The Head of the Information Technology Directorate at the Lagos State Internal Revenue Service, Mr Rasheed Olu-Ajayi, speaks with Oluwakemi Abimbola on how the agency is leveraging technology to boost revenue collection as well as the deadline for the filing of annual tax returns
It has been generally agreed that the Federal Government and states need to raise more tax revenue to fund infrastructure growth, what is LIRS doing about this?
LIRS has always been meeting its revenue targets as set by the state government. The truth of the matter is every year; we work on strategies on how to achieve the given target. Just this last fiscal year, we met over 90 per cent of our revenue target, which is record-breaking because we have never achieved that in the history of LIRS. All that obviously depends on the automation of our processes with the support from the state government, executive chairman of LIRS, the directors and every member of staff in the agency. In terms of what the agency is doing to help government fund infrastructure, our purpose here is obviously to collect taxes and the taxes we collect go straight to state government coffers.
In what ways has LIRS used technology to increase tax revenue over time?
The agency is one that is very tech savvy. We are one of the outstanding agencies of government in the state that has leveraged technology. You hardly see any process in this agency that has not been digitised or automated. We are collecting tax-payers’ money and by doing that, we need to ensure that there is good accountability, transparency, seamlessness in our processes. That is how we have leveraged technology to remove the leakages within our processes. Even when we have audit every year, people commend us for having good ICT infrastructure in the state. It speaks for itself. Every member of staff here is equipped. We leverage technology.
How is LIRS training its officers to handle tax dealings at the grassroots levels?
For starters, there isn’t anybody who works at the agency here who isn’t a graduate. If they have gone through the four walls of the university, you can be sure that they are tech savvy, all that is required is training on how to use the technology provided by the agency. You can’t fall short of that. Within our informal sector for instance, this is, the sector that deals with artisans, market men and women, we have an application that interacts with them at that level, which is on a smartphone called IBILE Hub, coined from the acronym for Lagos State. With that we are able to collect taxes on a smartphone from artisans and traders in all the markets in Lagos State.
Many states are still battling to raise their tax revenue but Lagos appears to be ahead. What do you think many states are not getting right in this?
The variations in tax revenue among states can be attributed to a combination of factors. Lagos may be ahead due to effective tax administration, robust economic activities, and strategic fiscal policies. In contrast, other states may face challenges such as inefficient tax collection systems, a less diverse economic base, or difficulties in enforcing compliance. Analysing the specific dynamics within each state, addressing structural issues, and implementing transparent, business-friendly tax policies could contribute to enhancing tax revenue in states facing challenges. At LIRS, we get to receive other states revenue generating agencies. They come here to understudy our processes. Recently, we had the Gambian revenue authority which came to Nigeria to understudy our processes at LIRS. It means we are doing something right. For us to have attained over 90 per cent of our revenue target means that there is something that we are doing right and we want to keep doing it and ensure that we generate the best revenue for the state government.
What is annual tax returns?
It is a statutory filing of returns by corporate entities and individuals. It is usually on a preceding year basis. Annual returns made to the LIRS are meant to allow employers of labour file the deductions that they have made from their employees in the previous year of assessment. In January of every year, every corporate entity within Lagos State is expected to file such tax returns as stipulated in Section 81 of the Personal Income Tax (Amendment) Act 2011.
You have moved from manual filing to e-filing, what impact has that had on your processes?
It has had a lot of impact on our processes. Before now, the agency used to meet its revenue target to about 70 to 80 per cent but since the emergence of the technology that we have adopted, we have tipped the scale a little bit higher than that. So, it has had a significant impact. That couldn’t have been done without the support of the state government particularly under the administration of Mr. Babajide Sanwo-Olu and Mr. Ayo Subair- the Executive Chairman, who steers the ship at the LIRS with all the directors and more importantly with all the staff as well who have been working tirelessly to ensure that we meet our revenue targets.
What is the difference between employer’s annual filing and an individual’s annual filing?
Both filings are statutory. For corporate entities, it means employers of labour would have to file returns on behalf of their employees for the preceding year, say for the year 2023, they would be filing in January 2024,and for individuals, it means that they have the tax responsibility to file for themselves. We have observed that some individuals (employees) have this perception that once their employers have filed returns, they don’t need to file returns. I must state categorically that this is a statutory requirement that every corporate entity and individual must have filed their annual tax returns by January 31st and March 31st respectively.
What is the deadline for filing annual tax returns?
The deadline is January 31 every year for corporate entities, which starts on January 1; while the deadline is March 31 every year for individuals.
What are the consequences that a person or entity can face if they fail to file or do so after the deadline?
Again, because it is a provision of the law, it means that if there are defaults there are penalties. Section 81(3) of the Personal Income Tax (Amendment) Act 2011 clearly states that any employer of labour who fails to file their returns shall be liable on conviction to a penalty.
Kindly clarify the ways tax returns are filed?
There are two ways that individuals and corporate entities have to file. I will start with the corporate entities. For them, they first of all need to be able to log into their portal. The portal is once they get on there, they will need their Payer ID to log in and a corresponding password. Once they are able to get into the portal, there is a returns module at the left side of the panel, once they click on returns modules, they find four templates in there. The first template is annual returns, the second one is payment schedule, the third one is projections and then you have withholding taxes templates. Once, they download those templates, they will populate it with their data and upload same back into the portal. It is about three or four steps that are required. Once they have been able to do that, they would have completed their filings. For individuals, they would also need to login with their Payer ID and a corresponding password. Again, once they login, they will find individual returns module on the left hand side under the returns stamp. Once they fill that in, they will fill in their personal information, their statement of income, the statutory deductions, the reliefs and if they have other staffs and assets. Presumably, it is about five steps. Once, they are done, they will get a notification that they have done their filing and that brings them to the end of the tax returns filing.
How well have companies and individuals been embracing the e-Tax filing system?
I would say they have been embracing it in a significant way. On a yearly basis, we have observed an increase in the number of people who are filing tax returns. It has also increased tax compliance in Lagos State as well. Before now, our agency would usually go around and check if every individual has filed their returns, now at the touch of a button from the system, we can know if company A has filed their returns or if they haven’t. It gives us that benefit.
What are the common mistakes observed for those filing their tax returns for the first time?
Sometimes, when taxpayers or tax consultants download the templates for the purpose of uploading their returns, you find in some cases that the template has been adjusted. When they adjust the templates, sometimes, it gives a wrong figure or true reflection of the tax deductions. They may have added extra lines. It gives false value and at the point where we are doing assessment and doing the tax deductions, then you now find that Company X may have been asked to pay additional money which they are not entitled to and that is because they have altered the templates before uploading same back into the system. In other quarters, some would assume that they know the requirements and rather than use our own templates, they use their own templates and obviously, that causes distortions.
Before the introduction of the e-Tax filing, what was the process like?
The tax filing process before now was very monotonous and you find people have to go to different tax stations, and this brings about a lot of congestions at our offices. It was totally against the principles of taxation which has to do with convenience. This was why we thought that we needed to digitise this process of filing annual tax returns and other tax dealings. We needed to automate this to bring the principle of convenience, the principle of ease, flexibility to people so as to enable them file their taxes from the comfort of their offices or home. It has really been good since that time. It has made compliance very good for us at the agency.
You have integrated third party payment components in the process. How has that worked out?
It has been okay. These are standard infrastructure which has been incorporated into e-Tax filing. We needed to ensure that we made e-Tax simple for everyone. There are multiple channels on the platform, so individuals have the benefit to select whatever payment method that they want to adopt and that has really helped us a lot. At the end of the day, reconciliations are done and payment go to the right channels. It’s seamless.
What is tax Payer ID and how do you get it?
Tax Payer identification number is the unique number that is assigned to every individual or corporate entity registered on the e-Tax platform. It is a unique way of identifying taxable persons. Just as your BVN is different from that of your husband or children, so is the tax Payer ID which is unique to each individual. For entities, we usually denote it with a ‘C-’ for corporate entities and whichever Payer ID that you see that has ‘N-’ is for individuals on the system. You get a Payer ID upon registration for e-Tax. For corporate entities, you need an RC number, which is one of the requirements that you need to get a Corporate ID. For individuals, the requirements include a Bank Verification Number(BVN) or a National Identification Number (NIN) with a corresponding date of birth.
What can be done in a situation where an individual has multiple Payer IDs?
In time past, we had instances where individuals would have more than one Payer ID. This may come about when some individual ask a third party to do their tax transactions. They may want to make payments for Land Use Charge or Physical Planning Permit, at that point in time, a teller may arbitrarily create a tax Payer ID to go with the payment. With the emergence of e-Tax, that has been brought down to zero because you cannotactually have more than one tax ID in the system.
Is there a special court for handling tax defaulter cases?
There is no special court. The judicial process goes through the State High Court, Magistrate court or Tax Appeal Tribunal.
What are your thoughts on the prescribed sanctions for default in filing tax returns?
You see the challenge we have in Nigeria is that some of our laws are outdated. When this law was made and it was amended in 2011, the penalty was still a lot of money. So, if you fine someone then, they would scream and blow the roof down. Right now, it is archaic and nobody has done anything about it. The sanction is what the law says, we have to act within the ambit of the law. The law cannot say charge N500,000 and we charge N1m. That is also against the law. We must be seen to be acting within the ambit of the law.
There are companies who don’t remit tax deducted, what are your thoughts on this?
What we advocate for is to do enough tax sensitisation and advocacy. When an employer is deducting tax from an employee and it is not remitting it, it is not only cheating the government, it is also cheating that individual. If you are not going to remit the taxes, you may as well leave it for the individual but you are deducting taxes on the grounds that you want to remit same to government but you are not. Such individuals should blow the whistle on their employer. It is their hard earned money. In some instances, we see such individuals might need to get a service from the government; enroll their wards in school and they are requesting for tax clearance and these individuals would not have one because their employer did not remit. Again there are instances where you might be a traffic offender with the LASTMA and they want to see your tax clearance that you’re a good citizen perhaps to set you free. So, it is disenfranchising in many ways when employers deduct those taxes and don’t pay. Similarly, once you have registered on e-Tax, on a monthly basis, you should get an SMS when your taxes get paid by your employer. If people who are registered aren’t getting that notification, then they should blow a whistle.
For first timer wanting to file their taxes, are there resources or support services available to help them navigate the process?
The e-Tax application itself is quite simple to use. Anyone who can operate a smartphone can use the e-Tax platform. You only need to be able to navigate to the portal, there are only a few tabs on there. But if they have challenges, we have social media handles that are responsive. You can use the chat tab on our website and our people are always responsive. Even on weekends, you will find someone to attend to you. Around our tax stations as well, we have the people that we call ‘Subject Matter Experts,’ this is a separate desk that is assigned at our tax stations and people can walk in there and be helped with filing theirtax returns.
Following the submission of the company’s annual tax returns by employers, are there any additional statutory obligations for the employees within their organisations?
Nothing; aside from the employees having to file their own tax returns as well and be sure that the companies are actually remitting their taxes.