A Presentation by Mr. Babatunde William Fowler at the International Conference Centre, Abuja, May 2013.

1. ENGENDERING
A HEALTHY TAX CULTURE
IN THE GRASSROOTS
A presentation by
Tunde Fowler
Chief Executive Officer
Lagos State Internal Revenue Service
at the Workshop on Positioning Local Government as
a Hub for National Transformation held at the
International Conference Centre, Abuja.
13th – 15th May 2013
1

2. OUTLINE
Overview of Tax Administration in Nigeria
3
1.1 General Perception of Tax in Nigeria
Chapter 1:
4
Chapter 2: Practical Issues with Tax Culture and Administration in Nigeria
Chapter 3: The Need for Reform & The Reform Strategies
5
7
(The Lagos State Experience)
4.1 Political Will/Human Capital Development
4.2 Human Capital: Organizational Restructuring
4.3 Process Reengineering / Simplification Of Assessment
and Payment Process
4.4 Facility Upgrade
8
9
12
13
4.5 Engaging the Stakeholders
14
4.6 Collaborations
18
4.7 Advocacy, Enlightenment and Education
19
4.8 Enforcement
22
4.9 Highlights of Other Strategies
24
Chapter 4: The Harmonization of Levies and Charges at the Local Government (The Lagos State Model)
Chapter 5: The Lagos State IGR Trend Analysis
Appendix
25
28
40
2

3. CHAPTER 1
Overview of Tax
Administration in
Nigeria
3

4. Overview of Tax Administration in Nigeria
General Perception to Tax in Nigeria
The National Tax Policy (NTP) identified tax as a very important tool for
national development and growth in most societies. One of the major indices
by which development and growth can be measured in any society is the
amount of wealth which is created by economic activities undertaken in that
society.
Nigeria did not consider taxation as a sustainable source of revenue, during
the 1970s and late 80s as a lot of attention was focused on oil revenue. During
this period, all the States in the country relied earnestly on proceeds from the
Federation Account.
In 2008 at the turn of the global recession which saw a sharp fall in oil prices
and by extension reduced proceeds from the Federation accounts, The
overdependence on the above stated revenue created an imbalance in the
implementation of some of the fiscal policies.
Governments (Federal, State, and Local) began to look inwards focusing on
Internally Generated Revenue (IGR) as a sustainable means of funding as
bankruptcy loomed among the States. (see appendix: Paying Taxes 2010 –
The Global Picture)
4

5. CHAPTER 2
Practical Issues With
Tax Culture and
Administration In
Nigeria
5

6. 2.1 Practical Issues
Lack of required facilities for the Board to carry out
its functions.
Low remuneration/morale and Lack of skills
comparable to those of taxpayers.
Under assessments, Arbitrary assessments and Nonassessments.
Non-Remittance of taxes and Diversion of
Revenue/Sharp Practices.
Inconsistencies in the application of enforcement
standards.
Loss of Revenue due to the State Government.
A presentation by The Executive Chairman
6

7. CHAPTER 3
The Need for Reform & The
Reform Strategies:
(The Lagos State Experience)
7

8. 3.1 Political Will/Human Capital Development
The Administration of Asiwaju Ahmed Bola Tinubu, Governor of Lagos State(1999-2007),
initiated the State Revenue Administration reform process. Part of his reform strategies
were:
•Autonomy of Lagos State Internal Revenue Service: the Autonomy has given LIRS
the powers to; hire the professionals, who have the technical know-how as regards
tax issues and administration.
•Funding: Adequate funding is continuously made available to ensure the smooth
and efficient administration. Providing the revenue authority with modern day
technologies.
•Evasion & Avoidance: Lagos State is the fully implementing and enforcing the
provisions of the tax laws and its regulations. The State has effectively clamped
down on companies who evade or under remit taxes.
8

9. 3.2 Human Capital: Organizational
Restructuring
•
Development and adoption of vision and mission statement
•
Harmonization of the operational directorates.
•
Carrying out a full re-appraisal of the appointment and operational
procedure for Tax Audit Monitoring Agents with a 90-day turn-around
programme which ensures that tax audits are carried out more efficiently
•
Establishment of a virile operational procedure that ensures proper and
timely coordination of activities between the assessing and enforcing
arms of the Board
•
Members of staff who opted to remain in the civil service were
transferred to other Ministries and Departments. Others who are keen to
pursue a career in taxation administration were offered employment by
the autonomous LIRS and disengaged from the civil service
•
LIRS recruits as the need arises, professionals in relevant fields and offer
them competitive remunerations
9

10. 3.2 Human Capital: Organizational
Restructuring
•
•
•
Creation of new units; Religious , Judiciary,
Professional, Informal Sector, LASTMA, Self
Assessment Review Units, Public Sector,
Strategic Audit, Relationship Management Units,
Distrain unit
Capacity building: LIRS has in operation a well
equipped and functional training school.
Regular in house training are organized to
enhance staff skill
Staff are also exposed to the best practice in tax
administration through participation
conferences, seminars, off shore training. LIRS
currently sponsors Staff who are members of the
Chattered Institute of Taxation of Nigeria (CITN)
for both Tuition and Examination Fees
10

11. 3.2 Human Capital: Organizational
Restructuring
Executive
Chairman
Director
Finance &
Admin
Director PIT
Compliance
Unit
Commission
Unit
Recruitmen
t & Training
Field Unit
IT Support
Audit
Premises &
Assets
Director Legal
Services
Legal
Advisory
Director
Accounts
Correspond
ence
Litigation
Collections
Fund Mgt
Salary
Audit
Report Unit
Logistics
&Transport
(2) Deputy
Directors
Personal
Income Tax
Research
Unit
Regional
Co-ordinator
Mainland
Director Tax
Audit
Regional
Co-ordinator
Lagos Island
Regional
Co-ordinator
Ikeja
Deputy
Director
Special Duties
Deputy
Director
Chairman’s
Office/ Head
RMU
Board
Secretary
LIRS Organogram – Abridged Version
11

12. 3.3 Process Reengineering / Simplification
Of Assessment And Payment Process
•
The full implementation and use of e-TCC to further assisted
the blockage of general revenue leakages
•
Accelerated Tax Audits of Back Years. Over 1500 tax audits in
2006 , 3500 in 2007 and 4000 in 2008 and over 6,000 in 2011
were concluded and
tax audit liabilities paid.
1000
Professional Accountants and Tax practitioners were engaged
to collate tax audit data and assist in Tax payer Enumeration
•
Direct Bank Lodgment- Linkage of over 1200 branches of
banks on line; Automated Revenue Receipts.
•
•
•
•
Close Monitoring of revenue through the generation of timely
management reports- creation of accounts relationship
management unit that monitors remittances based on industry
Accounting and Reconciliation- Fast reporting and month-end
closing analysis.
Enhanced Internal Control
Continued enumeration of tax payers
12

13. 3.3 Process Reengineering / Simplification
Of Assessment And Payment Process
•
•
•
Self Assessment Scheme: LIRS introduced Self
Assessment Filing System for individuals, the
first of its kind in Nigeria and indeed black
Africa, to make tax payment convenient, boost
the State’s IGR and expand the tax payers’ list.
In partnership with collecting Banks, an
individual tax payer can conveniently pay his
tax at any of the over 1200 branches of these
banks and LIRS 37 Tax Stations.
Minimum Tax for those in the Informal Sector.
Establishment of Mini Tax Offices in over 40
Major Markets, as a means of bringing tax
assessment and collection closer to the
taxpaying public .
13

14. 3.4 Facility Upgrade
•
•
Renovation of Tax Offices
Deployment of IT infrastructure in all
tax offices
•
Installation of Generators
•
Procurement of new utility vehicles
•
Relocation of some tax offices to more
spacious and business friendly
environment
14

15. 3.5 Engaging the Stakeholders
The Lagos State Internal Revenue Service (LIRS) has
continued in its efforts to provide effective and efficient
service delivery to tax payers. The Lagos State Government
has continued to experience marginal improvement in her
Internally Generated Revenue (IGR), growth largely
attributable to increased tax base and increasing
compliance level especially in the Organized Private Sector
and the Informal Sector such as the professionals, markets,
artisans etc.
The effects of the Personal Income Tax (Amendment) Act
2011 affected tax rates as they were reviewed downward
and tax bands increased. The State relied less on the
revenue from the Federation Account while focusing its
attention on the Informal Sector (Professionals) and Direct
Assessment, recognizing that there is still room for
improvement. In achieving 100% Tax Compliance,
stakeholders’ have been engaged in the following events:
15

16. 3.5 Engaging the Stakeholders
PRESS BRIEFING ON THE PROSECUTION OF TAX
DEFAULTERS IN LAGOS STATE
On Tuesday, the 15th of January, 2013, the State Government held a
press briefing where it intimated the press and the general public
of its intention to commence prosecution of tax defaulters. This
became necessary owing to the inequitable position of the
taxpayers in the State whereby about 4 Million out of an estimated
8 Million income earners still do not pay taxes.
REWARD FOR TAX COMPLIANCE AND TAX PAYERS
ENGAGEMENT
The 6th Annual Taxation Stakeholders Summit which was held on
the 24th of January, 2013 was a testament to the State Government’s
continuous efforts to reward good citizenship. During the event the
attendance and engagement from different stakeholders
surpassed the previous years. His Excellency, the Governor of
Lagos State Mr. Babatunde Raji Fashola (SAN), recognized the
awardees who had achieved 100% tax compliance within the
individual and corporate categories.
16

17. 3.5 Engaging the Stakeholders
INFORMAL SECTOR (MARKETS) AWARDS
The Agency also recognized compliant taxpayers in the
Informal Sector (Markets and Artisans), this included; The
Textile Dealers, Association of Taxi Drivers, Automobile
Technicians, and Glass Dealers. They were recognized for their
high level of tax compliance. (see appendix)
STAKEHOLDERS’
CONFERENCE
FOR
INFORMAL
SECTOR (PROFESSIONALS)
The level of non-compliance especially in the Informal Sector
(Professionals) in Lagos State has deprived government of the
Revenue needed to continue in its efforts to provide necessary
infrastructures and amenities that befits a megacity status. The
Agency in the year under review organized a special
stakeholders’ conference for professionals in the Informal
Sector with a view to addressing the low level of tax
compliance in this sector. The meeting hosted by His
Excellency, Governor Babatunde Raji Fashola (SAN), appealed
to the conscience of the recalcitrant taxable residents of Lagos
State who have refused to fulfill their civic duty to do so before
the 12th of April, 2013.
17

18. 3.6 Collaborations
•
•
•
•
LIRS partnership with Banks ,which is mutually beneficial, has
reduced the turnaround time between tax assessment and
payment.
Nigeria Employers’ Consultative Association (NECA) in
collaboration with LIRS organized an interactive session for
the Organized Private Sector on the Challenges Faced by Tax
Authorities in discharging their duties at the Lagos Airport
Hotel on 21st of May 2008.
LIRS continue to collaborate with the State’s MDA through
mandatory confirmation of tax compliance status of
Individuals transacting business with the State Government.
Presently, LIRS has assessment desk in the offices of Land
Bureau , LASTMA and the State’s High and Magistrate Courts.
Collaboration with other Revenue Agencies
18

19. 3.7 Advocacy, Enlightenment and
Education
•
Tax payers’ education and enlightenment on the
need to pay taxes have been sustained through
unprecedented tax campaigns in Prints, on Radio
and Television.
•
LIRS took its tax campaign to the Traditional rulers
thereby co-opting them into the tax drive
•
Testimonial Adverts by notable and respected
citizen of the State - religious leaders, celebrities
etc
•
•
Tax awareness road shows in collaboration with
Not –for- Profit Organisations
Participation in events and shows
19

20. ADVOCACY,
ENLIGHTENMENT AND
EDUCATION
• Participation in Trade Fairs
• Tax Education and Enlightenment
Team (TEET) Activities : To ensure
accelerated and full coverage of the
state’s tax jurisdiction, LIRS commenced
Task Force operations (with 3 teams),
charged with the responsibility of
visiting Companies and Business
establishments within the State to check
tax compliance and educate the
taxpaying public. The activities of the
task forces have resulted in increased
tax payers’ base and compliance. The
Task Force teams have been increased
from 3 to 45.
20

21. ADVOCACY,
ENLIGHTENMENT AND
EDUCATION
• Publication of Frequently Asked
Questions on various tax issues.
• LIRS sponsored Television
Programme ‘Tax Talk ‘ is aired
weekly on 3 Television Stations .
• Sponsored page in the Financial
Nigeria.
• Distribution of Fliers
•Publication of Employers’
Guideline
• Functional website
www.irs.lg.gov.ng , with up to date
information and downloadable
forms
21

22. 3.8 Enforcement
•
When every other effort fails to recover tax assessed from
defaulting tax payers and after due process, we have had cause to
and will continue to invoke the distrain power of the Board as
contained in the relevant sections of the Personal Income Tax Act.
•
The LIRS has the full support of the State Government and the office
of the Governor of Lagos State to enforce the Law which includes
the power to distrain defaulters.
•
We ensure that all the required notices are given and it is only
when no response is received from the defaulter that we take
enforcement action.
•
•
We have also started pursuing the criminal provisions of the law
with a view to bringing to book individual officers or directors of tax
defaulting companies.
Necessary machinery has been put in place to ensure quick
prosecution of tax defaulters which will act as deterrent to future
22
defaults.

23. 3.8 Enforcement
•
Establishment Of Criminal Prosecution Unit:
part of the strategies of the LIRS aimed at
ensuring that all Income earning residents of
Lagos State pay taxes, the Agency
established the Criminal Prosecution Unit.
The Prosecution of tax defaulters is being
handled by the office of the Lagos State
Attorney General.
23

24. 3.9 Highlights of Other
Strategies
•
Addressing the practical issues highlighted above.
•
Putting in place a dynamic and proactive Revenue
Administration.
•
Ensuring effective and efficient collection of all tax
revenues due to the Lagos State Government under the
relevant Federal and State Laws.
•
Vigorously pursuing programmes that will lead to
widening the tax net and ensuring that all tax payers pay
the adequate tax as and when due.
•
Ensuring sustainable IGR to meet the ever increasing
expenditure profile of the State thereby making the State
less reliant on allocations from the Federation Account.
24

25. CHAPTER 4
The Harmonization of
Levies and Charges at the
Local Government Level
(The Lagos State Model)
25

26. The Harmonization of Levies and
Charges at the Local Government
(The Lagos State Model)
(The Lagos State Model)
On April 10, 2010, His Excellency, Mr. Babatunde Raji Fashola, SAN
signed into Law the Local Government Levies (Approved List For
Collection) Bill. This Law gives vital information to the public by
prescribing the levies that may be collected by Local Government
Authorities in Lagos State, and making explicit provisions for the
publication and administration of such levies. In the Schedule to this
legislation is a list of levies that could be legally charged and collected
by local government authorities in the State. By virtue of section 1(3) of
the Law,
“No levy shall be collected by or on behalf of any Local Government
Authorities in Lagos State unless it is specified in the Schedule to this Law.”
The provisions of the Law also include the regulation of the appointment
of revenue agents, prohibition of roadblocks or other obstruction for
purpose of tax collection, and required use of identification badges by
revenue officials of local governments.
The approved List of Levies must also be pasted at a conspicuous place
in all revenue offices of the Local Government Authority to ensure hat
adequate publicity is given to the people.
26

27. Conclusion
As highlighted in this presentation we have seen the
graphs discussed above, Lagos State has witnessed
phenomenal infrastructural and social development
in the past years, most of which were and are still
being financed with taxes.
Through the social contract process citizens accept
and comply with the tax laws in exchange for
government providing effective and efficient service
delivery.
Taxation is key to promoting sustainable growth and
poverty reduction.
It provides for a stable and predictable fiscal
environment to promote growth and help
Government finance their social and physical
infrastructural needs.
Combined with economic growth, it reduces long
term reliance on aid and ensures good governance
by promoting the accountability of governments to
their citizens
A presentation by The Executive Chairman
27

28. The Harmonization of Levies and
Charges at the Local Government
(The Lagos State Model)
(The Lagos State Model)
The Tenement rates, Neighbourhood Improvement Charges and
Ground Rents have been consolidated into the Land Use Charge which
is only payable annually.
It is worthy of mention that all levies collected by local government
council on consignment of goods passing through their respective areas
have all been consolidated into one charge called the Wharf Landing
Fee . This fee is chargeable only at a single point near the port of entry.
The above consolidation of levies has automatically abolished multiple
payment of user charges within the State.
28

29. CHAPTER 5
The Lagos State IGR Trend
Analysis
29

30. LAGOS STATE IGR TREND 2006 - 2012
2005
%
2006
%
2007
%
2008
%
2009
%
2010
%
2011
%
2012*
%
TOTAL
IGR
48,145,289,674.55
100
66,874,438,807.69
100
94,854,379,863.51
100
156,093,785,351.38
100
178,464,758,761.40
100
173,447,725,478.21
100
199,948,592,939.22
100
219,321,009,806.81
100
LIRS
34,389,664,035.07
71%
50,166,358,602.39
75%
68,344,401,762.18
72%
109,987,437,244.87
70%
139,141,615,253.03
78%
148,445,170,551.38
86%
167,463,534,675.95
82%
172,160,428,552.23
80%
OTHERS
13,755,625,639.48
29%
16,708,080,205.30
25%
26,509,978,101.33
28%
46,106,348,106.51
30%
39,323,143,508.37
22%
25,002,554,926.83
14%
32,485,058,263.27
18%
47,160,581,227.58
20%
Source: Report of the Accountant General Financial Statements (2006 - 2011)
2012 figures as reported by the Lagos State Ministry of Finance
30

31. LAGOS STATE BUDGET SIZE VS INTERNALLY GENERATED REVENUE 1999 - 2011
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
BUDGET SIZE
17.884
42.942
48.915
58.235
62.653
77.407
112.729
224.232
274.762
403.401
405.000
411.571
445.180
I.G.R
14.636
11.607
17.885
20.776
27.537
33.998
42.283
61.684
83.020
129.563
178.100 173.447
199.948
Source: Report of the Accountant General Financial Statements (2006 - 2011)
31

32. GRAPH INDICATING THE LEVEL OF EACH STATE'S FINANCIAL DEPENDENCE
ON FEDERAL ALLOCATION (IN % TERMS) - 2007
Note: Data not available in respect of Delta, Kaduna, Kwara and Sokoto States
Source of Data: Joint Tax Board
A presentation by The Executive Chairman
32

33. GRAPH INDICATING THE LEVEL OF EACH STATE'S FINANCIAL DEPENDENCE
ON FEDERAL ALLOCATION (IN % TERMS) - 2008
Note: Data not available in respect of Delta, Kaduna, Kwara and Sokoto States
Source of Data: Joint Tax Board
A presentation by The Executive Chairman
33

34. Appendix
Schedule
Levies to be collected by the Local Government Authorities - As Harmonised by
the Lagos State Government
1.Shops and kiosks rates.
2.Approved open market levy.
3.Tenement rates (only on properties not yet assessed for Land Use Charge).
4.Licensing fee for sale of liquor.
5.Slaughter slab license fee in abattoirs under local government control.
6.Marriage, birth and death registration fees.
7.Street naming registration fee.
8.Motor park levy (including motorcycles and tricycles).
9.Parking fee on local government streets or roads as may be approved by the
State Government.
10.Domestic animal licence fee (excluding poultry).
11.Licence fees for bicycles, trucks, canoes, wheelbarrows and carts (other than a
mechanically propelled trucks).
12.Radio and television licence fee (excluding radio and television in motor
vehicles, transmitters and other communication equipment).
13. Public convenience, sewage and refuse disposal fees.
14.Cemetery and burial ground permit fee.
15.Permit fee for private entertainment and merriment in public places (excluding
roads and streets).
16.Wharf Landing Fees (administered by a central collection agency).
A presentation by The Executive Chairman
34

35. Appendix
LIST OF APPROVED TAXES FOR EACH TIER OF GOVERNMENT
PART 1 – TAXES TO BE COLLECTED BYTHE FEDERAL
GOVERNMENT
Companies Income Tax
Withholding tax on company, residents of the Federal Capital
Territory, Abuja and non- residents individual.
Petroleum Profits tax
Value added tax
Education tax
Capital gain tax on residents of the Federal Capital Territory, Abuja,
bodies corporate and non-resident individuals
Stamp duties on bodies corporate and residents of Federal Capital
Territory, Abuja
Personal income tax in respect of(a)members of the Armed Forces of
the Federation; (b)members of Nigeria Police Force; (c)Residents of
the Federal Capital Territory, Abuja; and; (d)Staff of the Ministry of
Foreign Affairs and non-resident individuals.
A presentation by The Executive Chairman
35

36. Appendix
PART 11 – TAXES AND LEVIES TO BE COLLECTED BY THE STATE GOVERNMENT
1. Personal income tax in respect of
(a) Pay-as-you-earn (PAYE); and
(b) Direct taxation (Self assessment)
2. Withholding tax (individuals only)
3. Capital gain tax (individuals only)
4. Stamp Duties on instruments executed by individuals
5. Pools betting and lotteries, gaming and casino taxes
6. Road taxes
7. Business premises registration fee in respect of(a) Urban areas as defined by each state, maximum of(i) N10,000 for registration, and
(ii) N5,000 per annum for renewal of registration.
(b) rural areas
(i) N2,000 for registration, and
(ii)1,000 per annum for renewal of registration
Development levy(individuals only)not more than N100 per annum on all
taxable individuals.
Naming of streets registration fees in the State Capital .
Rights of Occupancy fees on lands owned by the State Government in urban
areas of the state.
Market taxes and levies where state finance is involved.
A presentation by The Executive Chairman
36

37. Appendix
PART 111- TAXES AND LEVIES TO BE COLLECTED BY THE LOCAL GOVRNMENT
Shops and kiosks rates
Tenements rates
On and Off liquor license fees
Slaughter slab fees
Marriage, birth and death registration fees
Naming of street registration fees, excluding any street in the State Capital
Right of Occupancy fees on lands in rural areas, excluding those collectable by the
Federal and State Governments.
Market taxes and levies, excluding any market where State finance is involved
Motor park levies
Domestic animal license fees
Bicycle, truck, canoe, wheelbarrow and cart fees, other than a mechanically propelled
truck
Cattle tax payable by cattle farmers only
Merriment and road closure levies
Radio and television license fees(other than radio and television transmitter)
Vehicle radio license fees(to be imposed by the Local Government of the State in which
the car is registered)
Wrong parking charges
Public convenience, sewage and refuse disposal fees
Customary burial Ground permit fees
Religious places establishments permit fees
Signboard and advertisement permit fees
A presentation by The Executive Chairman
37

38. Appendix
Mr. Tunde Fowler (Executive Chairman, LIRS) presenting Award Plaque for compliance with
the Law with respect to Personal Income Tax to Alhaja Abibat Mogaji ( Iyaloja General)
A presentation by The Executive Chairman
38

39. Appendix
‘Nigerians who do not have the tax culture are now responding
positively to tax payment’. ‘I enjoin every resident of Lagos State to
pay their taxes to ensure continued and unhindered development
in Lagos State.’
excerpt from the Address delivered by Comrade Akeem .A.
Kazeem, The Chairman Trade Union Congress Of Nigeria (TUC)
Lagos State Council at The 2013 Centenary May Day Rally Onikan
Stadium, Lagos.
A presentation by The Executive Chairman
39

40. Appendix
Paying Taxes 2010 – The Global Picture
International Finance Co operation and PriceWaterHouse
40

41. Appendix
Paying Taxes 2010 – The Global Picture
International Finance Corporation and PriceWaterHouse
41

42. THANK YOU!
42