FIRS: purpose, functions, power, and history

What is the Federal Inland Revenue Service (FIRS)

The Federal Inland Revenue Service (FIRS) is a regulatory body in Nigeria that is responsible for the assessment, collection, and accounting of taxes for the Federal Government. Established in 1943, the FIRS has gone through various reforms and restructuring to become a formidable revenue-generating agency.

This article provides an overview of the FIRS, its history, functions, powers, and its role in the Nigerian economy.

History of FIRS the Federal Inland Revenue Service (FIRS)

The Federal Inland Revenue Service (FIRS) was established in 1943 by an ordinance that gave the then-colonial government the power to assess, collect, and account for income tax. Initially, the mandate of the service was limited to collecting income tax from individuals, but over time, its functions expanded to cover other forms of taxes such as value-added tax (VAT), withholding tax, and capital gains tax.

The FIRS has undergone various transformations since its establishment, with each restructuring aimed at making the service more efficient and effective. One of the most significant reforms in the history of the FIRS was the merger with the Joint Tax Board (JTB) in 2007. The JTB, which was established in 1961, was responsible for harmonizing tax policies and promoting collaboration among tax authorities at the state and federal levels. The merger with the FIRS was aimed at achieving a more coordinated approach to tax administration in Nigeria.

In 2016, the FIRS went through another major reform that saw the restructuring of its operational units. The service was divided into four departments: the Large Taxpayers Office (LTO), the Medium Taxpayers Office (MTO), the Small Taxpayers Office (STO), and the Digital Support Services Department (DSSD). The objective of this restructuring was to improve tax compliance, increase revenue generation, and enhance the efficiency of the tax system.

Powers and functions of the Federal Inland Revenue Service

The FIRS is the primary agency responsible for the administration of tax laws in Nigeria. The service has the power to assess, collect, and account for various forms of taxes on behalf of the Federal Government. Some of the key functions of the FIRS include:

1. Tax assessment

The FIRS is responsible for assessing the tax liability of individuals and corporate entities in Nigeria. The service uses various tools such as tax audits, investigations, and information gathering to determine the tax liability of taxpayers.

2. Tax collection

The FIRS is also responsible for collecting taxes on behalf of the Federal Government. The service uses various methods such as direct debit, bank transfers, and electronic payment channels to collect taxes from taxpayers.

3. Tax enforcement

The FIRS has the power to enforce tax laws and regulations in Nigeria. The service can impose penalties, fines, and interest charges on taxpayers who fail to comply with tax laws.

4. Taxpayer education

The FIRS is also responsible for educating taxpayers on their tax obligations and rights. The service provides various resources such as publications, workshops, and seminars to educate taxpayers on tax laws and regulations.

5. Tax policy formulation

The FIRS is involved in the formulation of tax policies in Nigeria. The service provides input on tax laws and regulations to the Federal Government and other stakeholders to ensure that the tax system is fair, efficient, and effective.

The importance of FIRS in Nigeria’s economic development

The FIRS plays a crucial role in the economic development of Nigeria. The revenue generated by the service is used to finance critical government programs and projects such as infrastructure development, education, healthcare, and security. In 2021, the FIRS announced that it had generated a total of N4.95 trillion ($12.1 billion) in revenue for the Federal Government, which represents a significant contribution to the country’s economy.

The FIRS is also essential for the promotion of tax compliance in Nigeria. Tax compliance is crucial for the sustainability of government programs and the overall development of the country. Through its various initiatives and reforms, the service has been able to increase tax compliance among taxpayers, which has led to an increase in revenue collection.

Furthermore, the FIRS is critical for the promotion of transparency and accountability in the Nigerian tax system. The service has implemented various measures to ensure that tax collection is done in a transparent and accountable manner. For example, the FIRS has introduced a Taxpayer Identification Number (TIN) system, which assigns a unique identification number to taxpayers. This system makes it easier for the service to track and monitor taxpayer compliance and revenue collection.

FIRS and tax administration in Nigeria: challenges and reforms

Despite the significant contributions of the FIRS to the Nigerian economy, there are still some challenges facing tax administration in Nigeria. One of the major challenges is the issue of tax evasion and avoidance. Many taxpayers in Nigeria do not comply with tax laws, either by evading taxes or exploiting loopholes in the system. This has led to a significant loss of revenue for the government.

To address this challenge, the FIRS has implemented various reforms aimed at improving tax compliance and reducing tax evasion. For example, the service has introduced a Voluntary Assets and Income Declaration Scheme (VAIDS) that encourages taxpayers to voluntarily declare their assets and income and pay outstanding taxes. The service has also increased the use of technology in tax administration, which has improved the efficiency of tax collection and reduced the opportunities for tax evasion.

Another challenge facing tax administration in Nigeria is the issue of multiple taxation. The FIRS and state revenue services often overlap in their tax collection efforts, which can lead to double taxation and discourage investment in the country. To address this challenge, the FIRS has collaborated with the JTB and state revenue services to harmonize tax policies and eliminate multiple taxation.

The future of FIRS

The FIRS has demonstrated its commitment to improving tax administration and revenue generation in Nigeria through various reforms and initiatives. As technology continues to advance, the service is expected to leverage it to improve the efficiency of tax collection and reduce the opportunities for tax evasion.

In the future, the FIRS is also expected to continue collaborating with other regulatory bodies in the country to harmonize tax policies, eliminate multiple taxation, and promote sustainable economic development. The service is also expected to continue its efforts to improve tax compliance among taxpayers and promote transparency and accountability in the Nigerian tax system.

Conclusion 

The FIRS is a critical regulatory body in Nigeria that has played a significant role in revenue generation and tax administration. Despite some challenges, the service has implemented various reforms and initiatives aimed at improving tax compliance and revenue collection.

The future of FIRS looks promising, and it is expected to continue playing a crucial role in the development of Nigeria’s economy.

Presently, the federal government through the FIRS collects VAT in Nigeria, but personal income taxes are collected by the various states’ boards of internal revenue.