Tax fraud, tax evasion and non-compliance are the norm for many citizens in a country. As a result, it is the responsibility of the tax authority to ensure that perpetrators are held accountable for their actions. The NRS Establishment Act 2025 outlines four additional functions that empower the Nigeria Revenue Service to address these issues.
What you should know about tax fraud, evasion and non-compliance
Tax fraud occurs when the taxpayer deliberately refuses to provide the necessary information to the NRS. Evasion is illegally avoiding paying taxes. Non-compliance occurs when individuals fail to comply with all aspects of the tax law, either knowingly or unknowingly.
These three terms are serious matters in the hands of the tax authorities. This is why the law empowers NRS to investigate, examine and determine issues relating to tax fraud, evasion and non-compliance.
Taxable persons must avoid them to be good citizens. You should know that complying with the fundamental aspect is part of obeying your country’s laws and constitution. More so, there is a saying that the two inevitable things in life are taxes and death.
Every adult is expected to pay taxes imposed by the government. This should be done correctly. Carrying out tax fraud and evading those laws does not make the taxpayer smarter than the authorities.
NRS functions to handle tax fraud, evasion, and non-compliance
Section 3 subsection 4(e to h) of the NRS Establishment Act 2025 provides the Nigerian Revenue Service with the function to examine and investigate tax fraud and evasion. It also strengthened the Service to seize any tax fraud properties. A detailed explanation of this function is provided below:
Examining and investigating to ensure compliance
This function is in subsection 4e. The law explicitly states that the Nigeria Revenue Service has the responsibility of examining and investigating with a view to ensuring compliance. The service does this by carrying out tax audits and investigations on companies every five to six years.
Determining the extent of financial loss to the government from tax fraud and evasion
It is the duty of the Service to determine the extent of financial loss on revenue that was not realised due to tax fraud and evasion. NRS will carry out a forensic investigation exercise to determine the financial loss to the government’s purse.
Decide on methods to identify and seize proceeds relating to tax fraud and evasion
NRS set out the method it will use to identify proceeds from tax fraud and evasion. For example, it requires banks to provide bank accounts above 25 million for individuals and 100 million for companies. This data must be provided by the bank every three months.
Where the Service tracks and identifies an evasion or fraud, it takes necessary actions. This includes: confiscation, freeze, and seizure of proceeds from fraud and evasion.
For tax evasion, the tax authorities will recover the proceeds and add penalty fees. For tax fraud, after recovering the revenue, the defrauding taxable person will be prosecuted. Revenue evasion can also result in the prosecution of the taxpayer.
Establish techniques to control and prevent non-compliance
The NRS recently established an e-invoicing platform. This will ensure that the right amount of VAT is deducted by each company. Also, the e-invoicing technique provides sales invoice evidence that the NRS requires during audit and investigation.
Another notable technique from the NRS is the Taxpromax. This allows taxable persons to file tax returns and pay their tax liabilities to the tax office.