Four million Lagosians outside tax net, Ogunsanwo

Despite her leading position as the state with the highest internally generated revenue (IGR) record, only five million of the estimated nine million taxable Lagosians pay tax, says Folarin Olukayode Ogunsanwo, Chairman of the Lagos Inland Revenue Service (LIRS).

Ogunsanwo, who spoke with a team of Business Day journalists on Tuesday, said the figure which represents about 44.4% of those outside the tax net, presents an opportunity for the agency to ensure that it is reduced, in a bid to increase the tax revenue of the state which has over 20 million residents.

He revealed that the result of an analytical research carried out by the LIRS showed that of the 20 million people residing within Lagos, an estimated nine million are liable to pay tax according to law, but only about five million of these are currently captured in their tax base.

He identified individuals in the informal sector and the Small and Medium scale Enterprise (SME) as those forming the large chunk of the four million that do not comply with tax payment.

Reiterating the importance of increasing the tax base, so as to ameliorate against the current   dwindling revenue, the LIRS boss says this is an opportune time to ensure that LIRS generates the targeted N300 billion, which should be an improvement over the current over N200 billion being generated yearly through an efficient collection system that will ensure that all taxable individuals are captured.

“To ensure optimal tax collection, we want to automate our processes to reduce turn-around time, as well as make it more user-friendly; we have created a directorate to be in charge of the informal sector to ensure their tax compliance.

“We have also created a department charged with tax education and enlightenment. The team goes round the entire 20 local governments and 37 local council development areas(LCDA) every day, to enlighten Lagosians on the importance of tax payment and educate them on certain privileges they are entitled to as a result of tax payment,” he said.

The LIRS chairman added that their “collaboration with the Federal Inland Revenue Service (FIRS), Corporate Affairs Commission (CAC) and the Immigration Service, has led to an exchange in information that would ensure an expansion in our tax net to capture every individual required by law to remit their taxes to the state government coffers.”

Against a similar backdrop, the introduction of the National Identity number established by the National Identity Management Commission (NIMC) Act No 23 of 2007 is anticipated to go a long way in ensuring tax compliance from potential tax payers.

The purpose of the National Identity Number is for easy identification of every citizen in order to warehouse the profile of all Nigerians for effective national planning.

Yomi Olugbenro, partner, Tax and Regulatory Services, Deloitte, speaking to BusinessDay, confirmed the figure (four million) as the number of Lagosians outside the tax net.

He stressed that the informal sector formed a large chunk of tax payable Lagosians that do not pay tax.

In addition, he said the Federal Government’s effort to widen the tax net which is yielding positive outcome, signals that the same strategy will avail for the state in ensuring tax augmentation. “The Federal government had a target of registering an additional 500,000 potential tax payers by the end of March, to boost tax revenue and already they have successfully registered 360,000. By all indications therefore, the 500,000 target of tax payers to join the tax space is achievable.”

Olugbenro asserted that if tax compliance were achieved by all potential tax payers, especially those in the informal sector, the tax revenue could triple from an average of N21 billion accrued monthly from tax in the state.

Ogunsanwo and Olugbenro concluded that broadening the tax net rather than increasing tax rates ought to suffice for the state’s projected tax revenue for 2016.

LOLADE AKINMURELE