The Lagos State Internal Revenue Service (LIRS) has issued a public notice on the procedures and requirements for conducting Tax Audit Reconciliation Committee (TARC) meetings. According to the LIRS, the public notice is not intended to amend or override the provisions of existing tax laws, but to modify the process of conducting TARC meetings. The LIRS, by this modification, intends to leverage the use of technology to conduct TARC meetings and exchange correspondence with taxpayers, thereby addressing the challenges posed by the COVID-19 pandemic.
This is in line with Section 29 of the Finance Act, 2019 which permits the use of electronic mail as a means of communication with the tax authority. Also, the Federal and Lagos State Governments as well as relevant health authorities had issued advisory guidelines on physical distancing as part of the preventive protocols to manage the spread of the virus.
Summary of the Modifications to TARC Meeting Procedures
- All TARC meetings shall be conducted via video conferencing and shall be hosted by the LIRS. Physical meetings shall be an exception.
- Documentary evidence shall be provided by taxpayers in soft copies except in situations where soft copies are not available. Further, objections raised by taxpayers that are not supported by relevant documentary evidence shall be deemed moot and discharged in favor of the LIRS.
- All documents for resolution of an objection must be submitted one week before the TARC meeting. Where insufficient documents are submitted along with letters of objections, LIRS may call for additional documentation.
Further, the public notice highlights the triggers for a TARC meeting as follows:
- Documents submitted in respect of an objection indicate conflicting or contradictory position.
- Field audit findings are materially higher than taxpayers’ position.
- TARC meeting is deemed necessary by the LIRS.
Since many organizations have resorted to working remotely due to the physical distancing guidelines put in place by the government and health authorities to curb the spread of the COVID-19 virus, this is a step in the right direction. It is expected that the introduction of virtual meetings and electronic communication will aid the timely resolution of objections and ongoing tax audit exercise.
While we applaud the LIRS on this initiative, we look forward to an official communication on the modification of the procedures for fresh tax audit exercises. We recommend the adoption of a risk-based approach for fresh tax audit exercises, instead of the current routine-based approach.