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The Federal Inland Revenue Service (FIRS) has launched a comprehensive review of tax incentives under its administration to enhance transparency, eliminate inefficiencies, and ensure value for money in Nigeria’s tax expenditure system. This move aims to address issues such as overlapping and contradictory tax incentives, lack of coordination among stakeholders, and weak legislative oversight.

The FIRS has identified several problems with the current tax incentive system, including overlapping and contradictory tax incentives, lack of coordination among key stakeholders, absence of a central framework for managing incentives, and weak legislative oversight due to the non-existence of a dedicated tax committee in the National Assembly. Other issues include political interference in tax matters, concerns arising from the OECD’s Base Erosion and Profit Shifting (BEPS) Pillar II framework, and ambiguity around the rationale for granting certain exemptions.

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FIRS Executive Chairman, Dr Zacch A. Adedeji, emphasised the importance of data in tax expenditure reporting, stating, “The Service strongly believes that data is life in tax expenditure reporting. That is why the Tax Expenditure Management unit will receive the necessary support from the service to harness our integrated digital tax administration system, TaxPro-Max, and any other ICT tools needed to ensure accurate and efficient data collection.”

The FIRS is proposing several reforms, including amendments to the legal instruments that enable tax expenditures, to address misuse and align the system with global tax reforms like the BEPS Pillar II minimum tax rule. The agency is also advocating for the establishment of a centralised mechanism for regulating and monitoring tax incentives, which would conduct continuous cost-benefit analyses to determine whether each tax incentive remains justifiable.

Dr Adedeji highlighted the agency’s commitment to promoting a fair, efficient, transparent, and accountable tax system, stating that the FIRS is ready to collaborate with regional and international organisations to build a robust tax expenditure value chain that supports accountability and effectiveness.

The Head of the Tax Expenditure Management unit, Mr Ikata John, noted, “This workshop provides a critical platform for stakeholders to examine whether the tax expenditures are achieving their intended goals and if the associated costs are being accurately measured.” He emphasised the need for careful management of tax incentives to prevent revenue loss, adding that “the FIRS remains committed to promoting a tax system that is fair, efficient, transparent, and accountable.”

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The FIRS collected ₦21.6 trillion in tax revenue in 2024 and is targeting ₦25.2 trillion in the current fiscal year. Dr Adedeji highlighted the agency’s efforts to sustain significant contributions to the Federation Account despite declining direct contributions from some Ministries, Departments, and Agencies (MDAs)

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