The Special Adviser to the Executive Chairman of the Lagos State Internal Revenue Service, Abideen Akande, explains why Lagos residents must file annual tax returns, the benefits of the new regime, and penalties for non-compliance, in this interview with OKECHUKWU NNODIM
Can you explain the purpose of the annual filing system?
The annual filing system exists to enable the tax authority to understand how much income a taxpayer earned in the preceding year and how much tax has already been paid in advance. Essentially, it allows both the taxpayer and the tax authority to reconcile income and taxes. Nigeria operates a self-assessment tax system, which means that individuals are responsible for declaring their income voluntarily. Under this system, the taxpayer states how much income was earned during a specific period and how much tax has already been deducted or paid.
Previously, the assessment period ran from April to March, but this has been aligned with the calendar year. Now, taxpayers assess their income from January to December. The concept behind this system is simple: the government allows citizens to calculate and declare their own tax obligations honestly. Based on that declaration, the tax authority can determine whether there is any additional tax to be paid or whether the taxpayer has already paid the correct amount. But filing tax returns is not merely a voluntary exercise in the moral sense. It is actually a constitutional obligation.
Every organised society requires revenue to function. Roads must be built, hospitals funded, schools maintained, and public services provided. Taxes are the mechanism through which citizens contribute to those collective responsibilities. Once a taxpayer files, they are able to deduct any advance payments already made. If there is a balance remaining, the taxpayer is expected to settle it. If the taxpayer cannot immediately pay the full amount, the tax authority can approve a payment arrangement, provided the request is genuine and the taxpayer demonstrates willingness to comply. However, if someone deliberately attempts to evade taxes or refuses to comply, the law provides enforcement mechanisms.
Are these filings optional for low-income earners?
No, the filing itself is not optional. However, the tax system is designed to protect low-income earners from undue burden. For example, if an individual earns below the tax threshold, they will still be required to file their annual returns, but their tax liability may be zero. Currently, the threshold is calculated based on the minimum wage. Anyone earning below that threshold will not pay tax, but the individual must still disclose their income through the filing system. This approach ensures fairness and transparency. It also ensures that the government has a clear understanding of income distribution across the population. So, even if someone does not owe tax, they are still expected to file.
Where do Lagos residents file their taxes?
Lagos State began digitising the tax filing process several years ago. In the past, the tax filing form—known as Form A—was a lengthy six-page document that many people found difficult to complete. Recognising this challenge, the Lagos State Internal Revenue Service simplified the form and reduced it to a one-page format. In 2018, the state introduced a hybrid filing system that combined manual and electronic submissions. This was intended to ease taxpayers into the new digital process. By 2021, the system became fully electronic, and manual filing was discontinued. Today, all taxpayers must file through the e-tax portal. The portal can be accessed at: e-tax.lrs.net. The platform allows taxpayers to log in and enter details of their income for the previous year. It also allows them to declare tax reliefs and deductions that reduce their tax liability.
Among the reliefs that taxpayers can claim are: pension contributions, health insurance premiums, National Housing Fund contributions, mortgage interest payments, rental payments, and life insurance premiums. These deductions are permitted under the law because they represent essential financial obligations. However, there is an important rule regarding housing relief. Taxpayers can claim either mortgage interest or rental relief, but not both simultaneously. Another important feature of the system is that it only captures income for the preceding year, meaning January through December.
How does filing work for dividend and investment income?
Dividend income that has already been taxed at source is still declared during the filing process. However, declaring such income does not mean the taxpayer will be taxed again. The purpose of declaring dividend income is not to avoid double taxation. Rather, it enables the government to understand the broader structure of household income. Corporate taxes show how companies perform, but they do not necessarily reflect the financial reality of individuals. By collecting data from annual tax returns, the government gains insight into the economic position of households, including sources of income such as investments. This information helps policymakers better understand the economy and design policies that reflect real economic conditions.
Which year should residents file for in 2026?
Residents filing in 2026 will file for the 2025 income year. In other words, the tax return submitted in a given year always covers the income earned during the previous year. If someone has failed to file returns in earlier years, the tax authority may allow retroactive filings. In such cases, the individual will be required to submit returns for the missed years. However, once the current system is established, failure to file on time will attract penalties.
What are the penalties for failure to file?
The penalties are clearly defined. A taxable person who fails or refuses to file returns, or who deliberately provides incomplete or inaccurate information, will be subject to administrative penalties. The penalty structure is as follows: N100,000 in the first month of default, and N50,000 for each subsequent month. These penalties are intended to encourage compliance and ensure that taxpayers take the filing requirement seriously.
What outcomes can result from filing?
When a taxpayer completes their filing, one of three outcomes typically occurs. First, the taxpayer may discover that the taxes already paid during the year—usually through deductions such as Pay-As-You-Earn—are sufficient. In that case, the tax liability is zero, and no additional payment is required. Second, the taxpayer may find that they have underpaid taxes. In that situation, they will be required to settle the balance owed. Third, the taxpayer may discover that they have overpaid taxes. In such cases, the taxpayer can request a refund or apply the excess payment to future tax obligations. The electronic system gives taxpayers greater visibility and control over their tax records.
How does filing work for employees with multiple sources of income?
Many individuals today have multiple streams of income. For example, someone may have a regular job but also earn money from consulting, freelancing, investments, or small businesses. In such cases, the employer will typically deduct tax only on the salary paid by the company. However, the employee must still declare other sources of income during the annual filing process. For instance, if an employer pays an employee N100 and deducts N8 as tax, but the employee also earns an additional N20 from another activity, the total income becomes N120. The employee must declare the full amount and pay any additional tax due on the extra income. This system ensures full disclosure while preventing double taxation.
What about new employees or workers on probation?
Only income that has actually been paid to the employee is assessed. If someone is employed but has not yet been paid, then there is no income to declare for that period. Similarly, if payment is delayed, the income will simply appear in the next filing cycle. The tax authority focuses strictly on income received by the taxpayer.
How does the system support low-income earners?
The current tax structure was designed to reduce the burden on low-income earners. According to available data, more than half of taxpayers under the revised system pay zero tax. Approximately 43 per cent of taxpayers pay less tax than before, while only about 1.6 percent pay slightly more. This means the majority of households benefit from the reforms. By reducing tax pressure on low-income households, the system allows families to allocate more resources to essential needs such as food, education, healthcare, and housing.
What about informal-sector workers?
The informal sector represents a significant portion of the economy. For individuals operating small businesses—such as traders, artisans, or street vendors—the tax authority provides simplified filing procedures. These individuals can declare their estimated income through the system. However, if they fail to file, the tax authority may apply a presumptive tax assessment based on estimated turnover. In such cases, the tax authority may assume that one per cent of the estimated turnover represents tax liability. Filing returns allows taxpayers to avoid such assumptions and ensures that taxes are based on actual income rather than estimates.
What efforts are being made to educate residents?
The Lagos State Internal Revenue Service conducts annual awareness campaigns to educate residents about tax obligations. These campaigns use a combination of communication channels, including social media, television and radio programmes, newspaper publications, and community outreach initiatives. Tax officials also visit markets, business districts, and local communities to explain the filing process and assist residents.
In addition, taxpayers can visit dedicated service desks where officials provide direct assistance with the filing process.
These services are provided free of charge.
Are there plans to further simplify the system?
Yes. One of the upcoming initiatives is the introduction of a USSD-based service that will allow taxpayers to access certain features without internet access. Through the USSD platform, taxpayers will be able to: generate a Taxpayer Identification Number, locate nearby tax offices, and access basic guidance on filing. This will make the system more accessible to individuals who do not have smartphones or reliable internet connectivity.
Can the tax authority withdraw funds directly from bank accounts?
Yes, under certain conditions. The tax authority has what is known as the power of substitution. This provision allows the tax authority to recover unpaid taxes directly from a taxpayer’s bank account after due process. Banks are required by law to provide information on account balances when requested by the tax authority. However, this measure is typically used only after multiple attempts have been made to resolve the issue amicably. The objective is not punishment but ensuring that tax obligations are fulfilled. This practice is not unique to Nigeria; similar enforcement mechanisms exist in many countries around the world.
What is your final message to Lagos residents?
The e-tax portal opened on January 1, 2026, and residents are encouraged to begin filing as early as possible. Ideally, taxpayers should complete their filings by mid-January, or at the latest before March 21, to avoid the rush that typically occurs toward the deadline. The process is now simpler, faster, and more transparent. In many cases, taxpayers will discover that they have no tax liability at all. Filing early eliminates unnecessary stress, prevents penalties, and helps maintain accurate financial records. Ultimately, the goal is to promote voluntary compliance, strengthen public trust, and build a tax system that supports economic growth while remaining fair to citizens.
