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Issues in tax management
Tax administration in Nigeria cuts across the three-tiers of government. An effective tax policy document should, therefore, be one that establishes clear guidelines on crucial tax administration issues.
In the context of the Nigerian Tax Policy, the salient issues in tax administration include the following:
Intelligence and information gathering
As a first step in the tax administration process, tax authorities require adequate and correct information to carry out their duties of assessment and collection of taxes. Ideally, such information should be provided voluntarily by taxpayers.
However, this is not always the case and in a large number of instances, tax authorities have to source for and obtain information other than voluntarily from the taxpayer. In addition, even in instances, where taxpayers voluntarily provide information, such information, may either not be complete or accurate.
It is in this respect, that authorities would be required to develop workable and secure structures for intelligence and information gathering. Such structures shall compliment the normal administrative structures in place for obtaining information from taxpayers.
The tax authorities would, therefore, be required to develop internal competencies for such purposes and also partner with relevant government organs, such as the various law enforcement agencies, data gathering agencies and other agencies which have custody or access to information relevant to the activities of tax authorities.
In addition to the above, there will be close collaboration with these agencies to facilitate information gathering and in this regard, tax authorities shall consider short and long term measures, such as secondment of personnel, human capacity development programmes (training and provision of tools), proper use of information technology and creation of permanent inter-agency structures, towards realising these objectives.
Reliance shall also be placed on the introduction and use of the unique taxpayer identification number to facilitate easier identification and monitoring of taxpayers. Taxpayers shall be properly educated on the intelligence and information gathering methods of the tax authorities and all actions carried out by the tax authorities in this regard shall be done in line with statutory and constitutional provisions, which safeguard the right to privacy of taxpayers.
This is without prejudice to the rights of tax authorities (in appropriate cases), to use the instrumentality of the law to ensure full and complete access to information and data required for the effective and efficient administration of taxes in Nigeria.
Registration of taxable persons
In order to have an effective tax system in which all tax payers are covered, every taxable person (which includes companies, enterprises, partnerships and other business entities) must be registered for tax purposes. Registration is a fundamental step in the tax administration process and tax authorities at federal and state levels shall be required to register all taxpayers and issue a unique Tax Identification Number (TIN) along prescribed and standard formats, upon registration by taxpayers.
No taxpayer should have more than one TIN irrespective of place of registration. In addition, every TIN shall be unique to a taxpayer.
The TIN will provide a uniform mode of identification for all taxpayers in Nigeria. Government at all levels are, therefore, enjoined to support the introduction of a uniform system of registration and allocation of TIN and the creation of a database accessible to all tax authorities (and other federal, state and local government agencies) in the country.
This will provide easy and complete access to taxpayer information nationwide, which can be achieved by the efficient use of information communication technology and ultimately reduce the cost of administration and supervision while enhancing higher compliance.
The relevant tax authorities and the Joint Tax Board should ensure the successful administration/operation of the TIN programme.
Filing and returns processing
Filing and returns processing is a core process in the tax administration system. It encompasses all the processes commencing from preparation of returns and filing of self assessment by the taxpayer, to the issuance of assessments by the tax authority and the acceptance of returns filed by the taxpayer.
It also includes the review and amendment of tax returns by taxpayers and tax authorities, examination of accounts and the determination of the tax liability of the taxpayer. The process terminates where a final liability has been agreed between the tax authority and the taxpayer and only payment is outstanding.
Given that payment of tax is based on either self assessment or assessments issued by the tax authority, it is necessary that tax authorities accord, this particular function priority. In this regard, taxpayers shall be encouraged to file returns on a self assessment basis in compliance with tax laws, as it saves significant time and resources required by tax authorities in ensuring compliance by taxpayers.
This can be done, by developing structures that will enhance and simplify compliance, such as the creation of a reliable tax payer data base, electronic compliance system, automation and standardisation of the filing and returns process and regular publication of tax compliance manuals. Tax authorities shall also carry out widespread and regular tax payer enlightenment on the filing and returns process.Share