E-invoicing to Boost tax-to-GDP Ratio, Curb Revenue Loss – FIRS
The Federal Inland Revenue Service (FIRS) has stated that the implementation of the electronic-invoicing (e-invoicing) system will boost Nigeria’s tax-to-GDP ratio by improving tax compliance, enhancing transparency and curbing revenue losses.
The e-invoicing, according to the FIRS, is a merchant buyer solution which provides digital representation of transactions between suppliers and buyers, effectively replacing traditional paper or electronic documents such as invoices, credit notes, and debit notes.
The FIRS has, in recent times, deepened engagement on the e-invoicing ahead of the phased roll-out with some selected taxpayers.
At another stakeholders’ engagement for consultants to large taxpayers in Lagos, the Chief of Staff to the Executive Chairman of FIRS and Head of the Strategic Management Office, Tayo Koleosho, reiterated the benefits of the system in improving transparency on the business and tax administration side.
According to him, e-invoicing has helped globally in increasing tax compliance as “there is a lot of inter-data exchange between tax authorities and businesses.”
He disclosed 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.
This, he stated, is where e-invoicing would help through the automation of tax reporting and seamless data exchange.
“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 said.
The Coordinating Director, Compliance/Enforcement Group at FIRS, represented by the Director of Field Operations Management, Matthew Osanekwu, assured businesses of data security.
He added 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 the issuance of invoices by unauthorised persons can lead to six months’ imprisonment,” he said.
He added that the goal is to “improve our compliance gap, to improve our tax-to-GDP ratio to 18 per cent, that the federal government envisages. Also, to ensure that taxpayers comply with the provisions of the law.”
“Tax consultants must realise that change has come. FIRS is on a journey, and that journey is to become one of the most trusted and efficient tax systems in the world,” he said.
Project Manager for the e-invoicing initiative, Mohammed Bawa, stated that 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.
He disclosed 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 minimize 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,” he said.
