On assumption of office, the Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami, drew up a four-point objective as a template for his mission to reposition the Service, for efficient service delivery. Hitherto, the Service had operated without a clear direction thereby dampening the morale of the staff.

The cardinal objectives of his administration are: Rebuilding FIRS institutional framework; Collaboration with stakeholders; Making FIRS a Customer-centric institution and Making FIRS a Data-centric institution.

These objectives indubitably correlate with the three core areas of a tax system, which are, tax laws, tax policy and tax administration. A tax system works better by having a robust rapprochement with critical stakeholders, a properly nurtured and sustained customer-centric sentiment and a bias for data analysis and utilisation. All of these can blend well within the framework of a properly positioned and structured corporate institution.

It is to achieve all these that Mr. Nami applies himself diligently,since he took over the mantle of leadership at FIRS. The range of initiatives and reforms he has implemented thus far bespeak of him as a focused and devoted tax administrator and a team player, who understands how to harness human and financial resources to improve the country’s tax system.

Nami’s Approach to Improving Nigeria’s Tax System

The current Management at FIRS led by Mr. Muhammad Nami,realising the strategic importance of a tax system to the nation’s economy immediately mapped out strategies on how to reposition the FIRS for greater service delivery. It thus adopted a range of initiatives aimed at the overall strengthening of the tax system. These strategies covered the three core areas of a tax system: tax laws, tax policy and tax administration.

Tax Laws

It is an obvious fact that there is no taxation without legislation. Every round of tax reform must therefore begin with a review of the legal framework. As of the datethe new Executive Chairman assumed office, the 2019 Finance Bill was already in the works but had only been passed by the House of Representatives. Through concerted efforts by the new Management, the Senate passed the Bill on 11^thDecember2019 and presidential assent was given on 13^thJanuary 2020 and the Finance Act 2019 came into effect, setting the tone for several other reform initiatives by the Nami-led FIRS.

The Finance Act 2019was a wholesale amendment to seven different tax legislations namely: the Companies Income Tax Act, Value Added Tax Act, Capital Gains Tax Act, Stamp Duties Act, Customs and Excise Tariff Act, Petroleum Profits Tax Act and Personal Income Tax Act.

Small and medium businesses were the biggest beneficiaries of the reforms introduced by the Companies Income Tax Act (amendment). Specifically, the amendment divides companies into three categories for taxation. These are small, medium and big companies. Companies with an annual turnover of less than 25 million naira (small companies) are exempted from payment of corporate tax. Companies with an annual turnover of between ₦25 million and ₦100 million (medium companies) are taxable at 20% of assessable profits. Companies with an annual turnover of ₦100 million and above (big companies) remain taxable at the rate of 30% of assessable profits. This reform intervention recognises that small and medium businesses are the main drivers of job creation and economic growth. The reform is therefore aimed at reducing operational cost, encouraging recapitalisation and business expansion by small and medium companies.

Another major reform is with the Value-Added Tax. In addition to clarifying certain ambiguous provisions of the VAT Act, the amendment increased the rate of VAT from 5% to 7.5%. The concomitant reduction in Corporate Tax rates on one hand and an increase in the rate of Value-Added Tax, on the other hand, is consistent with the National Tax Policy which aims at a gradual shift from direct to indirect taxes. The guiding principle behind this stipulation in the National Tax Policy is that indirect taxes potentially offer higher yield while remaining cheaper to administer than direct taxes. 

Within the Year 2020 and as a follow-up measure to strengthening the legal framework, a Committee was constituted to further review all relevant tax laws. As a result of the Committee’s work, Draft Bills with amendments to the Federal Inland Revenue Service Establishment Act, the Value Added Tax Act and the Finance Act 2019 were prepared and submitted to the National Assembly (NASS) for further review.

In addition, within the same year, 13 information Circulars were also developed and released as follows:

• Taxation of Non-residents in Nigeria

• Taxation of seafarers onshore and offshore platform workers

• Taxation of companies involved in shipping, air transport and cable undertakings

• Taxation of Real Estate Investment companies

• Guidelines for filing income tax returns by foreign companies

• Circular on clarification for taxation of insurance companies

• Circular on clarification on commencement and cessation of business and business reorganisation

• Circular on tax implication of the operation or regulated securities lending transaction

• Circular on stamp duties

• Circular on value-added tax

• Clarification on sundry provisions of the Finance Act 2019 as it relates to CITA

• Guidelines on the tax treatment of section 27(C) of Companies Income Tax Act (CITA) on the deductibility of Foreign Tax Framework for the implementation of the country-by-country reporting in Nigeria.

Tax Policy

To minimise the incidence of double taxation and to further facilitate international trade and investment between Nigeria and the rest of the world, the FIRS in collaboration with the Federal Ministry of Finance, Budget & National Planning engaged in bilateral/ multilateral agreements.

In 2020, FIRS concluded the negotiation of the Avoidance of Double Taxation Agreements with Turkey. Negotiations are also at different stages with the following countries: Hong Kong, Saudi Arabia, Cyprus, Iran, Germany, Switzerland, India, Botswana, Japan, Greece, New Jersey and Russia. These will be concluded as soon as the few outstanding issues have been resolved.

In the year under review, Nigeria has an active ADTA agreement with 16 countries, namely: South Korea, Spain, Sweden, Singapore, France, Mauritius, UAE, Qatar, Kenya, Morocco, Ghana, Cameroon, Turkey, Sudan, Gambia and Denmark.

Another key tax policy issue which the Management of the Service continues to focus on is that of transfer pricing. The Management has, by way of follow up to the introduction of the Income Tax (Transfer Pricing) Regulations 2018, issued Demand Notes totaling 1.074 billion naira on 222 companies for failing to file their transfer pricing returns in line with the requirements of the Regulations.  54 companies paid penalties imposed on them and these amounted to ₦47.433 million. Currently, the Service is involved in several audits that have the potential for substantial revenue yield resulting from adjustments and additional assessments.

The Service also maintained its relationship with ATAF, WATAF, CATA and the OECD and organised a WATAF workshop on Risk Management in Bamako, Mali in June 2020.

Tax Administration

During the 2020 fiscal year, FIRS continued the implementation of various administrative measures to enhance revenue collection to achieve its target. From the onset, the new Executive Chairman identified four cardinal pillars to drive his reform interventions in the area of tax administration.

These objectives are: Rebuilding FIRS Institutional Framework, Robust Collaboration with Stakeholders, Building a Customer (Taxpayer)-Centric Institution, Building a Data-Centric Institution, Participation in international tax engagements.

On Rebuilding FIRS Institutional Framework:

The Management has been committed to building and strengthening the capacity of the Departments and Units of FIRS to deliver their mandates on a long term and sustainable basis. In line with this, the Board approved a new structure for the Service on 17^th January, 2020. The new Organogram is composed ofsixGroups and 32 Departments including the Internal Affairs Department that reports directly to the Executive Chairman.

Taxpayer Segmentation has been re-introduced. The Audit and Investigation departments were also reviewed for effectiveness.

The Annual Corporate Plan Retreat was reintroduced and it held between 7^th and 8^th February, 2020 with the theme “Repositioning FIRS for Efficient Service Delivery.” The 2020 Corporate Plan was approved by the Executive Chairman, FIRS and exposed to the staff at the headquarters.

The Intelligence, Strategic Data Mining & Analysis Department (ISDMA) was established to deploy technological tools analyze tax data and distil for improved assessment of taxpayers.

The Tax Incentive Management Department (TIMD) was also established to manage, implement and report on tax incentives as provided by relevant extant laws and regulations. This department is specifically in charge of the tax affairs of companies/ enterprises enjoying tax exemptions and holidays. Companies enjouying pioneer incentives, NGOs, Cooperative Societies, companies in Export Processing Zones, Free Trade Zones, Oil and Gas Export Processing Zones, those engaged in Downstream Gas Utilization and all others enjoying tax holidays are being managed by this department to forestall revenue leakages, such that companies, enterprises do not use their statuses as a cover to earn taxable income and refuse to pay tax on those income.

The National Tax Week:

The FIRS hosted the first ever National Tax Dialogue in January 2020. The event brought together leaders, institutional stakeholders and tax experts from across the world to discuss matters relating to improving taxation especially in Nigeria. Attendees included President Muhammadu Buhari, AFdB President, Dr. Akinwunmi Adesina, Executive Governor of Ekiti State, Dr. Kayode Fayemi, Executive Secretary of the African Tax Administration Forum, Mr Logan Wort, among others.

The Executive Chairman has approved that a week at the beginning of every year be set aside as the National Tax Week, to host events on tax education awareness, discuss contemporary tax matters, and proffer solutions to fiscal challenges.

On Collaboration with the Stakeholders:

The objective in this regard is to foster cooperation and collaboration between FIRS and key stakeholders in the Nigerian Tax System to provide a unified view of our plans to eliminate critical bottlenecks which hitherto impede efficient tax administration. Some of the stakeholders include:

Federal Ministry of Finance

The collaboration with the Federal Ministry of Finance on the recovery of tax debt from contractors or tax debtors that were uploaded on the FMF (GIFMIS platform) has yielded recoveries of over N500 million.

Corporate Affairs Commission

Through inter-agency collaboration, the Corporate Affairs Commission has provided integration to the Service on its information system for data reporting via the Application Programme Interface. This enables the FIRS to track and bring new corporate taxpayers into the tax net; generate taxpayer-identification number for new taxpayers at the point of incorporation, issue a certificate of incorporation and improve efficiency in the administration of stamp duties. 

Security Agencies         

The Service, through collaboration with the Economic and Financial Crimes Commission; the Department of State Security Services and the Nigeria Police Force established a joint task team known as the Special Crimes Division. The Division is responsible for intelligence gathering, joint investigation and enforcement activities relating to tax evasion and tax fraud.

In addition to these collaborative engagements, the new FIRS Board through the Technical Committee of the Board set up a Committee and tasked it with the following terms of reference:

• Review all existing memorandums of understanding between the Service and its stakeholders,

• Prepare new MOUs for consideration, and

• Recommend other agencies/stakeholders the Service may enter into a MOU with to deepen stakeholder collaboration.

The key objective for stakeholder collaboration is information and intelligence sharing to enhance effective and efficient tax administration. The MOUs are intended to provide the framework, scope and obligations for such collaboration.

MDAs

The Service continued to engage with and sensitise many functionaries of Federal & State Government MDAs in a bid to make them more aware of their tax obligations and ensure improved tax compliance.

On Building a Customer-centric Institution:

Making FIRS “customer-centric” entails building an institution that is viable for ease of doing business by focusing on efficient service and providing a positive customer experience on all tax compliant processes.

In line with this, the following measures were put in place for the period being reviewed:

• Taxpayers facing challenges in sourcing for FOREX to offset their liabilities are given the option of paying in Naira at the prevailing Investors & Exporters (I & E) FOREX window rate on the day of payment.

• Palliative measures to remove penalty and interest on the following category of debts.

• Self-Assessment filing.

• Tax Audit, Tax Investigation and Desk review assessments.

• Approved instalment payment plans under VAIDS.
• Extension of VAT returns filing to the last working day of the month.
• Extension of CIT returns filing by one month.
• Filling of returns with the possibility of delayed delivery of audited accounts component till 2 months after revised filling date.
• Enhancement of the capabilities of various e-platforms for tax returns filing, tax payments, receipting and application for Tax Clearance Certificates.

The period for filing personal Income tax annual returns (Military, Police, Foreign Service officials etc.) extended to 30^th June 2020.

The e-filing process has been made much simpler, user friendly and robust for the taxpayer to take advantage of instead of visiting tax offices, taxpayers have been provided with a dedicated email address to submit documents online.

The late returns penalty (LRP) has been waived for taxpayers that pay early and file later. Supporting documents can also be emailed to the dedicated email address or submitted later to the tax office, for those who are not able to use the email facility.

On Building a Data-Centric Institution

Reliable data is indispensable in modern tax administration. The various modernisation projects embarked upon by the new Management are aimed at either improving the integrity of available data or generating data for informed decision making. As part of the new Management’s drive to make the Service a data-centric institution, the following strategies have been initiated:

Technological Reforms

The TaxProMax was developed and deployed. It is an in-house Tax Administration Solution, which covers the major processes of a tax administration system (Registration, Filing, Payment and Reporting) by the extant tax laws and IMF Tax Administration Diagnostic Assessment Tool (TADAT) standards. This solution became operational on 1st June 2020 and is in use in all FIRS tax offices.

MoU between FIRS and NIBSS on funds sweeping and settlement of all FIRS taxes to Federation Account at CBN is operational.

‘My Bank Statement’ application has been developed for the transmission of customers’ transactions.

FIRS has developed a portal for Deposit Money Banks (DMBs) to provide information of corporate customers transactions above ₦10 million and individuals above ₦5 million.

On the 6^th of October 2021, the FIRS under Muhammad Nami was awarded the International Standard Organization (ISO) 27001:2013 certification. This affirms that the Services’ network is secure, the data processes and data it possesses are secure as well as the taxpayer information it holds and receives within Nigeria and across the world.

Tax Administration Challenges

The conduct of field tax audit and physical reconciliation of tax audit cases posed a serious challenge due to Covid-19.

Security challenges experienced in some parts of the country has slowed business activities thereby impacting negatively revenue collection.

Inadequate data from 3rd parties on non-compliant or unregistered taxpayers.

Tax evasion and tax avoidance.

A Sneak Peek into2011 – 2020 Collection Trends

The Service hadconsistently struggled to exceed the N5 trillion collection brick wall since 2012 when that barrier was first broken. Despite the best efforts of successive Management, collection per officer continued to fall.The table below provides a picture of FIRS’ performance from 2011 to 2020:

Year	Collection Target (N’Billion)	Actual Collection (N’Billion)	% Target Achieved	Staff Strength	Collection Per Employee (N)
2011	3,639	4,629	127%	6,445	718,231,187
2012	3,635	5,007	138%	8,265	605,807,623
2013	4,469	4,806	108%	7,085	678,334,510
2014	4,086	4,715	115%	6,624	711,805,556
2015	4,572	3,742	82%	7,182	521,024,784
2016	4,907	3,304	67%	7,182	460,038,986
2017	4,890	4,047	83%	6,589	614,205,494
2018	6,747	5,320	79%	9,388	566,680,869
2019	8,802	5,008	57%	9,448	530,059,272
2020	5,077	4,952	98%	11,000	450,181,3818

The various strategies introduced by successive Managements for sustained revenue growth were to no avail.  A careful study of the tax environment shows that the way business is conducted has changed drastically over the years.  The traditional “brick and mortar” business model has given way to online digital models.  As such, tax administrative strategies that were built on manual processes continued to fail because under the law, the tax authority can only tax taxpayers and transactions that are physically located in its jurisdiction.  Online transactions are beyond what physical eyes can see for taxation thereby resulting in the tax revenue leakages occurring in Nigeria.

Remember the saying, “it is impossible to continue to do the same thing, in the same manner, all the timeand expect a different result”.

Consequently, to track all physically invisible taxpayers and transactions, Management deployed the TaxProMax for tax administration beginning from June 2021.

Automating FIRS for Operational Efficiency

The FIRSEA, in section 25, provided for the deployment of technology in the tax administration processes.  Consequently, the President, Commander-in-Chief of the Armed Forces of Nigeria, directed all government MDAs and businesses to grant FIRS access to their data systems for a seamless connection.

In compliance with the law and the presidential directive, Management deployed the TaxProMax Solution and established the Intelligence, Strategic Data Mining and Analysis Department. While the TaxProMax will serve as the flagship tool for mining data, it will be complemented by other tools that the ISDM department may deploy and the data engineers in ISDMA shall carry out necessary distillations.

Management is very grateful for the feedback received from stakeholders so far on the TaxProMax – many were very complimentary while a few others were critical.  In response, Management directed an upgrade to the Solution’s functionality while the timeline for CIT returns filing due on 30^th June 2021 was extended to 31^st July 2021.  It is heart-warming to report that the combined effect of both measures assisted the Service to achieve the collection feat of June 2021.

Contrary to the very gloomy picture being painted by a few pessimists, the TaxProMax has performed excellently.  Its performance surpassed expectations when compared with the performance of previous systems that cost FIRS billions of naira.  Every officer of the Service must be proud that the TaxProMaxwas wholly developed in-house by FIRS personnel.

Below is the summary of TaxProxMax’s performance as of 30^th June 2021:

E-Registration	195,986
e-Tax Receipts:
e-Receipts (Local)	431,120
e-Receipts (Foreign)	3
e-Credit Notes (Local)	408,227
e-Credit Notes (Foreign)	8,341
e-TCC Issued	58,881

The above statistics are exclusive of the June 2021 collection of CIT and Education Tax paid via the TaxProMax Solution.

June 2021 Performance

The collection performance for June 2021, contrary to what the Economists and pessimistssaid,surpassed that of June 2020.  The Service collected over N650 billion in June 2021 as against N526.6 billion collected in the same month the previous year. This represents a 20% increase in collection over the 2020 figure.

The performance for 2021 is significant considering that the full effect of the over 5-month lockdown of 2020 became fully manifest in 2021 YOA.  Despite this phenomenon, the Service out-performed June 2020 (which was based on 2019 accounts – a year that experienced no lockdown) by 58.9% after adjusting for the one-off payment of N90 billion by an E&P company and NCS VAT collection, usually in the range of N40 billion.

On Participation in International Tax Engagements

Nami’s leadership of the FIRS has also launched Nigeria and the FIRS to international tax spectacle. For the first time in history, Nigeria heads the Commonwealth Association of Tax Administrators (CATA). Nami was unanimously elected President by the 47-member country organisation on November 12, 2021 during the organisation’s General Assembly which held virtually. Nami becomes the 15th President of CATA and first Nigerian to be so elected and will occupy the office for a three-year tenure.

Nami has had an inaugural meeting as the CATA President in the United Kingdom. He is taking Nigeria’s ideals on tax administration including digitalisation, tax legislative reforms and his reputation on accountability and focus to the international scene.He further promised that as President of CATA he will mobilise member countries and other tax bodies to build capacity of tax administrators to tackle the challenges they face.

“One goal I hope to achieve as your President is to work hand-in-hand with member countries to expand the character of tax administration such that our work is in tune with today’s innovation and realities,” he stated.

In September, 2021 Nigeria hosted the 17th General Assembly and 10th Anniversary of the West African Tax Administration Forum (WATAF). The theme for the 2021 General Assembly of WATAF, was “The Taxation of the Digital Economy: Exploring Untapped Revenue Sources in Africa”.The General Assembly is the highest decision-making body of WATAF and consists of all heads of tax administrations of the fifteen member states. The FIRS graciously accommodates the office of Executive Secretary of WATAF which its staff, Babatunde Oladapo, is the Executive Secretary.

Nigeria is actively involved in other international tax engagements such as the African Tax Administration Forum (ATAF), Organisation for Economic Cooperation and Development (OECD) among others.

Resolution of the Squabble Among Tax Bodies in Nigeria

Over the years, precisely since 2004, some professional bodies in taxation and economy remained at loggerheads over areas of influence. This squabble took its toll on the economy because where there is no peace and unity, there is no progress. In May, 2021, Nami, a pragmatic administrator who has the progress of these bodies at heart put a machinery in motion which finally resolved the issue. The professional bodies are the Institute of Chartered Accountants of Nigeria (ICAN), the Chartered Institute of Taxation of Nigeria (CITN) and the Association of National Accountants of Nigeria (ANAN).

He said: “following the disagreement and various court disputes since 2004 to date, between ICAN, ANAN and CITN on issue of Tax practice, it became necessary that FIRS under my leadership should intervene by inviting the three sister professional bodies for amicable resolution.” The FIRS facilitated signing of a memorandum of association which was meant to provide an atmosphere in which the bodies could operate seamlessly “to support what FIRS does and also contribute to the improvement of the Country’s position on the ease of doing business index”.

That was the very first time, ICAN, CITN and ANAN came together on one platform to affix their respective hands and seals to a document and affirmed their commitment to the growth and development of tax administration, compliance and practice in Nigeria.

Conclusion

Total revenue remitted to various FIRS accounts with CBN at the end of the year 2020 stood at N4.95trillion. This amount shows a slight shortfall compared to the revenue target for the year, which was N5.07 trillion. This was because of the general economic depression, volatile exchange rates, prevailing global economic crises occasioned by the COVID-19 pandemic and poor tax culture among the populace.

As at 30^th November 2021, the Service had collected over 5.03 trillion Naira, being 85% of the national tax target. It projects to meet and even overshoot its target by 31st December 2021.