LIRS, FIRS Sign MoU On Information Exchange, Joint Tax Audit
Caption: Executive Chairman, Lagos State Internal Revenue Service (LIRS), Ayodele Subair (left), and his counterpart at the Federal Inland Revenue Service (FIRS), Muhammad Mamman Nami (right), signing the MoU on collaboration in the exchange of information and Implementation of Joint Tax Audit & Investigation Exercises. They are flanked (standing) by: the Lagos State Commissioner for Finance, Dr. Rabiu Olowo Onaolapo; the state governor, Babajide Sanwo-Olu; Minister of State for Finance, Budget and National Planning, Clement Agba; the Lagos State Commissioner for Economic Planning and Budget, Sam Egube; and his counterpart at the Ministry of Justice/State Attorney-General, Moyosore Onigbanjo, at the Lagos State House, Marina on Monday, February 6, 2023
The Lagos State Internal Revenue Service (LIRS) and Federal Inland Revenue Service (FIRS) on Monday, at the Lagos State Government House, Marina, signed a Memorandum of Understanding (MoU) on the exchange of information and implementation of joint tax audit and investigation exercise.
The ceremony was witnessed by the Lagos State Governor, Babajide Sanwo-Olu, Minister of State for Finance, Budget and National Planning, Clement Agba, the FIRS and LIRS coordinating directors, as well as some of the Lagos State Executive Council members, including the Commissioner for Finance, Dr Rabiu Olowo Onaolapo, and Attorney-General & Commissioner for Justice, Moyosore Onigbanjo.
The agreement was signed by the Executive Chairman, LIRS, Ayodele Subair, and his counterpart, Muhammad Mamman Nami, Executive Chairman, FIRS.
Speaking at the event, Subair said the agreement was aimed at fostering greater collaboration between both agencies, adding that although they are not only independent of each other, but different in the types of taxes they administer. The collaboration, he continued, was to promote the smooth operation of activities not only for their mutual benefit but for improved service delivery to taxpayers.
According to him, “notwithstanding its inclusion as a fundamental obligation of every Nigerian citizen pursuant to Section 24 (f) of the 1999 Constitution as amended, filing of annual income tax returns or payment of tax therefrom is not an issue that citizens are 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 mobilization 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.
“Today’s signing of this Memorandum of Understanding is in furtherance of the above bargain on the part of the tax authorities. 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 which is currently adjudged as the lowest globally, standing at approximately 6%, compared to neighboring countries which average between 15 – 25%, he stressed.
The LIRS Chairman listed some expectations from the collaboration to include a reduction of compliance costs for taxpayers; improved transparency in the tax administration process, which will impact tax disputes, incidences and reconciliation; reduced administration costs for both tax authorities; and elimination of hiding place for recalcitrant taxable persons and entities.
Also speaking, the Executive Chairman, FIRS, Muhammad Mamman Nami, said the collaboration will enable both agencies carry out joint projects, working as a team, while ensuring automatic exchange of information which would give birth to bigger data for seamless tax administration.
According to him, “we will work together as a team during the investigation and have an automatic exchange of information. 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 are concerned.”
On his part, Governor Sanwo-Olu described the collaboration as “epoch-making,” adding that the conversation for the harmonization of the two agencies’ mandates started about a year ago, based on the need to forge a common front in widening the tax net to raise the country’s tax to GDP ratio.
The governor observed that Nigeria had maintained an unimpressive tax-to-GDP ratio of between 6 to 8%, despite the yearly record-breaking turnovers by both FIRS and LIRS. This, he said, has mounted pressure on the nation’s resources and created an imbalance in Government expenditure.
He said 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 in order to support the Government’s development programmes and improve accountability.
According to him, “we have just witnessed an epoch-making ceremony between the Federal Inland Revenue Service and Lagos Inland Revenue Service. 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. It was clear there was a need for a relationship to be consummated.
“Both FIRS and LIRS have been breaking records of their tax collection and administration yearly, but this is not enough. We have an unimpressive tax-to-GDP ratio, which ranges between six and eight per cent; this is totally unacceptable.
“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.
“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. 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,” the governor further added.