Technology and innovation have the potential to boost revenue collection from the informal sector, decrease significant leakages, and harmonize taxation in Nigeria, experts have said.
This was revealed at the 11th Zonal Tax Conference hosted by the South-West Zonal Districts held recently and themed ‘Presumptive Tax Regime and ICT in Optimising Revenue Generation.’
Yemi Sheriff Sanni, chairman of the CITN Lagos and District Society (LDS) and conference director, stated in his welcome address that “this year’s conference acknowledges the increasing digitalisation of economic activities, the role of technology, and current efforts by government and revenue authorities at all levels to broaden the tax net for increased compliance and optimal revenue mobilisation.”
The discussion over expanding the country’s tax net came in handy at a time when the government’s expenses exceed revenue in the first quarter of 2022.
Nigeria’s oil and gas revenues fell 51 percent between January and April this year, compared to budget estimates of N1.23 trillion, while expected benefits from oil proceeds continue to elude the country due to significant reductions in oil production and the burden of petrol subsidies.
In his speech, Adeola Agbogunleri, chairman of the CITN southwest zonal district, said “it is no longer news that taxation is the government’s major sustainable source of revenue; therefore, attention and focus must be on how to generate that revenue that will sustain our economy.”
Furthermore, the gathering of tax professionals to address diverse and trending issues in taxation in Nigeria and other jurisdictions emphasized the importance of presumptive taxation – the use of perceived income to determine the tax payable – as a means to consolidate the revenue gap from the informal sector.
Afolasade Coker, director, informal sector, Lagos state inland revenue service (LIRS), said at the event that tax authorities use presumptive tax to address unreliable returns, financial statements, tax evasion and avoidance, individuals and companies failing to register for tax, and non-resident companies earning income in Nigeria.
“There should be few or no loopholes for taxpayers to avoid or evade tax payment,” Coker said.
To increase revenue through presumptive taxation and information and communications technology (ICT), build trust in the taxpayer through accountability, and digitize tax filing to improve compliance.
“Incorporating ICT and presumptive tax into the tax system will increase the number of income earners covered by the tax net and increase government revenue,” said the LIRS director.
Despite being Africa’s largest economy, Nigeria’s tax system is polarized and non-automated, whereas countries with comparable market share have embraced technology for efficient tax administration.
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In light of this, Titilayo Fowokan, a discussant said, “Automated revenue collection processes reduce tax administration costs and are stronger and more efficient than manual processes.”
“It is better to have a stable, predictable and easy to administer structure for there to be an improvement in low tax culture.” she also said.
In addition, Linus Ozoede, while delivering a paper titled Sectorial analysis of Nigeria’s informal sector, the Role of tech in Optimal Tax Collection” mentioned that some of the factors that hinder effective tax administration in the informal sector include capacity constraints, education gap, technical know-how, illiteracy, etc.
“It is usually difficult to ascertain the profit, capital and returns of players in the informal sector, majority of whom are outside the tax net. Thus, leveraging on tech will go a long way to bring the informal sector into the tax net” Ozoede said.
“The Federal Inland Revenue Service (FIRS), as part of its efforts at modernising tax administration in Nigeria, has introduced a Tax Administration Solution (TaxPro-Max) for the ease of Tax compliance. TaxPro-Max enables seamless registration, filing, payment of taxes and automatic credit of withholding tax as well as other credits to the Taxpayer’s accounts among other features,” Ozoede also said during his presentation.
Although ICT will take time to permeate the informal sector and Nigeria at large, its importance cannot be over-emphasized.
More so, ICT will enable the integration of government ministries, departments, and agencies (MDAs), to ease tax collections, create an accurate database of taxpayers, drive revenue channeled for the development of tax communities, reduce a lot of leakages in the taxation process and harmonise it and release more non-oil income into the coffers of government.
