The IMF has warned that Nigerian governments’ ability to effectively finance infrastructure and services is constrained by low tax collection. Despite recent tax reforms by the Federal Government, Nigeria needs to grow tax revenue by registering more tax payers and enhancing collections and compliance, says Nmonwu.
Initiatives such as the government’s Voluntary Assets and Income Declaration Scheme (VAIDS) - which gives taxpayers an opportunity to voluntarily declare all previously undisclosed assets and income are steps in the right direction, he adds. Higher levels of automation and modernisation among tax authorities as well as increased use of digital filing and payment are also positive developments.
Says Nmonwu: “Another way Nigeria’s Federal and State Governments could enhance compliance is by encouraging businesses of all sizes to use technology to streamline capturing of transactions and automate payroll calculations. These solutions can help minimize the risk of non-payment of tax or incorrect remittances of taxes to the relevant government agencies.
“What’s more, the ability to generate financial statements, tax certificates, reports and electronic payslips with the click of a button is a major timesaver. An automated, cloud-based solution also means that businesses have an audit trail and reliable backups for all of their financial transactions, so that they can demonstrate their compliance with tax laws.”
Such software can help address some of the complexity Nigerian businesses face in paying tax. Nigeria aims to move from its current position of 181 out of 189 countries to top 50 on the Ease of Paying Taxes World Report (http://APO.af/xRjHCQ) which means that we will see a lot of reform of the tax system in the years to come, says Nmonwu.
“Spreadsheets and other manual methods are no longer sufficient to keep up with the growing complexity of today’s tax environment,” Nmonwu says. “As the tax authorities digitise and automate processes, they should be supporting small and medium businesses in doing the same in an effort to accelerate Nigeria’s integration with the global economy. They could, for example, run seminars or workshops together with vendors to showcase how cloud technology eases the compliance burden for small businesses.”