The Federal Inland Revenue Service (FIRS) and the Lagos Internal Revenue Service (LIRS), yesterday, issued a public notice regarding the Memorandum of Understanding (MoU) signed by both agencies on February 6, to establish a Joint FIRS and LIRS Audit and Investigation Team.
This is aimed at encouraging the exchange of information between the two tax agencies.
The notice is issued for the information and guidance of the general public, taxpayers and tax practitioners in line with the MoU for collaboration between both agencies in the area of exchange of information to ensure efficiency, accurate assessments and increased revenue for funding of government’s expenditure.
In the communiqué signed by the Executive Chairman, FIRS, Muhammad Nami, and his LIRS counterpart, Ayodele Subair, on Wednesday, the general public, taxpayers and tax practitioners were charged to provide full support and cooperation to both agencies for the overall economic benefit of all stakeholders.
Under the terms, the overall objective of the Joint Tax Audit is to improve tax administration by reducing tax compliance cost thereby enabling ease of doing business in the country.
Speaking on the MoU, Nami said such cooperation “would enable the two authorities to work as a team in sharing relevant information that would assist both parties in their tax administration and enforcement roles as it would also provide capacity building between both tax authorities.
“We will carry out a joint audit and investigation as a team; we will also conduct an automatic exchange of information for gathering data for the purpose of tax administration. With that information, we would be able to carry out tax administration seamlessly.”
On his part, Subair noted that aside from fostering greater collaboration between the two agencies, “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 fulfil their end of the bargain in achieving a balance.”
Also, FIRS and LIRS will leverage on their distinct competencies in tax administration to collaborate in the exchange of information, harmonisation of an integrated tax system and joint tax audit or investigation exercise (where necessary) in carrying out their respective mandates for the purpose of optimizing tax revenue to the Federal Government and the Lagos State Government respectively.
The collaboration is expected to improve tax administration with a view to enhancing tax revenue generation, creation of a robust database and improving Nigeria’s tax-to-GDP ratio.
It is, therefore, important that adequate measures be instituted to ensure transparency of the process and proper delineation of roles and responsibilities between members of the teams.
Deploying digital tools
At the outset of the MoU, KPMG Nigeria while congratulating the partners, had urged them to adopt digital tools to enhance tax administration at the national and state levels.
According to the firm, “emphasis should be on continuous investment in digital transformation and automation of their systems to enhance tax compliance and collection.
Stressing that the focus of all tax authorities should be how to “make tax just happen” and less visible to taxpayers, it added that “To achieve this, there should be less focus on tax audits and investigations, which are backward-looking tools.”
Partner/Head, Tax, Regulatory & People, KPMG Nigeria, Wale Ajayi, in his comments, noted that such MoUs were not strange as similar memoranda were reached under the Joint Tax Board (JTB) between the FIRS and the States Inland Revenue Service in 2017.
Ajayi however recalled that “the framework was not fully implemented due to logistic issues,” and wondered if these issues have been resolved under the current MoU.
He added that “If judiciously implemented, the MoU should also foster collaborative relationships between the two tax authorities and this will ensure swift resolution of overlapping tax issues.
“It is, therefore, important that adequate measures be instituted to ensure transparency of the process and proper delineation of roles and responsibilities between members of the teams.”
