June 16, 2020
Technological advancement has completely changed the way we live. There have been significant improvements in the way goods and services are provided with technological improvements in all aspects of the value chain. For every task that has been completed with relative ease, there are always new tools or products available to make the task even easier. With the Covid-19 pandemic, more reliance has been placed on technology, in order to enforce social distancing and reduce the spread of the virus. For example, many hospitals have adopted remote diagnostic and treatment technologies in attending to patients and many government meetings were held online for the first time in many countries all over the world. As governance and administration need to go on, tax authorities in Nigeria are also exploring ways to leverage on technology to improve administration and compliance.
In reducing the impact of the COVID-19 pandemic, the Nigerian Government enforced lockdown procedures that had an adverse effect on the economy and resultant impact on tax collection. Tax audits and investigation exercises that involved physical visits and review of documents to establish additional taxes due to the Government could not be carried out, since most business premises were locked and not accessible. Nevertheless, the fall in oil prices heightened the need for the Government to improve tax revenue in order to provide much needed healthcare facilities and palliatives required to combat the pandemic.
Given the lifestyle changes and adjustments required to reduce the spread of the virus, many taxpayers have adopted remote working to meet their business demands. The tax authorities have also identified the need to change their work approach in ensuring tax filings, audits and other administrative activities continue seamlessly as the pandemic continues. This article highlights the importance of adopting an electronic system for tax administration and compliance with Nigeria in focus.
In Nigeria, the process of migrating to an electronic system commenced fully in 2015 with the Federal Inland Revenue Service (FIRS)’s introduction of the e-tax system in collaboration with Nigeria Inter-Bank Settlement System (NIBSS). Since then, the tax system has gradually been migrating to online platforms, with the introduction of an online portal where Withholding Tax (WHT) credit notes and tax receipts can be viewed and downloaded and the application for Tax Clearance Certificates (TCCs) for Companies can be completed. Taxpayers are also able to pay various taxes directly from their bank accounts.
Concerning the application for TCC for companies, the migration to an online platform provided companies the opportunity to apply for their yearly TCC from the comfort of their office. With the originally established electronic system, after the initial online application, several visits to the FIRS office are required for the TCC to be processed and eventually issued. This rigorous and time-consuming follow up process almost negates the benefits provided by the online application.
The same portal used for the TCC application also allows taxpayers to view and download tax receipts and WHT credit notes. Therefore, companies do not need to store hard copies of these WHT credit notes, risking loss or damage, and the process of analyzing a company’s unutilized credit notes is much easier. However, the FIRS has recently announced a migration from this platform to a new one, but the new interface is yet to be made public to taxpayers. We, therefore, expect that some existing bottlenecks will be addressed by the new platform.
On the part of the state tax authorities, Annual PAYE Tax returns are filed using an online platform in a number of states, Lagos State, Port Harcourt and Ogun State to name a few. In Lagos state, this was implemented at the beginning of 2019 and has eliminated the long queues and all physical interaction required to file the personal income tax returns in compliance with the tax laws.