The Lagos State Internal Revenue Service (LIRS) has signed a Memorandum of Understanding (MoU) with the Federal Inland Revenue Service (FIRS) to ease the implementation of joint tax audit and investigation exercise.
The signing ceremony on Monday in Lagos was witnessed by Lagos State Governor, Mr Babajide Sanwo-Olu, FIRS and LIRS coordinating directors amongst others.
While the Executive Chairman, LIRS, Mr Ayodele Subair signed on behalf of Lagos State; his counterpart, Mr Muhammad Nami, Executive Chairman, FIRS, signed on behalf of the Federal Government.
Sanwo-Olu in his remarks said that the conversation for the harmonisation of both agencies’ mandates started about a year ago.
He explained that it was based on the need to forge a common front to widen the tax net to raise the country’s tax to Gross Domestic Product (GDP) ratio.
Sanwo-Olu noted that Nigeria had maintained an unimpressive tax-to-GDP ratio of between six to eight per cent, in spite of the yearly record-breaking turnovers by both FIRS and LIRS.
This, he said, mounted pressure on the nation’s resources and created an imbalance in government expenditure.
He affirmed that 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 to support the government’s development programmes and improve accountability.
“For us as a state, we are humbled by this collaborative effort and we believe our citizens will be the ultimate beneficiaries of this initiative.
“This collaboration did not just happen by chance; it is a conversation we started about a year ago with the chairman of FIRS when both parties reviewed their successes and limitations and it was clear there was a need for a relationship to be consummated.
“Studies have shown that there would be better service delivery to the citizens and improvement in the efficiency of tax collection when the two agencies work together.
“The cost of tax collection would be reduced, we would see better customer satisfaction and more resources would be generated for the Government to deliver more dividends of democracy.
“The MoU is in the best interest of the public, as it affirms the reason why we need to come together and strengthen the cordial working relationship between the two agencies,” he said.
Subair, in his remarks, noted that the significance of the agreement was to foster greater collaboration between the two agencies.
He said that the collaboration between the tax authorities was to promote the smooth operation of activities not only for their benefits but for improved service delivery for taxpayers.
Subair noted that notwithstanding its inclusion as a fundamental obligation of every Nigerian citizen pursuant to Section 24 (f) of the 1999 Constitution, filing of annual income tax returns or payment of tax therefrom was not an issue that citizens were 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 mobilisation 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.
“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.
“This is currently adjudged as the lowest globally, standing at approximately six per cent, compared to neighboring countries which average between 15 – 25 per cent,” Subair submitted.
Subair said that some of the expected achievements from the collaboration between both tax authorities include a reduction of compliance costs for taxpayers and improved transparency in the tax administration process.
These, he explained, would impact tax disputes, incidences and reconciliation; reduce administration costs for both tax authorities; and eliminate hiding place for recalcitrant taxable persons and entities.
Nami, the FIRS Chairman, said the essence of the collaboration between the FIRS and LIRS was to enable the two agencies carry out joint projects and investigations together.
He added that the development would ensure automatic exchange of information which would enable the agency get bigger data for seamless tax administration.
“We will work together as a team during the investigation and have an automatic exchange of information and 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 is concerned, he said.
