In a bid to capture more people in the tax net and boost its revenue, the Lagos State Internal Revenue Service (LIRS) is reportedly planning to start using Biometric Verification Numbers (BVN) to taxpayers. The move has attracted wide-spread criticisms.
According to a report released by Andersen Tax LP, the LIRS has constantly been considering ways to increase taxpayers’ database to boost revenue, with the most recent effort which is to leverage on taxpayers BVN.
The plan: LIRS recently issued a Public Notice on June 4th, 2019, informing the public of its intention to integrate the existing Taxpayers Identification Digit (PID) into the nationwide Tax Identification Number (TIN) system with the Joint Tax Board. Note that the PID is a taxpayer’s identity code issued by the LIRS to taxpayers in Lagos State.
- Meanwhile, in order to integrate the PID into TIN, the LIRS intends to leverage on taxpayers’ BVN.
- As a result of this, corporate organizations will ensure their employees provide their BVNs for processing of their Tax Clearance Certificates (TCCs)
- Also, self-employed persons will be required to provide their BVN to the LIRS for the creation of their unique identification number.
Major Concerns: Following this development, concerns have been mooted in different quarters. BVN information is very sensitive and private, and as such, may require a court order or CBN approval before such information can be released to the LIRS. It then begs the question of why the LIRS is moving to make BVN a requisite parameter for tax registration and compliance.
- The issue concerning measures to protect and guard the privacy of taxpayers has been raised.
- Another issue is how businesses will organize their affairs going forward such that minimal tax footprints are created.
- The LIRS is of the view that the BVN is generally the most credible identity management database with the widest coverage available within the country.
- Meanwhile, it has been argued that LIRS does not require BVN in its drive to sanitize the process of tax collection and administration in Lagos State
- Issues regarding why LIRS ignored less risky means of certifying the authenticity of the identity of taxpayers, such as national identity cards, international passport, or drivers’ licenses.
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Against the foregoing, if the LIRS successfully implements this, No transaction, personal or business, will escape the all-seeing eyes of the LIRS.
What the law says: According to the public notice issued by LIRS, BVN will now be required to access all LIRS’ electronic platforms including taxpayer registration, creation of Payer ID, payment of taxes, and validation of taxpayers’ profile.
While reactions still trail the purported move by the LIRS to integrate taxpayers’ BVN to the tax payment system, the move by the LIRS may not be backed up by the law. Here is a breakdown of what the law says;
- The authority to make such requests is embedded in Section 48(4) of the Personal Income Tax Act as Amended (PITAM)
- The tax act empowers the State tax authority to give notice to any person to deliver the required details
- Information required may include a name and an address specified therein within the time limited for the purpose of obtaining information in respect of the income or personal circumstances of any individual.
- The operation of BVN in Nigeria is regulated by the Central Bank of Nigeria (CBN)
Should you be worried? With the latest plan by LIRS, this may send some fears into the wind due to the fraudulent practices that may be carried out as a result of releasing bank account information like BVN. Meanwhile, the law is clear on this. Therefore, there is no need to panic.
- Section 48(2) of the PITAM prohibits officers or employees of the state tax authority from disclosing taxpayers’ information
- Also, section 37 of the 1999 Constitution of the Federal Republic of Nigeria guarantees and protects the privacy of citizens.
- While the contention is on-going, a court order may be required to restrain the LIRS move, as this may be described as an infringement on the right to privacy of citizens as provided in the Constitution.
What you can do: In the meantime, if implemented, businesses and individuals may need to pay more attention to how personal and business affairs are organized.
- Going forward, maintain an archive of source documents issued in respect of transactions made.
- For companies, essential documents in relation to taxes should be kept
- In addition to tracking business expenses, it is equally important to separate personal records from business records, especially those linked with bank statements.
- For instance, care should be taken in using business funds to make personal payments, such as children school fees, vacation expenses, etc.
- Taxpayers are also encouraged to seek advice from experienced tax professionals on how to manage their businesses going forward.
A call for caution to LIRS: Although it was disclosed that part of this LIRS’s plan is to put in place IT-based safeguards critical to effective and efficient tax administration practice, it was stated that;
- That the LIRS has guaranteed commitment to the confidentiality of taxpayers’ information in its custody.
- However, Andersen Tax LP is of the view that this calls for the utmost care and diligence on the part of the tax authority.
- Due to the recent global awareness of data protection regulation, it is thus important for the LIRS to consciously put impregnable measures in place to ensure data privacy and protection of taxpayers.
In conclusion, it is stated that the need to increase internally generated revenue should be weighed against the need to avoid data security risks to taxpayers.