Nigeria Moves to Boost Tax Compliance with New e-Invoice System. The Federal Inland Revenue Service (FIRS) has reaffirmed its commitment to increasing Nigeria’s tax-to-Gross Domestic Product (GDP) ratio through enhanced tax compliance and transparency.
A key component of this strategy is the deployment of an electronic invoicing system designed to curb revenue losses and streamline tax reporting.
Digital Transformation of Tax Compliance
The new system, known as the Merchant Buyer Solution (MBS), will replace traditional paper-based invoicing with a fully digital framework.
This platform is designed to facilitate real-time validation and storage of transaction data across business-to-business (B2B), business-to-consumer (B2C), and business-to-government (B2G) transactions.
By integrating transaction data into a single platform, FIRS aims to provide valuable insights into supply chains, purchasing trends, and financial activities. This data-driven approach is expected to strengthen fiscal policies and economic planning.
Key Benefits and Compliance Goals
Speaking at a stakeholders’ engagement session for tax consultants in Lagos, Mr. Tayo Koleosho, Chief of Staff to the Executive Chairman of FIRS and Head of the Strategic Management Office, emphasized the significance of the initiative.
“Electronic invoicing improves transparency on both the business and tax administration sides. Globally, it has proven to enhance compliance by enabling seamless data exchange between businesses and tax authorities,” he stated.
While large taxpayers in Nigeria already exhibit a compliance rate exceeding 90%, the national average lags below 50% due to enforcement challenges among smaller businesses. The e-invoicing system is expected to bridge this gap by automating tax reporting and minimizing human intervention.
Koleosho further outlined the implementation timeline, revealing that the system is scheduled for full deployment by mid-year.
“We are targeting a July launch. The benefits include ease of doing business, streamlined tax administration, and improved tax compliance. This is a win-win for businesses and tax authorities alike,” he said.
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Stakeholder Collaboration and Support
To ensure a smooth transition, FIRS has pledged support for businesses in integrating their accounting and enterprise resource planning (ERP) systems with the new platform. Technical assistance will be provided to facilitate compliance and optimize tax processes.
Project Manager for the e-invoicing initiative, Mr. Mohammed Bawa, underscored the pivotal role of tax consultants in driving adoption.
“Tax consultants serve as intermediaries between taxpayers and the tax authority. Their involvement is crucial in educating businesses about the new system and guiding them through implementation,” Bawa explained.
He also emphasized the importance of stakeholder collaboration, especially in a country as large as Nigeria, where broad-based adoption is essential for the success of any tax reform.
Nigeria Aligns with Global Best Practices
Highlighting international trends, Bawa noted that over 21 African countries, including Ghana, Kenya, and Rwanda, have already implemented e-invoicing systems.
“Nigeria currently ranks 171 out of 190 countries in the ease of paying taxes. Reducing human interaction in tax processes is key to improving this ranking.
The new system will increase transaction visibility and allow electronic tax filings, eliminating the need for physical visits to tax offices,” he added.
The initiative aligns with the government’s broader objective of raising Nigeria’s tax-to-GDP ratio from the current 10.3% to 18% within three years.
Regulatory Framework and Enforcement
Providing further clarity on regulatory backing, Matthew Osanekwu, Director of Field Operations Management at FIRS, cited Section 13A of the VAT Act, which mandates the issuance of tax invoices. He warned that non-compliance carries significant penalties.
“Failure to issue a tax invoice attracts a penalty of 50% of the transaction cost. Additionally, issuing invoices without authorization can lead to a six-month jail term,” Osanekwu cautioned.
He also reassured businesses about data security, emphasizing that FIRS officials are legally bound by confidentiality agreements.
“Every FIRS officer has signed an oath of secrecy, and unauthorized disclosure of taxpayer information is punishable by a six-month imprisonment,” he affirmed.
Call to Action for Tax Consultants
As the country gears up for the full implementation of e-invoicing, tax consultants are being urged to actively support the transition.
“Consultants are key partners in this process. Your role is to bridge the gap between tax authorities and taxpayers, ensuring a smooth adoption of the system.
The ultimate goal is to close Nigeria’s compliance gap and boost our tax-to-GDP ratio,” Osanekwu concluded.
With the upcoming deployment of the e-invoice system, Nigeria is taking a significant step toward modernizing its tax administration, fostering compliance, and maximizing revenue generation in a transparent and efficient manner.
