The Federal Inland Revenue Service has launched a sweeping review of all tax incentives under its purview, aiming to boost transparency, correct inefficiencies, and guarantee value for money within Nigeria’s tax expenditure framework.
This development was revealed by the Executive Chairman of FIRS, Zacch Adedeji, who was represented by Mrs. Bolaji Akintola, Coordinating Director of the Corporate Services Group, at a tax expenditure workshop held on Tuesday in Abuja.
Adedeji disclosed that the Service had already uncovered several infractions through its ongoing monitoring and evaluation processes.
He stated that the FIRS Tax Expenditure Management unit has been directed to scrutinize the foundational structures of all incentives, with early findings pointing to serious challenges demanding urgent action.
Among the issues identified are conflicting and, in some cases, contradictory tax incentives; a lack of stakeholder coordination; the absence of a centralised framework to manage incentives; and limited legislative oversight due to the lack of a dedicated tax committee in the National Assembly.
Also flagged were instances of political interference, concerns tied to the OECD’s Base Erosion and Profit Shifting Pillar II framework, and a lack of clarity regarding the rationale behind certain exemptions.
According to Adedeji, “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.”
Looking ahead, the FIRS Chairman said the agency is prepared to partner with regional and global organizations such as the Economic Community of West African States (ECOWAS), the International Monetary Fund (IMF), the World Bank, and the Addis Tax Initiative (ATI) to establish a transparent and effective tax expenditure value chain.
He noted that while certain abuses have already come to light, broader questions persist about the continued necessity of many existing tax incentives. To confront these concerns, the FIRS is recommending a series of reforms, including amendments to the legal foundations of tax expenditures.
According to Adedeji, these changes are necessary to stop abuse, bring the system into compliance with international tax frameworks like as the BEPS Pillar II minimum tax regulations, and adjust it to changing economic circumstances.
FIRS is also advocating for a centralized structure to regulate and oversee tax incentives. Such a system, the Service argued, would conduct regular cost-benefit analyses (CBAs) to determine the justification for maintaining each incentive.
Under this model, overlapping roles across Ministries, Departments, and Agencies would be eliminated.
The Executive Chairman emphasised the importance of cross-agency collaboration in overhauling the tax expenditure regime, pointing out that agencies such as the Nigerian Investment Promotion Commission (NIPC), the Nigeria Export Processing Zones Authority (NEPZA), and the Oil and Gas Free Zones Authority (OGFZA) continue to bear the majority of the responsibility for evaluating tax incentive impacts.
Adedeji also highlighted mounting pressure on the FIRS to raise tax revenues at a time when direct remittances from some MDAs to the Federation Account are declining.
Despite these hurdles, he said the FIRS has maintained significant tax revenue generation through strategic reforms and initiatives. In 2024, the agency collected N21.6 trillion and is targeting N25.2 trillion for the current fiscal year.
Earlier during the workshop, Head of the Tax Expenditure Management unit, Ikata John, reiterated the importance of incentives in promoting investments, supporting key industries, and advancing policy goals.
However, he warned that their fiscal implications must be rigorously monitored.
He cautioned that mismanaged or poorly designed incentives could erode government revenue and negate their intended benefits.
“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 said.
John concluded by affirming the FIRS’s commitment to building a tax system that is “fair, efficient, transparent, and accountable.”
