African Tax Administration Paper 29
Recently, there has been an expansion in the deployment of digital systems and digital IDs among taxing authorities. However, little is known about the extent to which such technologies are being adopted, or about whether the data from them is being used strategically to improve tax administration. Even less is known about this in the context of subnational tax administration, although this could be very relevant in some contexts, such as Nigeria. This study investigates the extent of the adoption and strategic usage of data from e-tax systems and digital IDs among state internal revenue services (SIRSs) in Nigeria. Data was collected through qualitative interviews conducted within the SIRSs – one from each of the country’s six geopolitical zones, and within the Federal Inland Revenue Service (FIRS). The qualitative data from the interviews was evaluated using thematic analysis. The findings revealed that there is scope for improvement in the adoption and usage of data from e-tax systems and digital IDs among the SIRSs. It was also found that the extent of adoption and strategic data usage from e-tax systems by SIRSs likely improves states’ per capita internally generated revenue (IGR), but similar insights on the impact of digital IDs have not been obtained. Lastly, it was found that there are some lessons SIRSs could learn from FIRS in terms of strategic use of data from e-tax systems and digital IDs. Specifically, SIRSs need to integrate an audit risk engine and machine learning for performing analytics into their e-tax systems, and also automate the estimation of annual credits for withholding tax suffered, tax refunds and penalties, as well as tax audit management including case selection, allocation of auditors and generating audit reports. Some policy recommendations are offered that are consistent with these findings.