The Chief Compliance Officer, Lagos Inland Revenue Service, Abideen Akande speaks with EDIDIONG IKPOTO on the state’s annual tax returns and other tax-related matters
How would you assess the LIRS whistleblower initiative which was launched last year?
We have received information from the tax-paying public. We now have over 15 cases out of which about nine are actionable.
In terms of compliance generally, we have seen improvements in compliance and our connections in the state. But we can’t tie it solely to the LIRS whistleblower initiative, because there are other initiatives that we are running side by side. So, I believe it is a result of both the whistleblower initiative and the other initiatives that the agency has been implementing.
What is the penalty for filing incorrect tax returns?
The law doesn’t really want to punish you unless you are really recalcitrant. It says something in Section 94 that if without any reasonable excuse, you make an incorrect return, then you will be liable on conviction to pay N20,000. That is one. And then, the cost you have under-declared, you will now pay double the amount that you have cheated the government.
Tell us about the Lagos State annual tax returns.
There is a foundational imperative for tax returns and it is embedded in the Constitution of the Federal Republic of Nigeria, which says that every citizen must disclose voluntarily without prompting, all the income that he or she has earned and pay appropriate tax to the tax authority. That implies one thing, it is a self-assessment, you are the one that is voluntarily declaring how much you earned and this is how much you are paying.
So, it is on this that the law decides to ride on. We have laws that guide corporate entities and individuals. The campaign which we are running currently relates to the tax returns that are supposed to be filed annually by employers of labour to the relevant tax authority. Now, the employers of labour could be a corporate entity or an individual that is a sole proprietorship. As long as you employ people, you are obliged by the provisions of the law to file tax returns on behalf of your employees and that does not absolve the employees of their own obligation to file returns.
The campaign we are currently running focuses on employers filing tax returns on behalf of their employees.
Who is supposed to file these tax returns?
The obligation rests squarely on the individual, the ultimate taxpayer as well as the employer of labour. But the current one that we are talking about relates to the employer. We will run the one for individuals later because the deadline for that is March. You won’t know the totality of your income until the year ends anyway. So, that is why you cannot file it before year-end.
But the employer as of today knows how much he has paid Mr A from January to December last year. So, that is the person that has an obligation to file returns and say, “I have paid Mr A 50 from January to December, and I have paid Miss X N70 from January to December. And, I have deducted N3 from that N50, and N5 from that N70, which have been remitted to you.” That is what tax returns are all about.
The law provides that a tax authority should prescribe the format for you to submit the tax returns. The critical thing you need to put there could be the name of the person; the tax ID so that we will know who you are referring to; the total amount that you have paid; and then the tax. We can ask for other things, but those are basic things that need to be there. The constitution requires the taxpayer to eventually say when he or she would be filing his or her own return that he or she received X amount from company W last year; so much amount was also received from his or her tenants. It allows the tax authority to actually cross-check the validity of the information that is being provided by the taxpayer.
Is there a time frame for these returns to be filed?
Yes. The employer will not know how much he has paid you until the end of the year. So, it is from January 1-31 every year.
Once it crosses into February, what is the penalty?
If it is late, it attracts a N500,000 penalty for a corporate entity, but N50,000 for an individual. It is strict. Lawyers call it a strict liability offence. So, it is not something that you can hide. By February 1, you are already liable to a N500,000 penalty if you are a corporate entity.
Is there a particular process for filing these returns?
Yes, there is a process. In Lagos, for the past three to four years, we have migrated from manual or hardcopy filing to electronic filing. So, the only process we have currently is electronic filing. You will file it online. We have an E-tax platform and it is on that platform that you can file it. It is etax.lirs.net
We will move away from manual processing to electronic processing, But not all employers of labour have all the resources to do it. So what have we done, we have created specialised tests in all our stations, where people who don’t have the resources or the assets can go there. And our staff there are dedicated to that purpose and will attend to you free of charge.
You have spoken about filing as an individual and as a corporate entity. What is the fundamental difference between the two?
The constitutional requirement is for the individual and the citizen to file taxes. Now, for the company, also, at the state level, we don’t tax companies. We tax individuals. It is Federal Inland Revenue that companies are responsible to for their own activities. So, it is personal income tax that we administer at the state level. But part of the personal income tax is money that employers pay the individuals.
