Nigeria Deploys Big Data As It Gets Serious With Non-Oil Revenue

The Nigerian government is getting serious with non-oil revenue as it works to modernize the process of collecting taxes in the nation. The government is developing a comprehensive system that will make it easier to collect taxes. They are beginning that process by possibly auditing government contractors who make money from government but refuse to even report the earnings, and in the process avoid paying taxes.

In efforts to improve tax compliance levels, the Federal Government has commenced the review of tax compliance records of all contractors, who received payments from its various agencies in the last seven years. ….

A statement from the Finance Ministry, said the result of the sampling exercise showed that some Tax Clearance certificates, which were presented at the point of contract award were found to have little bearing to the true value of business conducted by the contractors.  —

The initiative is part of the construction of a central data base of financial information being developed for use in tax compliance. The data will be used to crosscheck information provided to the tax authorities.

The database project dubbed, ‘Project Light House’, is aimed at building comprehensive profiles of tax payers using a wide range of available data sources, including BVN, foreign exchange allocations, land registry records, and information obtained  from foreign governments.

By working to aggregate the data from disparate sources, government is deploying big data in the process. I note the following on this effort by government:

• Government in Nigeria usually collects VAT and WHT at source especially when transactions involve the banking sector and government. The implication is that, under most cases, the tax on profit had already been collected. Of course, there are companies that can make more in profits than the 5-10% government had deducted at source for WHT. Nevertheless, for more than seven years now, the deducted VAT/WHT records are always with Federal Inland Revenue Service (FIRS) and it is very strange that federal contractors can get tax clearance without FIRS checking records which are already in their systems. The only way this can happen is when the government entity awarding the contract does not report the payment to FIRS. In that case, FIRS will not see it.
• Government is coming for the landed property. Also, they are equipped with BVN and can check bank records. Taxing the real estate is a very good development in the country. Let the rich people pay tax as rich people. Yet, there is also a concern that government can abuse this system where just having money in the bank could trigger tax burden for companies. This is a gray area and government needs to explain why it needs the BVN for tax purposes.

Meanwhile, if you are owing government tax, you have a grace period to self-report and do good.

She urged such companies to promptly take advantage of the concessions offered under the Voluntary Asset and Income Declaration Scheme (VAIDS), adding that once an audit or investigation had commenced, a company or individual would not be able stop that process by participating in VAIDS.

“VAIDS has now been open since July 1st and some applications have already been received. If the tax authorities reach a company before such company has applied for VAIDS, then the full audit process will be conducted. This could result in penalties, interest and prosecution. So companies and individuals who know they will be affected are urged to quickly take advantage of VAIDS,” she was quoted.

In general, efficiency in tax collection is a welcome development. Nigeria will not make progress if it cannot even collect taxes from its federal contractors. Everyone would have expected this to have been dealt with many years ago. Federal contractors are paid by government and FIRS is usually provided information as the government entity deducts the 10-15% of payment for VAT/WHT. Most times, the contractor may not have to pay more tax as the deducted amount had covered the tax due. But where FIRS does not look at the data, provided by the other government entities, before clearing the contractor, you have a dereliction of duty. So this reform should go beyond technology. They need to ensure the right people are working for government to avoid these lapses in operations.

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