Ease of doing business in Nigeria – A case for eliminating multiple tax reviews, audits and investigations


The importance of ensuring a conducive environment for businesses cannot be over-emphasized, given their immense contribution to the growth of the national economy. This is more so, in the light of current economic growth and stability plans by Federal Government of Nigeria (FGN).

One of the major steps taken by the current administration in demonstrating commitment towards the creation of a competitive business environment was to set up the Presidential Enabling Business Environment Council (PEBEC). The specific reforms spearheaded by PEBEC have yielded positive results as evidenced by World Bank’s 2018 Ease of Doing Business Index where Nigeria ranked 145th (out of 190 countries). This is an improvement on prior year’s ranking of 170th, placing Nigeria among the 10 most improved business environments globally.

The foregoing notwithstanding, there is still a lot of room for improvement considering the current business realities in Nigeria, which still appear unfriendly. Generally, Nigerian businesses are exposed to multiple taxes/levies from various regulatory agencies, cutting across tax, immigration, customs, etc.

For tax administration in particular, the Federal Inland Revenue Service (FIRS), State Internal Revenue Service (SIRS) and Local Government Councils (collectively referred to as Primary Agencies) are the relevant regulatory bodies tasked with the primary responsibility of administering (including audits, reviews etc.) and collecting taxes at Federal, State and Local government levels respectively. However, in recent times, several other bodies such as the National Assembly, Revenue Mobilization Allocation and Fiscal Commission (RMAFC), Ministry of Justice, Economic and Financial Crimes Commission (EFCC) etc., have also taken up the role of pursuing companies directly to enforce and monitor tax compliance.

Considering the legislative focus of the Primary Agencies on tax, direct enforcement by these other bodies beg the question of the legality of their involvement in tax administration. Arguably, the laws establishing some of these bodies appear to permit direct review of taxpayers’ tax records. For instance, Section 6(1a) of the RMAFC Act empowers RMFAC to monitor accruals to and disbursements of revenue from the Federation account. While tax payments are not direct accrual/disbursement to the Federation Account, RMAFC has interpreted this power to extend to direct review of taxpayers’ compliance status since, ultimately, relevant taxes also accrue into the Federation Account.

The banking sector is one of the sectors most affected by RMFAC’s intervention. Banks have had to undergo tax compliance reviews conducted by RMAFC, despite previously undergoing the audit by Primary Agencies and settling resultant liabilities for the same periods. Considering that tax revenue moves from FIRS to Federation Account, normal expectation would be for RMAFC to obtain FIRS’ records on the tax position of the banks in order to monitor tax accruals to the Federation. This position is strengthened by the provision of Section 6(2b) (iii) of RMAFC Act, which empowers RMAFC to demand and obtain regular and relevant information, data or returns from FIRS.

The National Assembly, EFCC, Ministry of Justice, and other bodies have also been involved in the review of records of various taxpayers. FIRS and SIRS also conduct different types of reviews on taxpayers’ records some of which cover the same taxes and periods. These include desk reviews, value-added tax and withholding tax monitoring exercises, tax audits, tax investigations etc.

These multiple tax review processes can be quite hectic, spanning a number of months or years in some cases and requiring allocation of staff and other resources of the taxpayers to attend to regulators. Taxpayers are also made to collate the same information multiple times for the different agencies; thus, making them incur significant costs as a result.

The duplication of activities by government bodies in monitoring and ensuring tax compliance in Nigeria is clearly an inefficient use of resources by both government and taxpayers. Also, the resultant effect on businesses can be far-reaching, including:

  • Significant hike in regulatory compliance cost
  • Reduced profitability
  • Valuable time of employees/representatives not spent on core business activities
  • Disruption of business activities
  • Potential leakage of confidential and sensitive business information etc.

Bearing the above issues in mind, as FGN seeks to achieve the budgeted tax revenues for 2018 and beyond, by ensuring increased tax compliance and improved efficiency in tax collection, the following actions may be considered:

  • Collapse the operations of various regulators with overlapping functions such that only FIRS and SIRS would be required to carry out tax audits and investigations on the records of taxpayers.
  • Where other regulators must continue to carry on the review exercises, it may be necessary to have focal points of interest as opposed to full-scale reviews by all relevant regulators
  • Encourage inter-agency collaboration and data sharing, such that where a taxpayer has filed required documentation with one regulator, the information can be shared with other relevant bodies in order to reduce the burden of compliance on businesses
  • Ensure adequate training of officials and automation of the review process by FIRS and SIRS to facilitate speedy reconciliation and conclusion of audits/reviews
  • Focus on expanding the tax net, rather than overburdening the existing compliant taxpayers

One of the principles of taxation suggests that corporate entities and individuals should contribute their fair share of taxes towards the development of the economy. In enforcing tax compliance, it is imperative that the resources and processes deployed towards achieving this do not deter voluntary tax compliance while ensuring that taxpayers suffer no inconvenience.

In essence, the manner in which tax compliance is enforced can itself weaken or strengthen public trust and ultimately affect the development of the economy. It is therefore expected that FGN will in the long run initiate reform strategies which would eliminate multiple tax reviews, audits and investigations and ensure optimal utilisation of available resources while boosting the ease of doing business in Nigeria and ultimately, investors’ confidence.