Information Technology in Increasing Tax Revenue

The recent economic situation has put Nigeria in a frantic search for alternative sources of revenue as the petroleum revenue is on a nosedive. This has drawn more attention to the tax revenue. However, the taxation sector is encumbered with a lot difficulties in effectively generating enough revenue to keep the Nigerian economy afloat. The inability of the tax system to effectively and accurately generate the tax revenue has led to problems like tax evasion, double taxation and even double evasion. In light of this problem, this essay will be addressing the role of information technology in effectively increasing the generation of tax revenue.

The importance of information technology in tax administration cannot be overemphasized. Information technology allows for the effective and efficient administration of the tax system. Information technology used in the tax system may be referred to as Tax technology. Tax technology streamlines processes and makes them more efficient by enabling the flow of data. This results in far fewer hours and resources spent on tax processes. The proper administration of information technology to generating tax revenue will result in the increase in the revenue from taxes.

At a recent tax stakeholder forum organized by PwC, a survey was conducted to find out why many Nigerians do not pay tax. Interestingly, the report of survey did not show that Nigerians didn’t pay tax because they were poor, but quite a large percentage of Nigerians attributed nonpayment of tax to the unclear state of the tax rules and the complexity in the compliance with such rules. The difficulty in ascertaining the tax laws and the complexity in complying with rules is a major bane to the proper and effective tax remuneration. As much as this might to not be a problem to Corporate organizations paying tax on their own behalf and on behalf of their workers, it is a big problem to those in the informal sector. The informal sector include those making their incomes from unregistered businesses and from small scale trading and activities. The tax from the informal sector is just as important as that gotten from corporate businesses and the government.

One question that arises is: how can information technology provide a relief to this problem? Nigeria as a developing nation is becoming more technologically sophisticated, as the ratio of the population that has access to the internet and every form of other technological devices is increasing by the day. In light of this, it would be a step towards development if tax registration is made as easy as possible by making it an online process. The simplification of the registration process and the actual completion of the whole process without stepping into a tax office will guarantee that more people, more income earners will be willing to subscribe to the tax system which in turn will lead to an increased revenue.

In addition to the simplification of the registration process, the payment of taxes should also be a simple process. The payment process can be simplified into two processes. First, ascertaining the tax payable on an income and second, providing simple means by which this tax can be paid. On the first process, contributing to the problem of the complexity of the tax compliance process is the complexity in determining the amount of tax to be paid by the tax payers on their income. This problem can be reduced if there is an online platform that has been inserted with the tax algorithms whereby tax payers log on to, input their income and other necessary information and their tax is calculated for them. On the second process of the actual payment of tax, to ensure effectiveness, online filing and tax payment should be introduced to reduce the compliance time and the associated cost. It will also help reduce human interaction between the taxpayers and the tax officials which could help in checking sharp practices.

By making the registration and payment of tax only an online affair, only the literate or more internet inclined population is being catered for. However the whole population requires consideration, including the not very educated ones. This then brings us to the implementation of tax activities through the use of USSD. Everyone who has a phone can access the USSD. Unstructured Supplementary Service Data (USSD), sometimes referred to as “Quick Codes” or “Feature codes”, is a protocol used by GSM cellular telephones to communicate with the service provider’s computers. USSD can be used for WAP browsing, prepaid callback service, mobile-money services, location-based content services, menu-based information services, and as part of configuring the phone on the network. An example of USSD is the *894# used by First Bank of Nigeria Plc. for its mobile and online transactions. Since the USSD code can be used for bank transactions, it will create a lot of convenience if the tax authorities can implement this method for carrying out tax registration, payment and other related activities.

In conclusion, the tax revenue generating system is faced with a lot of difficulties and some of it include the inability of the tax payers to ascertain the rules guiding the process and also, the complexity in complying with the tax rules. As characteristic of the information technology system, it brings ease, convenience, accuracy and effectiveness. Hence, applying information technology to the tax processes will ensure ease to both the payers and the tax authorities. In consequence, there will be increased tax revenue and in turn, a better standing economy.

Sources:

Taxologist; 7 reasons to transform tax with technology, Thomson Reuters One source

tax-watch-june-2016.pdf https://www.pwc.com/ng/en/assets/pdf/tax-watch-june-2016.pdf

10 Steps Nigeria Should Take to Increase its Tax Revenue | Chukwuebuka Uyanwa | Pulse | LinkedIn https://www.linkedin.com/pulse/10-steps-nigeria-should-take-increase-its-tax-revenue-uyanwa

Nigeria @ 50: Top 50 Tax issues. October 2010, by PriceWaterHouse Coopers, pg. 4

https://en.m.wikipedia.org/wiki/Unstructured_Supplemantary_Service_Data .

Joseph Elijah

0813 745 2353

elijahjoseph14@gmail.com