Governor Babajide Sanwo-Olu of Lagos State has expressed optimism that the state’s bilateral agreement with the Federal Government of Nigeria will benefit Nigerians.
Sanwo-Olu stated this on Monday during the signing ceremony for a memorandum of understanding between the Federal Inland Revenue Service and the Lagos State Inland Revenue Service, according to Arise TV.
The agreement creates a joint tax audit system that would reduce duplication of effort and make it easier to share information important to the enforcement of current tax laws.
The bilateral agreement is expected to harmonize tax administration, improve system effectiveness, and offer solutions to the problems associated with multiple taxation.
The Minister of State for Finance, Mr. Clem Agba, witnessed the agreement signing event held the State House in Marina, which also had Commissioner for Finance, Dr. Rabiu Olowo; Lagos Attorney General, Mr. Moyosore Onigbanjo; Commissioner for Economic Planning and Budget, Sam Egube, and Commissioner for Information and Strategy, Mr. Gbenga Omotoso, in attendance.
The scope of the MoU enabled both tax authorities to exchange information sourced under International Tax Treaties in accordance with global protocols, as well as creating a common tax collection platform to prevent double taxation, in addition to providing joint jurisdiction in tax audit and bringing about an integrated system of tax compliance.
Sanwo-Olu referred to the partnership as “epoch-making,” noting that discussions about harmonizing the mandates of the two agencies began about a year ago. These discussions were motivated by the need to create a united front in order to expand the tax net and increase the country’s tax to GDP ratio.
The governor said that despite both FIRS and LIRS having annual record-breaking turnovers, Nigeria had maintained an unattractive tax to GDP ratio of between 6 and 8%.
According to him, this has increased the strain on the country’s resources and led to an imbalance in government spending.
In order to fund the government’s development programs and enhance accountability, Sanwo-Olu claimed that Nigeria must function at the same level as other sub-Saharan African countries, which have tax to GDP ratios between 14 and 15%.
“We just saw a historic ceremony between the Federal Inland Revenue Service and Lagos Inland Revenue Service,” he remarked. This partnership was the result of a discussion we had with the chairman of FIRS about a year ago, during which both sides discussed their strengths and weaknesses.
“It was obvious that a relationship needed to be consummated. Each year, FIRS and LIRS have broken records for tax administration and collection, yet this is insufficient. It is completely intolerable that our tax to GDP ratio, which runs between 6 and 8%, is so low.
“Studies have indicated that when the two agencies collaborate, the delivery of services to the public would be improved, as would the effectiveness of tax collection. There would be a decrease in the cost of tax collection, an improvement in customer satisfaction, and more resources would be generated for the government to provide greater democratic dividends.
“As a state, we are humbled by this collaborative effort, and we think that this program will ultimately benefit our population. The MoU serves the public interest because it reaffirms the necessity for cooperation and fortifies the friendly working relationship between the two agencies.
Sanwo-Olu emphasized that the goal of the bilateral agreement was to increase the tax base and bring more people into equity rather than to overburden tax-paying residents. The Governor claimed that a sustainable tax administration system will provide the government with additional resources to ease social burdens and care for the weak.
The governor pointed out that Lagos’s budget was much smaller than what the State ought to be allocating. Given the size of the State economy’s GDP, he claimed that the market study suggested a benchmark budget for the State of N5 trillion. Sanwo-Olu claimed that thanks to the group effort, Lagos may have been on the correct track to raise its budget level to the proper level.
Agba claimed that in order to finance national development initiatives, the nation’s tax base needed to be increased due to declining oil revenues. According to the minister, duplication of efforts by both agencies would reduce the effectiveness of both the Lagos and Federal governments in generating resources and would make it harder for both to collect taxes.
According to the minister, cooperation would not deprive either party of anything; rather, it would help both sides earn money to fill infrastructure gaps in their respective fields.
The MoU, according to chairman of FIRS, Mr. Mohammed Nami, would assist both organizations in strengthening their respective areas of expertise while assisting the Lagos and Federal governments in generating income for initiatives and development initiatives.
The collaboration, according to LIRS Chairman, Mr. Ayo Subair, would result in speedy resolutions to tax disputes and occurrences, resulting in seamless resolution of concerns. He also mentioned the elimination of hiding locations for stubborn taxpayers and entities, as well as decreased administrative costs for both tax authorities.