The global trend has been revenue generation. Revenue is the receipt of a government or a business. Government revenue is the money received from taxation, fees, fines, inter-governmental grants or transfers, securities sales, mineral or resource rights, as well as any sales made. Government or the public sector create revenue to pay for government expenditure as salaries of workers and for the execution of capital projects.
If a government revenue is more than its expenditure, it operates a surplus budget. If the expenditure is more than its revenue, it is operating a budget deficit. Companies also need revenue to survive. A company’s revenue is the money earned primarily from the sale of its products or services to customers. The difference between a company’s revenues and expenses determine whether it is making profit or loss.
For many governments, the dominant share of revenue is tax. Taxation is the system where taxes are levied on some types of income, earnings or purchases. In Nigeria, the tax system comprises the tax laws, tax policy, and tax administration. The Nigerian tax system contributes to the well-being of Nigerians through improved policy and appropriate utilisation of tax revenue.
The tax system is also to encourage stable revenue generation to accomplish laudable projects and investment, economic stabilisation, distributive equity, etc, for economic growth and development(Presidential Committee on National Tax Policy, 2008). Revenues are collected through individual income taxes, corporate taxes, customs and excise duties, sales taxes, withholding taxes, value added tax, etc. Taxation in Nigeria is enforced by the three tiers of government (Federal, State, and Local Governments), spelt out in the Taxes and Levies law, 1998.
The Federal Inland Revenue Service, FIRS, is the apex of the tax system in Nigeria. Its chairman is appointed by the President with the approval of the Nigerian Senate. The states and the Federal Capital Territory have their various Internal Revenue Services, IRS, or agencies to administer taxation. The 774 Local Governments have their various revenue departments. The FIRS encourages voluntary compliance with the tax laws and regulations by providing information and assistance to tax payers and to take necessary and appropriate action to enforce the laws. The Federal Government collects the profit taxes, royalties, crude oil sales; company income tax, value added tax, customs and excise duties on behalf of the federating units. There is also a Joint Tax Board, JTB, for the three tiers of government supervised by the FIRS Chairman.
Agencies in the tax system are to help taxpayers pay the correct amount of tax. Databases on tax payers are established by the Federal, State and Local Governments to identify all possible sources of income of tax payers for tax purpose. Cases of tax loss abound in the system as it is in many parts of the world. In a study on Taxation and Revenue Generation in Nigeria (Adegbite & Fasina, 2019), consistent low tax revenue inflow is characterized by government negligence, tax evasion, avoidance, record falsifications, gross inefficiency and leakages have hampered the amount of revenue realised from tax sources over the years. The incidence of tax evasion and avoidance by tax payers is high, leading to low level of government revenue which further reduces the level of government expenditure, culminating into a reduction in the income savings and expenditure of households and firms, leading to low level of economic activities and economic growth.
Governments through enabling legislations make taxpayers file accurate returns. Taxation is a major contributor to revenue generation and indeed the Gross Domestic Product, GDP. The use of technologies has the potential to revolutionize the way we file our taxes, making the process faster, easier and more accurate. Tax administrations are increasingly using technology to transform their operations. The use of advanced techniques in artificial intelligence, machine learning and machine-to-machine links are opening up new service options for tax administrations that allow more ‘compliance-by-design’ style approaches. The trend is increasing for tax administrators to unlock the power of digital transformation. The Finance Act 2020 and Sections 25 of the FIRS Establishment Act empowers the FIRS to deploy technology to automate the tax administration process, including assessment, collection and information gathering.
The amendments to the FIRS Establishment Act in the Finance Act 2021, empowered it (FIRS) to use third-party technology to automate tax administration. The e-Tax portal, TaxPro Max, is the FIRS latest effort at digitalising tax administration in Nigeria. The electronic platform was deployed in 2021for taxpayers to easily pay taxes, and to file naira-denominated tax returns online. It enables taxpayers obtain tax clearance certificates and instant credit of withholding tax and other credits.
The intention is to ease compliance, make the system convenient, flexible for stakeholders like taxpayers, tax practitioners, experts and policy makers. With these, the burden on taxpayers and agencies will reduce, thereby improving services. In a dynamic world our government is trying to adapt to change and develop the Nigerian tax system. Transparency and accountability by tax agencies are needed to increase revenue generation for government.
Source – https://www.vanguardngr.com/2024/06/enhancing-nigerias-revenue-tax-system-with-ai-technology/
