How automation can drive tax collection process

The Lagos State Internal Revenue Service has taken a significant step towards enhancing tax collection with the deployment of an upgraded electronic process for the collection of Hotel Occupancy and Restaurants Consumption Tax in the state. In a recent discussion on CNBC Africa, Theo Emuwa, a Partner at Aelex, shed light on the efficiency of this new process and its potential impact on driving revenues. Emuwa highlighted the inevitability of such a development, citing the Federal Inland Revenue Service's (FRS) successful implementation of electronic VAT collection from supermarkets as a precedent. The electronic system enables real-time tracking of tax collections, streamlining the process and reducing manual errors. Emuwa emphasized the importance of data in tax collection, stating that without accurate data, tax evasion and revenue leakages become prevalent issues. Lagos State's initiative to digitize tax collection aligns with global trends towards leveraging technology for more efficient revenue generation. The move is expected to not only increase revenue collection in the state but also minimize losses due to inefficiencies. Emuwa noted that while the initial investment in infrastructure may pose a challenge for some states looking to emulate Lagos' model, the long-term benefits and improved efficiency make it a worthwhile endeavor. The adoption of electronic systems in tax collection has proven successful in various sectors, such as personal income tax, where Lagos State has already implemented electronic platforms for tax collection. Emuwa stressed the importance of having a strategic plan for taxpayer identification and efficient data management to enhance revenue generation. Addressing the issue of tax evasion, Emuwa emphasized the need for proactive enforcement and monitoring systems to curb evasion and ensure compliance. He pointed out that understanding and taxing emerging industries, like online streaming platforms, presents a unique challenge that governments must address to capture untapped revenue sources. Emuwa also highlighted the role of education and training for tax collectors in navigating the complexities of new industries and ensuring compliance. Drawing parallels to international tax enforcement efforts, Emuwa underscored the significance of data in identifying tax evaders and recovering lost revenues. He cited the example of the American government's successful crackdown on Swiss bank accounts, where access to data led to the recovery of undeclared assets and tax collections. In conclusion, Emuwa emphasized the critical role of data-driven tax collection strategies in maximizing revenue potential and combating tax evasion in a rapidly evolving economic landscape.