FIRS Commences Review Of Tax Incentives, Uncovers Infractions

FIRS has commenced the review of tax incentives.

NaijaOnPoint Nigeria reports that the Federal Inland Revenue Service (FIRS) has commenced a comprehensive review of all tax incentives under its administration, citing the need to improve transparency, eliminate inefficiencies, and ensure value for money in the country’s tax expenditure system.

This move was disclosed by the Executive Chairman of the FIRS, Dr. Zacch Adedeji, who was represented by the Coordinating Director of the Corporate Services Group, Mrs. Bolaji Akintola, at the Tax Expenditure Workshop held in Abuja on Tuesday.

Dr. Adedeji said the Service had already identified a number of infractions in the administration of tax incentives, as a result of ongoing monitoring and evaluation processes.

He noted that the Tax Expenditure Management unit within the Service has been mandated to assess the foundational elements of all incentives, with early findings revealing major issues that require urgent attention.

Some of the problems uncovered include overlapping and, in some cases, 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.

Also cited were 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.

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 expressed the agency’s readiness to collaborate with regional and international organizations, including the Economic Community of West African States (ECOWAS), the International Monetary Fund (IMF), the World Bank, and the Addis Tax Initiative (ATI), in building a robust tax expenditure value chain that supports accountability and effectiveness.

He said while some abuses have already been observed, there are broader concerns around the continued relevance of many tax incentives currently in place. To address these issues, the FIRS is proposing several reforms, including amendments to the legal instruments that enable tax expenditures. These changes, Adedeji explained, are critical to addressing misuse, aligning the system with global tax reforms like the BEPS Pillar II minimum tax rule, and making the framework more adaptive to changing economic realities.

The FIRS also advocates the establishment of a centralized mechanism for regulating and monitoring tax incentives. Such an arrangement, it argued, would be able to conduct continuous cost-benefit analyses (CBAs) to determine whether each tax incentive remains justifiable. Duplications and overlaps among Ministries, Departments, and Agencies (MDAs) would be eliminated under this model.

The Executive Chairman stressed the urgent need for inter-agency cooperation to transform the tax expenditure ecosystem, especially as the responsibility for impact assessments and evaluations still lies largely with MDAs such as the Nigerian Investment Promotion Commission (NIPC), the Nigeria Export Processing Zones Authority (NEPZA), and the Oil and Gas Free Zones Authority (OGFZA).

Dr. Adedeji drew attention to the growing pressure on FIRS to boost tax revenue collection at a time when direct contributions from some MDAs to the Federation Account are declining.

Despite these challenges, he said, the FIRS has managed to sustain significant contributions through reforms and strategic initiatives. In 2024, the agency collected a total of N21.6 trillion in tax revenue and is targeting N25.2 trillion in the current fiscal year.

Earlier at the event, Mr. Ikata John, Head of the Tax Expenditure Management unit, emphasized that while tax incentives play an important role in encouraging investments, supporting industries, and achieving policy objectives, their fiscal impact must be carefully managed.

He noted that poorly designed or inadequately monitored incentives can significantly reduce government revenue, defeating their original purpose. “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.

Mr. John added that the FIRS remains committed to promoting a tax system that is fair, efficient, transparent, and accountable.

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