By 
In a decisive move to curb the persistent revenue losses attributed to illicit financial flows (IFFs), the Federal Inland Revenue Service (FIRS) is convening a national conference aimed at enhancing institutional capacity and fostering collaboration among key agencies.
The initiative is part of a broader strategic effort to stem capital flight and tackle aggressive tax avoidance practices, particularly by multinational corporations operating in Nigeria. According to estimates, Nigeria loses an estimated $88.6 billion annually to IFFs—primarily through manipulative commercial transactions masked as legitimate trade.
Across Africa, the continent loses approximately $1.6 billion daily to illicit outflows, amounting to a staggering $587 billion each year—funds that could otherwise support critical development goals.
Strengthening Interagency Coordination
Professor Bolaji Owasanoye (SAN), Coordinating Director of FIRS’ Directorate on Proceeds of Crime and Illicit Financial Flows, said the upcoming conference seeks to build interagency synergy, improve information sharing, and sharpen technical capacity for detecting and responding to illicit financial activities.
“FIRS cannot address this challenge alone. Effective revenue collection begins with proper tracking. The conference is designed to align all relevant stakeholders towards a unified national response,” Owasanoye said.
In line with its expanded statutory mandate under the Proceeds of Crime (Recovery and Management) Act, 2022, the FIRS has established a dedicated department focused on proceeds of crime and IFFs. This reflects a growing recognition that the boundaries between tax evasion, money laundering, and financial crimes are increasingly blurred.
Focus on Commercial Leakages and Transfer Pricing
Owasanoye identified three core sources of IFFs: criminal activity, corruption, and—most significantly—commercial transactions involving multinational corporations. He emphasized that many firms exploit transfer pricing and trade mispricing tactics to shift profits offshore, thereby avoiding taxes in Nigeria.
He explained:
“A company may be registered in Nigeria, but its operational and pricing decisions are controlled by a foreign head office. Through inflated procurement costs or manipulated intra-group transactions, profits are shifted to low-tax jurisdictions, depriving Nigeria of taxable income.”
Illustrating this, he cited the example of a local manufacturer importing bottle caps from a related foreign entity at exaggerated prices, inflating operational costs and eroding taxable profit.
“These schemes are often engineered internally. Unless regulators are equipped with comparative data and analytical tools, such practices may go unnoticed,” he said.
He also flagged risks of complicity, noting that gaps in oversight may stem from limited expertise, poor data access, or deliberate neglect by internal staff, auditors, or tax officers.
Global Alignment and Legal Backing
Owasanoye referenced findings from the Thabo Mbeki-led High-Level Panel on IFFs, which found that over 60% of Africa’s financial outflows are driven by manipulative commercial practices—particularly in extractive industries.
He highlighted Nigeria’s active participation in the OECD’s Base Erosion and Profit Shifting (BEPS) initiative, which promotes equitable global taxation and seeks to hold multinational enterprises accountable for profit shifting.
“The challenges are global and systemic. Even countries in the Global North, where many of these companies are headquartered, acknowledge the scale of abuse. That’s why international cooperation is key,” he added.
Tax Reforms to Promote Equity and Inclusion
On the implications of Nigeria’s tax reform agenda, Owasanoye clarified that the current policy direction aims to promote fairness and economic resilience. Small businesses and low-income earners are being shielded through exemptions, while attention is being redirected toward large corporations with significant revenue capacities.
“The government is not taxing poverty—it’s targeting wealth. Once a business matures and crosses the profitability threshold, it becomes taxable. But emerging enterprises remain protected,” he explained.
He stressed that equitable taxation requires not just legislative reform, but also access to cross-border corporate data through automatic exchange of information frameworks.
“By comparing what a company declares in Nigeria with disclosures made in other jurisdictions, we can identify inconsistencies and address base erosion effectively,” he said.
Building Tools for Sustainable Revenue Protection
The FIRS’ upcoming conference forms part of a comprehensive strategy to equip Nigerian authorities with the tools, data, and cross-border partnerships necessary to secure national revenues and counter sophisticated tax avoidance schemes.
Owasanoye concluded by reaffirming the agency’s commitment to reform:
“This is not just about protecting government revenue. It’s about creating a fairer economic environment where legitimate businesses can thrive and national resources are deployed for the public good.”
Comments