Joseph Bakare
The Federal Inland Revenue Service (FIRS) is considering a comprehensive tax reform to tackle tax evasion by multinationals.
The FIRS is taking this decision over what it described as “illicit profit shifting” by multinationals operating in Nigeria.
As a means of tackling tax evasion by defaulting multinationals; the FIRS has revealed that tax administration will be reformed in four areas.
These include rebuilding the FIRS’s institutional framework; robust collaboration with stakeholders; building a customer or taxpayer-centric Institution; and making the FIRS a data-centric institution, according to FIRS Chairman, Muhammad Nami.
The agency had set a target of raising tax collection by $5m per staff member as a minimum; over the next four years and increasing Nigeria’s tax-to-GDP ratio to 10 percent.
Nami disclosed that total revenue target by the FIRS for 2020 is N8.5 trillion. Broken down, this includes oil tax revenues of N3.7 trillion ($23.3bn) and non-oil revenues of N4.8 trillion.
Nami lamented that that Nigeria was losing around $10bn in tax revenue as a result of profit shifting activities.
Also, the International Monetary Fund in 2019 advised that Nigeria should broaden its tax base by reforming the VAT system; by overhauling the current range of tax exemptions, and improving tax administration. It noted that Nigeria had one of the smallest tax-to-GDP ratios in Africa.
Additionally, the IMF welcomed a move towards a VAT with full crediting of input tax; increased compliance monitoring of tax incentives, and broad-based use of excises. However, it advised a comprehensive reform of the VAT system in Nigeria; as well as an aggressive removal of tax exemptions and incentives – which should instead be rules-based.
It argued against the introduction of new tax exemptions, warning that these narrow the tax base.
