Companies and individuals who do not currently have taxpayer identification numbers in Nigeria can now make payments without being registered.
According to the Federal Inland Revenue Service (FIRS) for Company Income Tax and Value Added Tax payments, this is a new move to simplify tax compliance in the country.
In a media briefing in August, then FIRS chairman Sunday Ogungbesan said there were more than 440,000 companies in Africa’s biggest economy of which only about 120,000 paid taxes.
“I think it’s good in the sense that it will help government to collect more money because what we have seen is the number of taxpayers who want to pay are unable to pay because of certain difficulties,” said Taiwo Akindele, Partner, Tax & Corporate Advisory at PwC.
Such as not having a tax identification number or VAT registration, he says.
“It doesn’t make sense for a country that is trying to raise its revenue profile to make it impossible for some people to pay taxes,” said Akindele.
However, he considers the challenges, with no tax numbers he feels tracking how much is paid into their accounts will be difficult.
“I’m not sure that this step is going to simplify the taxes there, it’s more or less something to help government collect more money,” he said.
“That’s going to create some reconciliation issues and some people will then pay taxes and not be able to get tax clearance certificates to do their business and that has a way of even discouraging other people to come into the tax net,” Akindele said.
His suggestion is to use their existing tax registration system to solve that issue.
“If somebody walks up to a bank, it means its someone who is willing to comply, if you make it possible for banks to be able to validate already whether they have a number with the tax authorities.”
“If you don’t have it, then it should be possible for the banks to get a ready registration for you, so that before you even pay the taxes, we create a record for you, you pay the tax, and you can then go to the tax authority to regularise it.”