The Nigerian Communication Commission (“the Commission”) recently announced that it had signed a memorandum of understanding (MOU) with the Federal Inland Revenue Service (FIRS). This is to enable the FIRS to ascertain the accuracy and completeness of value added tax (VAT) and other taxes payable by telecommunications operators (“the Telcos”).
The MOU is part of inter-agency collaboration aimed at improving transparency of business operations in Nigeria. Under the MOU, the FIRS will integrate its application programme interface (API) technology with the systems of the Telcos for independent verification of VAT payable on qualifying transactions by the mobile network operators rather than rely solely on the Telcos’ book of accounts.
The Commission noted that it had conducted its due diligence, as the telecommunications industry regulator, to ensure that the API will not create another layer of tax on the Telcos, who are already dealing with multiple taxation issues. It further reassured that the integration of the technology with the Telcos’ transactions systems will not impact the cost and quality of service provided to consumers by the Telcos.
The integration of the FIRS’ solution with the Telcos’ transaction systems demonstrates the FIRS’ commitment to leverage technology to improve tax administration in Nigeria. It is anticipated that this technology will provide the required certainty in taxing the Telcos, reduce incidence of multiple taxation experienced in the telecommunications sector, and improve VAT collections. Further, it is hoped that the integration of the systems will make future tax audits seamless and less disruptive to the business activities of the Telcos.
In addition, the FIRS must put in place adequate measures to protect the privacy and security of the Telcos’ customer information.
It is expected that the Commission and the FIRS will issue a guideline on the modalities for the integration process.
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