FG mandates tax identification for banking, financial services in major revenue reform

In a significant move to improve tax compliance and boost government revenue, the federal government of Nigeria has introduced a bill requiring individuals to provide a Tax Identification Number (TIN) before accessing or continuing to operate banking, insurance, and stockbroking services.

This measure, part of the broader tax reform agenda under President Bola Tinubu’s administration, aims to tighten the country’s tax collection system.

The bill, titled “A Bill for an Act to Provide for the Assessment, Collection of, and Accounting for Revenue Accruing to the Federation, Federal, States, and Local Governments; Prescribe the Powers and Functions of Tax Authorities, and for Related Matters,” was presented to the National Assembly on October 4, 2024.

It marks a crucial step in the government’s ongoing effort to reform Nigeria’s tax structure and ensure a more equitable distribution of the tax burden.

According to the proposed law, individuals looking to open a new bank account or operate existing accounts across banking, insurance, stockbroking, and other financial services must provide a TIN.

This policy will enable tax authorities to track financial transactions and ensure that both individuals and businesses are complying with Nigeria’s tax laws.

READ ALSO: Tax revenue from trade, vehicle repair sectors soars by 49% amid inflationary pressures

An exemption has been made for non-resident individuals who earn only passive income from investments within Nigeria. These individuals will not need to register for a TIN, though they will still be required to provide specific information as directed by tax authorities.

Furthermore, the bill allows tax authorities to automatically issue TINs to those who do not apply, notifying them promptly of their registration. This aims to close gaps in the system and prevent individuals from bypassing the requirement.

The bill includes strict penalties for those who fail to comply with the new TIN requirements. A fine of N50,000 will be imposed for the first month of non-compliance, followed by a N25,000 fine for each additional month of continued violation. This is designed to ensure adherence to the new regulations and formalize the country’s economic system by broadening the tax net.

Advertisement

“This move is essential in formalizing the economy and ensuring that individuals who engage in financial services contribute their fair share of taxes,” said Dr. Jide Olumide, a tax policy analyst.

He highlighted that requiring TINs across financial services would make it more difficult for tax evaders to conceal income in bank accounts or investment portfolios.

While many experts have praised the policy as a necessary step in enhancing tax compliance, there are concerns about potential implementation challenges.

Financial consultant Funke Adegbemi pointed out, “The policy is ambitious, but enforcement will be key. There’s a need for robust systems and coordination among tax authorities, banks, and financial institutions to ensure compliance without causing disruptions to financial services.”

Adegbemi further emphasized the importance of public awareness, stating that educating the public on the benefits of compliance is crucial for the long-term success of the reform.

READ ALSO: Tax credit scheme to link Lekki Deep Sea Port/Epe Expressway with Benin/Shagamu Expressway

“Automatic TIN registration is a good idea, but the government must also invest in public education to help citizens understand how this reform benefits them and the economy.”

This initiative is part of a comprehensive overhaul of Nigeria’s tax system, driven by the Tax and Fiscal Reform Committee established in August 2023. Led by renowned tax expert Taiwo Oyedele, the committee has been tasked with redesigning the nation’s tax structure to create a more efficient, growth-oriented system that can drive economic development and increase compliance.

The committee’s recommendations have already led to several changes, and the introduction of mandatory TINs for financial services is one of the most significant reforms to date.

By tightening the link between financial services and tax compliance, the government hopes to capture more taxable income and ensure that individuals and businesses pay their fair share.

The introduction of this bill underscores the federal government’s resolve to enhance revenue collection and tackle tax evasion.

With Nigeria facing fiscal challenges exacerbated by fluctuating oil revenues, strengthening domestic revenue sources is seen as a crucial step toward economic stability.

Advertisement