Regulating transfer pricing mechanism for improved tax collection in Nigeria: A synoptic exposure

Abstract

Nigerian government, in its quest to adopt and implement international best practice on transfer pricing, aimed at enhancing tax disclosure rules and tackling tax evasion, which largely arose from the base erosion and profit shifting, the Federal Inland Revenue Services (FIRS) introduced the new Income Tax (Transfer Pricing) Regulations, 2018. This study, therefore, examines and syntheses the regulation of Transfer Pricing (TP) for improved tax collection as well as its implication on taxpayers. The methodology adopted was a content analysis drawn from the literature and relevant regulations on the subject matter. The study concludes that the recent regulations released by the FIRS would impact positively on part of the government by creating more revenue as it blocks leakages. More interestingly, it would help in improving tax collection as a result of the stiff penalty imposed on defaulters, which may equally encourage prompts returns and increased government revenue. As a follow-up, the paper recommends that
companies should establish a TP policy and align it with the regulations to make it effective. In addition, on the part of the government, the study recommends a strong institution, that is, by strengthening the FIRS with a sound vision and institutional mechanism to implement and impose the relevant provisions as deemed appropriate, devoid of corruption and window
dressing.