FIRS Pledges to Raise Tax-to-GDP Ratio, Improve Tax Compliance with e-Invoice system

FIRS Pledges to Raise Tax-to-GDP Ratio, Improve Tax Compliance with e-Invoice system

CHIGOZIE  AMADI

The Federal Inland Revenue Service (FIRS), yesterday said it was determined to drive Nigeria’s tax-to-Gross Domestic Product (GDP) ratio by improving tax compliance, enhancing transparency, and curbing revenue losses with its e-Invoice system.

The e-Invoice system, known as the Merchant Buyer Solution (MBS) was designed to replace traditional paper-based invoicing with a digital framework that facilitates real-time validation and storage of transactions.

It covers business-to-business (B2B), business-to-consumer (B2C) and business-to-government (B2G) transactions.

The platform will unify transaction data, providing insights into supply chains, purchasing trends and financial data to support data-driven fiscal and economic policies.

Speaking at a stakeholders’ engagement for consultants to large tax payers in Lagos, the Chief of Staff to the Executive Chairman of FIRS and Head of the Strategic Management Office, Mr. Tayo Koleosho, said the platform set for full deployment mid-year was expected to improve tax reporting, minimise evasion and align Nigeria’s tax administration with global standards.

He noted the significance of the initiative, stressing that, “Electronic invoicing helps to improve transparency, both on the business side and on the tax administrative side.

“Globally, it has helped to increase compliance because there is a lot of inter-data exchange between tax authorities and businesses.”

He explained that while compliance among large taxpayers was already above 90 per cent, the national average remained below 50 per cent due to enforcement challenges among smaller businesses.

The e-invoicing system, he noted, would bridge this gap by automating tax reporting and ensuring seamless data exchange.

Koleosho, further clarified the timeline for implementation, stating, “We are hoping that by July of this year, we will go live. The benefits of this system are ease of doing business, ease of tax administration, and ease of tax compliance. It is a win-win for all.”

He assured businesses of FIRS’ support in integrating their accounting and enterprise resource planning (ERP) systems with the platform, emphasising that technical assistance would be provided to facilitate a smooth transition.

According to him, stakeholders’ response has been overwhelmingly positive, with several large taxpayers already volunteering for the pilot phase.

Project Manager for the e-invoicing initiative, Mr. Mohammed Bawa, highlighted the crucial role of tax consultants in ensuring successful implementation.

“Tax consultants play a critical role in tax administration because they sit between the tax authority and the taxpayers.

“This engagement is to enlighten them on where we are with the e-invoicing project and to seek their support in guiding their clients through the process,” he said.

Bawa underscored the need for broad-based adoption, stressing that in a country as large as Nigeria with over 200 million population, stakeholder collaboration was essential for the success of any tax reform.

He also placed Nigeria’s adoption of e-invoicing within the broader global context, pointing out that over 21 African countries, including Ghana, Kenya, and Rwanda, had already implemented the system.

“Nigeria currently ranks 171 out of 190 countries in the ease of paying taxes. The only way to improve on this is to minimise human interaction in tax processes.

“We want to increase visibility into transactions so that all tax filings can be reported electronically without requiring physical visits to tax offices,” Bawa added.

He added that the initiative aligned with the government’s broader objective of increasing the country’s tax-to-GDP ratio from the current 10.3 per cent to 18 per cent in 3 years.

The Coordinating Director, Compliance /Enforcement Group, FIRS represented by the Director of Field Operations Management, Matthew Osanekwu, provided insights into the regulatory framework backing the initiative. He explained that Section 13A of the VAT Act mandates taxable persons to issue invoices, with non-compliance attracting penalties.

“Failure to issue a tax invoice is an offense. The penalty is 50 per cent of the cost of the transaction, and issuance of invoices by unauthorised persons can lead to six months imprisonment,” he stated.

Osanekwu, also reassured businesses of data security, noting that FIRS officials were bound by confidentiality laws.

“Every officer of FIRS has signed an oath of secrecy, and any unauthorised disclosure of taxpayer information carries a penalty of six months imprisonment,” he affirmed.

Calling on tax consultants to actively support the transition, he added, “Consultants act as bridge builders between tax authorities and taxpayers. “You are recognised as partners in this process. The essence of this is to improve our compliance gap and increase our tax-to-GDP ratio.”