The Federal Inland Revenue Service (FIRS), on 30 April 2019, notified the public that it has introduced new measures to simplify and ease tax audit experience for all taxpayers.
The new measures are intended to:
- Reduce tax audit cycle to 63 days
- Eliminate multiple tax audits by various tax authorities
- Facilitate a single tax audit exercise window for a taxpayer that operates in more than one tax jurisdiction within Nigeria
In order to ensure that the above objectives are achieved, FIRS, various States Internal Revenue Service (SIRS) and Joint Tax Board (JTB) signed a Memorandum of Understanding (MoU). Understandably, the achievement of the 63-day cycle for completion of a tax audit exercise will depend largely on human factors such as; ease of provision of relevant documents by taxpayers, level of efficiency of the tax authorities during the review process and availability of the parties for reconciliation meetings to resolve the tax audit issues identified. Thus, it may be challenging or difficult to conclude some tax audit exercises within the recommended timeline above. Nonetheless, the recommended timeline sets a benchmark that tax authorities and taxpayers can work towards to ensure the speedy conclusion of tax audits. To ensure the objectives of the new measures are achieved, tax authorities may also consider simplifying tax audit selection procedures and adopting a risk-based approach to tax audit exercises. Further, while there are no indications on the required steps to reduce the audit completion cycle, elimination of multiple tax audits would go a long way in reducing the time spent by taxpayers. With respect to elimination of multiple tax audits, the FIRS Notice requires a taxpayer that operates in more than one tax jurisdiction within Nigeria, to apply for a joint tax audit through JTB, or the Office of FIRS’ Executive Chairman, or the Office of the Chairman of the relevant SIRS where the taxpayer’s head office is domiciled. This initiative is a welcome development and a step in the right direction in addressing taxpayers’ clamour for elimination of multiple tax reviews and audits to ensure efficient use of resources of both the tax administrators and the taxpayers. It remains to be seen, how the MoU would play out. It would be recalled that FIRS signed MoU with SIRSs during the Voluntary Assets and Income Declaration Scheme (VAIDS). However, the aftermath of VAIDS was greeted by conflicting tax audits/reviews by SIRSs, which included years already covered under VAIDS, for which a taxpayer had already made a voluntary declaration. It is hoped that the MoU would be upheld to ensure that the above objectives are met.