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LIRS issues public notice on Tax Audit Reconciliation Committee (TARC) meeting procedures

The Lagos State Internal Revenue Service (LIRS) (“the Agency”) has issued a public notice (“the Notice”) on the procedures for Tax Audit Reconciliation Committee (TARC) meetings. The Notice, which was published on 23 June 2020 via the official social media channel of LIRS, was issued as an alternative measure after considering the effects of the COVID-19 pandemic on the business environment.

LIRS relied on the provisions of Section 29 of the Finance Act 2019 which supports the admissibility of electronic delivery of correspondences with revenue authorities. The Agency also took into consideration, the various notices issued by the relevant health authorities on the need for social distancing measures as part of efforts to curb the spread of COVID-19.

In the Notice, LIRS asserts that TARC meetings hosted by LIRS will be virtual by default, and physical meetings will only be required in exceptional cases. Further, the meeting should be backed up by documentary evidence in soft copies, though hard copies will also be permissible where soft copies are not available.

The Agency also re-affirmed its right to call for further documents and information to address all objection issues where the documents provided are deemed insufficient. Thus, the documents must be provided to LIRS at least a week before the slated TARC meeting for review; as no new documentary evidence will be considered during the meeting except in extra-ordinary situations,  and at the discretion of the TARC chairperson.

The Agency further provided the basis for constituting a TARC meeting as follows:

  • Where submitted documents indicate conflicting positon on objection issues
  • Where field audit findings are materially higher than taxpayers’ position
  • When it is deemed necessary by LIRS

In the face of the COVID-19 pandemic and the ensuing dwindling government revenue, the Notice is an innovative step towards adapting technology in tax administration and this will aid in unlocking tax revenues hitherto trapped as a result of audits. 

While commending the initiatives of LIRS, It is noteworthy that the Notice did not bring to the fore, the strategy to reduce the tax audit cycle. Thus, the Agency is advised to leverage technology to accelerate its post-audit reconciliatory stage, and promptly release tax assessments.

While the Notice only relates to taxpayers resident in Lagos State, we expect that other state tax authorities will take a cue from LIRS and issue similar public notices, in view of the Pandemic.

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