•Abideen Akande
The Special Adviser to the Executive Chairman of the Lagos State Internal Revenue Service (LIRS), Abideen Akande, in this interview, speaks on why filing an annual tax return is compulsory for every Lagos resident, penalties for defaulters and the intent of the tax reform, reports The Guardian.
Excerpts:
Why does the Lagos State Internal Revenue Service (LIRS) make filing of annual tax returns compulsory for residents of the state?
Filing of returns allows the tax authority to know how much you have earned in the preceding year and how much tax, if any, you have already paid in advance. Nigeria operates a self-assessment tax system. This means that you voluntarily declare your income for a defined period.
When I was growing up, the assessment period used to run from April to March of each year, but it has now been aligned with the calendar year, which is January to December of each year. Unlike the filing of annual tax returns by employers, which is done between 1st to 31st of January every year, filing of returns by individuals involves disclosing the income you earned in the previous year because that year has already ended.
The interesting thing is that people often talk about constitutional rights, but shy away from constitutional obligations.
Unlike the filing by employers that is done in January, which is predicated only on statutory provisions, filing by individuals is actually predicated on both the Constitution and the law.
That tells you how important it is. In any organised society, you must have a tax system. As the saying goes, ‘aside from taxes, the only other certainties are death and change.’ So, tax compliance is inevitable.
Here in Nigeria, it is based on self-assessment. You declare how much you earned. If you have already paid some tax in the preceding year, or if tax was deducted from your income at source, you disclose it to the tax authorities. Then, of your own volition, you may say: ‘This is how much I earned, and this is how much has already been deducted from me.’ If you still owe the State government, say, N5 or N10, you go ahead and pay it.
If you cannot pay immediately, you can approach the tax authorities and request a payment plan. For instance, you may say: ‘Please allow me to pay N3 now, N3 next month, and N4 later.’ If the tax authority is satisfied that you are genuinely facing financial challenges, it may approve the arrangement.
But if it believes you are simply trying to evade payment, it may decline your request and proceed to recover the money, using the provisions available under the law.
Are there specific groups of people the state government is targeting with this?
No, it is not optional. Even if by your own assessment, you believe you do not owe the government any money, you are still expected to file. For example, you may indicate that all the income you earned last year was below N840,000, which is around the annual equivalent of the minimum wage threshold. In that case, you would automatically not be liable to pay tax.
However, you must still declare that you earned N800,000 from different sources.
The government has set a threshold below which it does not tax the poor; your tax liability in that situation would be zero, but you still need to inform the government that you earned that amount of money you claimed.
Is there a specific place residents are expected to do this, considering the work pressure in Lagos?
In anticipation of this challenge, the state has already begun digitising the filing process in Lagos around 2017 or 2018.
When I started work in the early 1980s, the Form A used then was about six pages long, roughly the size of an A3 document and it could cover the entire table. One of the first things we did as a management team was to reduce it to two pages. Eventually, we simplified it to just one page.
After that, we digitised the process. In 2018, we introduced what we called a hybrid filing system, where some people filed manually while most filed electronically. By 2021, after COVID-19, we stopped manual filing completely in Lagos. Everything is now done electronically. You simply go to the e-tax platform at e-tax.lirs.net. You input your details, and the system guides you to the filing page. It shows where to enter your income, your expenses, and any taxes that may have been withheld from you. Remember that the form called ‘Form A’ is a declaration of income and claim for reliefs.
The law provides statutory relief. For instance, contributions to a pension are tax-free.
Health insurance contributions are tax-free. Contributions to the National Housing Fund are tax-free. If you live in your own house financed through a mortgage, the interest component of the mortgage payment is tax-free. Life insurance premiums for yourself or your spouse are also allowable deductions.
However, you cannot claim both mortgage interest relief and rent relief at the same time. If you live in a rented apartment, the new law allows you to claim rent relief, capped at N500,000 or 20 per cent of your gross income, whichever is lower.
Narrations, record-keeping are key for businesses to prevent presumptive tax’
LIRS restates January 31 deadline for employers’ yearly tax returns filing
Now, regarding what we are filing: it is the income of the preceding year. Since we are in 2026, you will file income earned from January 1, 2025, to December 31, 2025. You must disclose all income sources: salary, side businesses, rent and even investment income like dividends. Dividends are usually taxed at source, so the tax deducted is final.
For instance, if you received N100,000 in dividends from BUA Cement, the company would already have deducted the applicable tax before payment. You still declare the income, but it will not be taxed again.
This helps the tax authority to understand the full size of economic activity in the state, which also contributes to measuring the Gross Domestic Product (GDP) of Lagos State, including household economic activities.
What specific month in a year are individuals expected to file their taxes?
The filing window opens from January 1 and the deadline is March 31. However, Nigerians tend to wait until the last minute. Imagine a room that can seat 20 people. If people arrive gradually from 9 a.m., there will be no problem. But if all 20 arrive at the same time, say at 2:30 p.m., there will be chaos at the door.
To manage this, we increase the system bandwidth during the filing season to handle higher traffic. Still, my advice is simple: once you know your total income, usually by mid-January, go ahead and file. There is no need to wait until March.
How will this apply to individuals who recently changed jobs or whose employers delay payment of salaries?
In such cases, you are only assessed on the income actually paid to you. For example, if you worked for 12 months, but your employer only paid you for 10 months, you will declare only the amount received for those 10 months. If the remaining salaries are paid later, you will declare them in the following year’s filing. In simple terms, the taxman is only interested in money that actually entered your pocket in a particular year period.
For those whose employers have filed tax returns on their behalf, won’t this amount to double-filing for them?
It is not double-filing. For example, if your employer paid you N100 and deducted N8 as tax before paying you N92, the employer would have declared that to the tax authority.
Now, if you earned N20 from side businesses, you will file a total income declaration of N120, N100 from your employer and N20 from other sources. You will also indicate that N8 tax has already been paid by your employer.
If your assessment shows that your total tax liability should be N11 and N8 has already been paid, you will simply pay the balance of N3. This allows the tax authority to cross-check records and confirm that what your employer declared matches what you reported.
Some fear that filing taxes may amount to multiple taxation by the government. How do you address this concern?
The truth is that under the new tax regime, most people will actually pay less tax or no tax at all. From our data, 54.7 per cent of taxpayers would pay zero tax under the new regime. 43.7 per cent would pay less tax than before, while only about 1.6 per cent would pay more. This analysis was based on a sample size of about 1.5 million taxpayers in Lagos.
The reform was designed to reduce the burden on low-income earners, allowing households to have more money for food, health care and education.
Is the LIRS encouraging every resident of Lagos who earns income to file their tax before March 31?
Yes, I advise everyone to do so in their own interest. Even people in the informal sector can file through simplified processes. If their income is below the taxable threshold, their tax liability will simply be zero. But if they refuse to file, tax officers may apply a presumptive tax of 1 per cent of estimated turnover.
For example, someone who files and declares N3 million turnover may still pay zero tax because their actual income falls below the taxable threshold. Another person with the same turnover who fails to file may be assessed 1 per cent of N3 million, which is N30,000. So, filing protects the taxpayer.
For clarity, what are the penalties for defaulting?
Under the new law, a taxable person who fails or refuses to file returns, or knowingly submits incomplete or inaccurate returns, is liable to an administrative penalty. The penalty is N100,000 for the first month of default and N50,000 for each subsequent month until compliance is achieved. N100,000 can buy your internet data for an entire year. So, it makes more sense to comply than to pay such penalties.
