By Dr Tom Ohikere
Government revenues are central to funding public expenditures in all countries. With enthusiasm tendencies, developing countries must raise internal revenues through taxes as they have very large spending needs on human development, education, health, and job creation.
However, nothing makes a difference when tax time rolls around like having all of your documentation ducks in a row. The importance of record keeping cannot be overstated. By closely monitoring and thoroughly tracking all expenses, revenue, and deductions throughout the fiscal or calendar year, one can ensure that accounting officers be able to fill out tax returns accurately and completely. Without good record keeping habits, however, tax time may prove to be a challenge.
The Nigerian informal sector currently conducts business in cash. These enterprises often refuse to accept cheques, thereby enabling them to conceal their turnover and taxable profits. To evade taxes, such businesses manipulate their figures for tax reduction purposes and are able to obscure all revealing third party information on their transactions. This is one of the primary reasons the Central Bank of Nigeria recently introduced the “Cashless” system; to help tackle this issue in major Nigerian cities.
To the taxpayers, record keeping is the ultimate act of responsibility in any kind of business and will be advantageous when it comes to the rigors of tax time, as well as in the context of other situations throughout the year.
Documentation helps to ensure consent and expectations. It helps to tell the narrative for decisions made, and the client responded to the different situations. In this same manner, it is important to record information that can help support the proper treatment plan and the reasoning for such services.
The most critical aspect of effective taxation is access to accurate information. Due to the nebulous nature of the informal sector, securing information on informal sector businesses for tax purposes is an onerous task as most informal businesses do not keep proper records. Thus, ascertaining tax liability and ensuring compliance poses to be extremely difficult.
To succeed effectively in business and tax administration, proper record keeping must be maintained and businesses are encouraged to toe this line for seamless tax management.