The Lagos State Internal Revenue Service (LIRS) is striving to achieve full tax compliance among businesses, leveraging technology and simplified processes to ease the burden on taxpayers. With a deadline of January 31, 2025, for filing annual tax returns for the 2024 tax year, the LIRS is reporting encouraging progress, with approximately 80% of the 40,000 active PAYE (Pay As You Earn) operators already compliant. The focus is not merely on collecting penalties for non-compliance, which are relatively modest (N500,000 for corporate entities and N50,000 for individuals), but on fostering a culture of responsibility and transparency among businesses. Filing tax returns is presented as a civic duty and a necessary process for maintaining a positive business image and demonstrating good governance.
The filing process itself is straightforward, requiring employers to submit a report detailing their employees’ salaries, deducted taxes, and any applicable reliefs or allowances. This report functions as a record of the employer’s role as an agent collecting taxes on behalf of the government. It enables the LIRS to verify the accuracy of the deductions and ensure that employees receive the correct tax benefits. This process also extends to other payments made by businesses, such as fees to consultants, lawyers, and auditors, which are subject to withholding tax. The submitted information is then cross-referenced with the individual tax returns filed by employees by March 31st, ensuring consistency and accuracy across the system.
The LIRS emphasizes the simplicity of the tax system and the availability of user-friendly online platforms to facilitate compliance. The e-tax platform provides a comprehensive suite of tools for registration, filing, and interaction with the LIRS. The use of unique identification numbers, such as the NIN (National Identification Number), streamlines the process and enhances transparency. Furthermore, the LIRS offers multiple channels for support, including a chatbot, social media platforms, telephone helplines, and dedicated help desks at their physical offices. These resources are designed to address any challenges taxpayers may encounter and minimize the cost of compliance.
Common errors encountered during filing often stem from incomplete employee records, hindering the LIRS’s ability to process information accurately and ensure that employees receive their due benefits. The LIRS stresses the importance of providing comprehensive data for each employee, recognizing their role as the primary taxpayer. Regarding exemptions, the focus is on promoting the use of Tax Identification Numbers (TINs). Under new regulations, businesses without a valid TIN face double withholding tax rates, incentivizing their acquisition. The TIN is gradually becoming a mandatory requirement for various financial transactions in Nigeria, further strengthening tax compliance.
The LIRS clarifies the distinction between the TIN and the legacy Taxpayer ID, explaining the transition towards a unified national identification system. The TIN, issued by the Joint Tax Board (JTB), is now the primary identification number for all taxpayers in Nigeria and is recognized internationally. While the Taxpayer ID, specific to Lagos State, remains functional in the background, the TIN takes precedence. This transition mirrors previous shifts in identification systems, such as the move to 10-digit bank account numbers, where older numbers still exist but are superseded by the newer format. Obtaining a TIN is straightforward through the e-tax platform, using the NIN for validation.
Addressing concerns about financial inclusion, the LIRS reiterates that withholding tax is not a new concept and that taxpayers are already subject to it, regardless of whether they provide their TIN. The requirement to provide a TIN merely enhances transparency and allows taxpayers to track their tax contributions. The LIRS advocates for greater financial literacy, encouraging taxpayers to view tax payments as a mark of citizenship and a contribution to the nation’s development. Individuals are encouraged to file their tax returns as soon as they have the necessary information, even before the March deadline. The LIRS is committed to providing extensive support to taxpayers, acknowledging that not everyone is tech-savvy. They offer a range of assistance channels, from chatbots and phone lines to dedicated help desks at their offices, all free of charge. The LIRS maintains a strict policy against any form of extortion by its staff, emphasizing dismissal as the consequence for demanding bribes from taxpayers.
