States Mull Digital Tax Technology As Revenue Shortfalls Hit 40%

Heads of Inland Revenue Service (IRS) of the 36 states of the federation on Monday gathered in the Federal Capital Territory (FCT), Abuja, to consider ways of adapting new technology and Innovations available to improve revenue collection in their various states.

The new development is prompted by the findings by the Nigerian Governors’ Forum (NGF) that tax collected from contact-intensive taxes fell by an average of 40 per cent across all states in Nigeria during the period of the lockdown.

The Secretariat of the Forum organized a programme tagged: NGF’s Technology and Tax event to help facilitate the scale up of modern, taxpayer-friendly, and technology-driven revenue administrations in all States of the federation that will be capable of providing world-class services; characterized by efficient, paperless operations, and equipped with ICT-enabled risk-based enforcement capable of optimising their revenue mobilization strategies.

Director General of the Nigerian Governors’ Forum Secretariat, Asishana Bayo Okauru hinted that the figure was the outcome of research conducted by the Secretariat last year.

He said the result was a big lesson which exposed the criticality of internet-based business support systems and payment platforms for the automation of all back-end operational processes and payments across all revenue streams.

Okauru also noted that the lessons learnt from the research showed that most contact-intensive taxes are at risk, adding that all revenue administrations need to move to a digital future.

“Lessons of the COVID-19 pandemic have pointed to one direction – that all revenue administrations need to move to a digital future.

“Specifically for tax authorities, one big lesson that we have learnt is the criticality of internet-based business support systems and payment platforms for the automation of all back-end operational processes and payments across all revenue streams.

“From our research last year, we already know that most contact-intensive taxes are at risk, given the lessons we learnt during the period of the lockdown where taxes collected from contact-intensive taxes fell by an average of 40 per cent across all States in Nigeria.

“Coupled with a weak environment for tax policy and tax legitimacy, low technological integration in tax administration has undermined efforts to mobilise domestic revenues in the country.

“This has undermined the capacity of tax authorities to collect taxes efficiently and the ability of taxpayers to meet their tax responsibilities conveniently” he said.

Also speaking, Mohammad Nami, the Chairman, Federal Inland Revenue Service (FIRS), stressed the need to look inwards on how to improve the revenue of the states to augment the shortfall of allocations from the Federation Account, insisted that taxation all over the world has always been the most reliable and sustainable source of government revenue if well harnessed and effectively administered.

Nami regretted that the reliance on oil revenue in the previous years has exposed the country to huge revenue challenges and resulted in poor budget implementation across the three tiers of government.

The FIRS boss noted that proffering solution for the nagging revenue challenges requires a deliberate strategic action plan.

“For us as a mono-product economy, the reliance on oil revenue in the previous years has exposed our dear country to huge revenue challenges and resulted in poor budget implementation across the three tiers.

Therefore, proffering solution to these nagging revenue challenges requires a deliberate strategic action plan hence the need and justification for today’s event.

“Taxation, in most advanced jurisdictions, has gone beyond the bricks-and-mortar model but relies more on data and intelligence which are driven by technology.

“The adoption of technology in revenue administration processes is crucial and a major enabler for enhanced and sustainable revenue generation in a globalized and knowledge-driven world. Therefore, revenue authorities at all levels must adopt automated processes and embrace e-solutions both in their internal operations and in dealing with the taxpayers within their respective jurisdictions.

“The need to embrace technology in tax administration was the basis for the choice of our theme, ‘Leveraging on technology solution for enhanced administration of indirect taxes, at the 145th Joint Tax Board Meeting.

The JTB meeting harped on the need to further broaden and increase revenue generation at all levels by leveraging on ICT and that the adoption of technology will optimize and harness the various taxes and plug revenue leakages.

The FIRS as the country’s leading tax institution has taken some steps at automating its processes from e-registration, e-filing, e-payment, e-receipt, e-collection and e-TCC, to ensure that it improve on its collections. It also recently launched its proprietary e-solution platform. TaxPro Max, a solution developed by the Service for effective and integrated e-tax administration.

There is also the ongoing automation and real-time VAT collection and reporting system in addition to leveraging on technology in enhancing the exchange of information with taxpayers as provided in the Finance Act 2020, according to Nami.

Representative of the World Bank at the programme, Shubham Chaudhuri, said the road to technology adoption by tax administration is critical.

According to Chaudhuri, COVID-19 exposed the fact that digital systems is very important for effective tax administration and compliance

“What COVID-19 has shown us is that the compliance of digital systems is important.

“The road to technology adoption by tax administration is critical. A tax administration in the 21st century should use the new wave of technology to radically transform the tax services.

“The e-Services have to be expanded. There needs to be a widespread use of the e-platform. This means that digital by default, nothing but digital compliance.

“This means a high-quality experience for tax payers with e-assessment, algorithm based and user-centric design,” Chaudhuri said.

Also lending his voice, Fabrizio Santoro, who is from the International Centre for Tax and Development, said tech solutions were not going to yield results unless we get the basics right.

He said: “Tech solutions won’t work until we get the basics right. This means that we have multiple systems running in parallel, operating in silos and producing multiple data sets.

“We believe that peace metal technologies like e-Filling can help to improve tax compliance.

“Tech solutions can increase compliance costs for taxpayers but taxpayers can make mistakes if they don’t use the technology properly and mistakes are easy to make and hard to rectify.”