FIRS and LIRS Sign Memorandum of Understanding to Collaborate on Tax Administration

March 3, 2023

Summary

On 6 February 2023, the Federal Inland Revenue Service (FIRS or “the Service”) signed a Memorandum of Understanding (MoU) with the Lagos Internal Revenue Service (LIRS) to establish a collaboration between the agencies to conduct joint tax audit, investigation and promote automatic exchange of information for tax purposes.

Details

The FIRS is the tax authority of the Federal Government while the LIRS is the tax authority of Lagos State, the state with the highest Internally Generated Revenue in Nigeria and typically referred to as the commercial capital of Nigeria.

According to the FIRS, the MoU provides the following:

• The two tax authorities would establish a Joint Audit or Investigation Team to be known as “FIRS/LIRS JAIT” or just “JAIT”. The JAIT exercises will cover both current and back-duty audit or investigation of the records of any selected taxpayer;

• The MoU is to address the issue of duplication of tax audit or investigation duties between the two tax authorities on any selected taxpayer as a result of the streamlined audit and investigation process for jointly executed audit or investigation exercises in terms of assessment, collection and recovery;

• Exchange of information, spontaneous or on-request between FIRS and LIRS for building a reliable and up to date database on corporate and individuals (especially the high-net-worth) taxpayers including Ministries, Departments and Agencies (MDA) of Governments;

• Both the FIRS and the LIRS are to ensure the confidentiality, safeguard of records and financial information of taxpayers of all the information exchanged. The tax authorities are also required to improve transparency and accountability with periodic reports on the outcome of the shared data/information in terms of additional tax yield or otherwise;

• Any of the tax authorities may decline a request for information if the disclosure of the information would be contrary to public policy and law;

• The collaboration between the two tax authorities is intended to herald the commencement of the harmonization of hitherto fragmented tax system at different states level with a view to eliminating multiplicity of taxes;

• The tax authorities are to clearly mark and showcase all dedicated projects funded with the tax revenue resulting from this exercise;

• This collaboration between the two tax authorities is intended to result in staff training and consequently improved staff capacity development and strengthening of tax administration in Nigeria.

Implication

The government agencies expect the MoU to bring about increased transparency by reducing duplication in tax administration, reduction of tax compliance costs for taxpayers, and minimizing the administrative costs for the tax authorities.  According to them, one of the major objectives of the collaboration is to raise funds for Lagos State government and the Federal Government to be able to fund their budgetary requirements.

We will continue to monitor events and provide any relevant updates. In the meantime, it is important for taxpayers to liaise with their advisers to organize their tax records appropriately to avoid unnecessary back-duty taxes.