How Payroll Data Can Ensure Private Firms Pay the Right VAT

Private companies that route all revenue through banks maintain clearer accounts and reduce fraud risks. Hidden earnings often stem from off-bank transactions, which compromise VAT compliance. Tax authorities can estimate a firm’s profit by subtracting wages and other operating expenses from declared revenue. Since wages are non-VATable, accurate payroll reporting is key to determining the correct VAT base. States like Lagos require PAYE returns and collect higher VAT as a result. Other states could boost their Internally Generated Revenue by enforcing worker and wage disclosures in partnership with the FIRS. Mandating full payroll declarations will help the FIRS verify wage bills and secure the precise VAT owed by private establishments.

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