The Lagos State Internal Revenue Service (LIRS) and Federal Inland Revenue Service (FIRS) have signed a Memorandum of Understanding (MoU) on the exchange of information and implementation of joint tax audit and investigation exercise.
The agreement signing ceremony held at the Lagos State House, Marina, on Monday, was witnessed by Lagos State Governor, Babajide Sanwo-Olu, Minister of State for Finance, Budget and National Planning, Clement Agba, FIRS and LIRS coordinating directors, and some government officials.
While the LIRS Executive Chairman, Ayodele Subair, signed on behalf of Lagos State, his FIRS counterpart, Muhammad Nami, signed on behalf of the Federal Government.
Speaking at the event, Subair said the importance of the agreement was to foster greater collaboration between the two agencies.
He said though both tax agencies are not only independent of each other but different in the types of taxes they administer, the collaboration between the tax authorities was to promote the smooth operation of activities not only for the benefit of tax authorities but for improved service delivery for taxpayers.
“Notwithstanding its inclusion as a fundamental obligation of every Nigerian citizen pursuant to Section 24 (f) of the 1999 Constitution as amended, filing of annual income tax returns or payment of tax therefrom is not an issue that citizens are keen on. Nonetheless, citizens expect to have direct benefit of democracy and good governance without remembering that the most reliable and sustainable means of Domestic Resource mobilization for Government expenditure is taxation.
“There is no reason to debate the above as it has been established that tax compliance and good governance are expected to co-exist as the undividable social contract that binds citizens and governments anywhere in the world. Therefore, citizens and governments are expected to fulfill their end of the bargain in achieving a balance.”
“Today’s signing of this Memorandum of Understanding is in furtherance of the above bargain on the part of the tax authorities. While this initiative of a joint audit is not a new one, it is peculiar because it comes at a time when our dear nation struggles with the dwindling oil receipts and other economic woes which have affected the tax-to-GDP ratio which is currently adjudged as the lowest globally, standing at approximately 6%, compared to neighboring countries which average between 15–25%,” the LIRS boss stated.
According to him, some of the expected achievements from the collaboration between both tax authorities include a reduction of compliance costs for taxpayers; improved transparency in the tax administration process, which will impact tax disputes, incidences and reconciliation; reduced administration costs for both tax authorities; and elimination of hiding place for recalcitrant taxable persons and entities.
On his part, Nami said the essence of the collaboration between the FIRS and LIRS was to enable the two agencies to carry out joint projects together and to ensure automatic exchange of information which would enable the agency get a bigger data for seamless tax administration.
“We will work together as a team during the investigation and have an automatic exchange of information. With this, we will be able to carry out our mandate seamlessly. As part of the joint operation, we will be able to implement presumptive tax as far as issues of tax administration are concerned,” he said.
Also speaking, Governor Sanwo-Olu, who described the collaboration as “epoch-making”, said the conversation for the harmonisation of the two agencies’ mandates started about a year ago, based on the need to forge a common front in widening the tax net to raise the country’s tax to GDP ratio.
He stated that Nigeria had maintained an unimpressive tax-to-GDP ratio of between six to eight per cent, despite the yearly record-breaking turnovers by both FIRS and LIRS.
This, he said, has mounted pressure on the nation’s resources and created an imbalance in Government expenditure.
Sanwo-Olu said Nigeria must operate at the same level as other nations within sub-Saharan Africa doing between 14 and 15 per cent in tax to GDP ratio in order to support the Government’s development programmes and improve accountability.
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