Sanwo-Olu bemoans Nigeria’s poor tax-to-GDP ratio as LIRS, FIRS sign MoU


Lagos state governor Babajide Sanwo-Olu, yesterday, bemoaned Nigeria’s unimpressive tax-to-GDP ratio of between 6 to 8 per cent, despite the yearly record-breaking turnovers by both Federal Inland Revenue Service, FIRS and Lagos State Internal Revenue Service, LIRS.

This, he said, has mounted pressure on the nation’s resources and created an imbalance in Government expenditure.

Sanwo-Olu who spoke at the signing of Memorandum of Understanding between FIRS and LIRS at the Lagos State House, Marina, said Nigeria must operate at the same level as other nations within sub-Saharan Africa doing between 14 and 15 per cent in tax to GDP ratio in order to support the Government’s development programmes and improve accountability.

“Studies have shown that there would be better service delivery to the citizens and improvement in the efficiency of tax collection when the two agencies work together. The cost of tax collection would be reduced, we would see better customer satisfaction and more resources would be generated for the Government to deliver more dividends of democracy. For us as a State, we are humbled by this collaborative effort and we believe our citizens will be the ultimate beneficiaries of this initiative. The MoU is in the best interest of the public, as it affirms the reason why we need to come together and strengthen the cordial working relationship between the two agencies,” he said.

While describing the collaboration as “epoch-making”, Sanwo-Olu noted that the conversation for the harmonization of the two agencies’ mandates started about a year ago, based on the need to forge a common front in widening the tax net to raise the country’s tax to GDP ratio.

The Executive Chairman, LIRS, Mr Ayodele Subair, in his remarks, said the importance of the agreement was to foster greater collaboration between the two agencies.

He said though both tax agencies are not only independent of each other but different in the types of taxes they administer, the collaboration between the tax authorities was to promote the smooth operation of activities not only for the benefit of tax authorities but for improved service delivery for taxpayers.

“While this initiative of a joint audit is not a new one, it is peculiar because it comes at a time when our dear nation struggles with the dwindling oil receipts and other economic woes which have affected the tax-to-GDP ratio which is currently adjudged as the lowest globally, standing at approximately 6%, compared to neighboring countries which average between 15 – 25%,” Subair submitted.

According to the LIRS Chairman, some of the expected achievements from this collaboration between both tax authorities include a reduction of compliance costs for taxpayers; improved transparency in the tax administration process, which will impact tax disputes, incidences and reconciliation; reduced administration costs for both tax authorities; and elimination of hiding place for recalcitrant taxable persons and entities.

In his own remarks, Executive Chairman, FIRS, Muhammad Mamman Nami, said among the benefits of the collaboration is the ability to implement presumptive tax, automatic exchange of information, joint investigation among others.