The Federal Inland Revenue Service (FIRS) has announced plans to implement a digital solution, the FIRS e-Invoice, aimed at improving tax administration and compliance in Nigeria.
The Executive Chairman of FIRS, Dr. Zacchaeus Adedeji, disclosed this on Wednesday speaking at at the “Emerging Tax Matters” stakeholders’ engagement organized by the Lagos Chamber of Commerce and Industry (LCCI) in collaboration with FIRS.
According to him, this initiative aligns with the Tax Administration and Enforcement Act of 2007 and is part of the FIRS’ ongoing digital transformation strategy.
Represented by Mrs. Oti Olaniyi, Acting Director of the Medium Taxpayers Department, Adedeji noted that the e-Invoice system would facilitate real-time validation and storage of transactions across business-to-business, business-to-consumer, and business-to-government transactions.
Modernising the Nigerian tax system
The introduction of the e-invoice is seen as a crucial step towards modernizing Nigeria’s tax system, ensuring efficiency, transparency, and better compliance.
Adedeji stated that the evolving tax environment presents both challenges and opportunities and leveraging technology is essential for creating a more sustainable and equitable tax system.
“Our collective efforts will pave the way for a more prosperous and resilient Nigeria. As we move forward, we encourage you to support these initiatives with constructive feedback and collaboration.
“By doing so, we can all build a stronger, more resilient economy that benefits everyone,” he said.
Tax reforms
The FIRS Chairman also highlighted the recent restructuring within the tax agency and the introduction of various tax reforms.
These changes are intended to support sustainable growth and equitable development, particularly by providing tax incentives that stimulate local industries.
Adedeji stressed the importance of transparency in implementing tax incentives, ensuring they align with the country’s broader development goals.
He also pointed out the significant challenges posed by the informal sector, which constitutes a large portion of Nigeria’s economy.
To better engage with this sector, he said the government plans to introduce simplified tax regimes and registration incentives to encourage small and micro-businesses to participate in the formal tax system.
LCCI calls for collaboration
In his remarks, LCCI President Mr. Gabriel Idahosa commended FIRS for its ongoing reforms and urged for stronger collaboration between the government and the private sector.
Idahosa noted that Nigeria’s tax system has undergone significant transformations aimed at boosting revenue, simplifying compliance, and addressing the country’s fiscal challenges.
According to him, under its new leadership, FIRS has set an ambitious target of increasing tax collection by 57%, aiming for N19.4 trillion in revenue in 2024.
Currently, Nigeria’s tax-to-GDP ratio stands at 10.86%, but the government hopes to raise this to 18% over the next three years through these reforms.
Idahosa stressed that achieving this goal will require coordinated efforts between both the public and private sectors. He also recommended that tax policies should support business innovation and competitiveness.
“Recommending tax breaks for wage increases and removing barriers to foreign currency-denominated transactions can create a more robust investment environment,” he added.
He further emphasized the need for trust between the government and citizens, stating that transparency and fairness in the tax system are crucial for encouraging compliance.
“For these reforms to succeed, businesses and citizens must embrace a culture of tax compliance,” Idahosa concluded.
Nairametrics had reported that the FIRS in the first four months of this year failed to reach the approved target for the 2024 budget of N9.96 trillion, with a monthly average of N829.97 billion from oil taxes.
Based on the approved 2024 budget, FIRS is meant to have collected N3.32 trillion in oil taxes between January and April this year but the agency is farther from this goal by N1.69 trillion, an amount more than what it collected.
The FIRS recorded a total of N1.63 trillion as tax revenue from the oil sector between January and April 2024, which is 49% of the approved goal.
Lower than the approved budgetary goal, the FIRS has an internal goal of N7.5 trillion for the entire year, with a monthly average of N625 billion.
This means that the agency should have an internal four-month tax revenue goal of N2.5 trillion. However, it only recorded about 65% of its four-month goal.
