commercial entities into the tax net.
Furthermore, we expect continuous capacity building on both joint tax administration matters, and data protection and cybersecurity issues that may arise from this new collaboration. We also expect subsidiary legislations to follow, especially in view of the FIRS' Executive Chairman's indication that the collaboration is also aimed at implementing a presumptive tax regime pertaining to the administration of personal income tax and ground rent in Lagos State.4
Moreover, the JAIT would likely usher in an era of less speculative and more thorough tax investigations and audits. The obvious possibility of the shared access by the FIRS and the LIRS to information relating to corporate and capital market affairs makes this even more remarkable.
CONCLUSION
With this fresh collaboration, the chances of businesses continuing to escape the tax nets of the federal and state tiers of government becomes increasingly slimmer. We expect that the JAIT will have a robust database at its disposal comprising at least, access to corporate tax and allied information made possible by the existing collaboration between the FIRS and the Corporate Affairs Commission (CAC) formally initiated in 2015 at the latest.
With recent changes in the Nigerian tax landscape, it is crucial that taxpayers immediately engage competent and qualified tax legal practitioners to reduce tax exposures.
Footnotes
1. Associate, Real Estates, Succession and Tax Department, SPA Ajibade & Co, Lagos, Nigeria.
2. Associate, Real Estates, Succession and Tax Department, SPA Ajibade & Co, Lagos, Nigeria.
3. Posted on 8th June 2023 at 8:40 am via the official Twitter handle of the FIRS, "Federal Inland Revenue Service NG" @FIRSNigeria, https://twitter.com/FIRSNigeria/status/1666711864015814656?t=aXwQOJAOP98a9DEBE9MdrQ&s=08, last accessed 13th June 2023.
4. Elizabeth Christopher, 'Tax Harmonisation: FIRS Signs MoU With LIRS For Joint Tax Operations' (Voice of Nigeria, 7th February 2023) https://von.gov.ng/tax-harmonisation-firs-signs-mou-with-lirs-for-joint-tax-operations/ last accessed 8th June 2023.
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