Nigeria is shifting from a self-assessment tax regime to an automated system in which authorities validate returns against independently sourced electronic data, marking a structural overhaul of compliance administration.

“In a future world, five to ten years from now, we’re looking at our returns in an automated fashion,” Tania Davids, Africa tax and transformation lead, KPMG, said at a KPMG webinar titled ‘Strengthening the tax function to respond to regulatory changes.’

Under the new framework, revenue officials may already possess a company’s revenue and expense profile before annual filings are submitted.

The reform reduces reliance on voluntary declarations and strengthens the state’s capacity to verify income at source.

Large taxpayers have completed pilot phases, with enforcement beginning in April 2026. Medium taxpayers are scheduled to go live in July 2026, with enforcement from January 2027, while emerging taxpayers will be integrated in 2027.

Electronic invoicing anchors the system. Supported by third-party reporting from banks and financial institutions, it captures revenue at the transaction level and links supplier invoices directly to buyer expense records. Discrepancies can be flagged automatically, limiting scope for underreporting or margin manipulation.

Unlike traditional audits based on periodic reviews, digital invoicing enables continuous monitoring.

“We needed decision-making to rest on more than one person; there was a clear protocol on escalation,” said Adeniyi Adeyemi, Group Head of Tax, Sterling Financial

As data integration deepens, authorities will be able to validate submissions in near real time and potentially pre-fill returns, transforming self-assessment into algorithmic verification.

The shift comes amid fiscal strain. Nigeria’s fiscal deficit is projected at N23.85 trillion in the 2026 budget, while the newly reconstituted Nigeria Revenue Service has set a revenue target of N40.71 trillion.

Although Nigeria’s tax-to-GDP ratio has risen to about 9.5 percent, it remains below that of peer economies, underscoring the structural revenue gap.

Automation offers a route to higher compliance without raising statutory rates.

“In the manual situation, you still have the option of review and correction. In the automated model, errors once absorbed within annual reviews may now trigger automated flags,” Davids explained.

By tightening verification and reducing information asymmetry between taxpayers and the state, the system is designed to widen the effective tax net.

Yet fiscal urgency coexists with budget constraints. Allocation to the digital economy sector has been reduced to N84.56 billion in the 2026 fiscal year.

Revenue digitisation requires sustained investment in analytics infrastructure, cybersecurity, system integration and skilled personnel. Automation at scale depends as much on institutional capability as on policy design.

For businesses, the reform alters the compliance equation. Under the previous regime, companies calculated liabilities internally, filed annual returns and responded to audits selectively. Disputes often revolved around interpretation, documentation gaps or post-filing reviews.

The automated model compresses that timeline. Where third-party data diverges from company filings, authorities may issue queries before final assessments are concluded. Compliance shifts from periodic defence to continuous reconciliation.

Companies will need stronger internal controls and closer alignment between enterprise systems and invoicing platforms to ensure accounting records reconcile with transaction-level data accessible to authorities.

Tax functions are likely to move closer to finance and technology teams, with greater board-level oversight of compliance risk.

Automation reduces discretion. Errors once absorbed within annual reviews may now trigger automated flags. Smaller firms could face steeper adaptation costs, including system upgrades and staff training.

Tax professionals expect fewer disputes over whether revenue exists, since both authorities and companies will rely on shared electronic records. However, disagreement may shift to classification, deductibility, transfer pricing interpretation and timing recognition, particularly during the transition from legacy systems.

A central objective is to improve compliance beyond large corporations. Third-party reporting could widen visibility into self-employed professionals and smaller enterprises operating within the formal banking system.

While emerging taxpayers will not be fully integrated until 2027, the signalling effect is immediate: informational gaps that once constrained enforcement are narrowing.

The self-assessment model placed primary responsibility on taxpayers to compute and disclose liabilities, with authorities intervening selectively. The automated framework introduces parallel data streams, positioning companies less as sole reporters and more as validators of state-captured information.

As enforcement expands over the next two years, tax administration is moving from voluntary disclosure toward data-backed validation.

For companies, compliance will increasingly be measured not only by what is declared, but by how closely those declarations align with the digital footprint already visible to authorities. (BusinessDay)

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