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Revenue generation: Relief as tax revenue takes centre stage


Tax revenue continues to be a topical issue in Nigeria, especially with the country’s tax revenue said to be the lowest in the West African sub-region. However, with the reforms put in place by the Federal Inland Revenue Service, the pattern is changing; BENJAMIN UMUTEME reports.

On January, 21, 2023, the Federal Inland Revenue Service (FIRS) announced that it had collected N10 trillion in tax revenue in 2022, there was the clinking of glasses in official circles, especially with declining revenue from the oil sector.  The amount is the highest collection ever recorded in the history of the Service.

This collection represents an over one hundred percent leap from the tax collected by the Service in 2020 – the first year of the current management of the Service led by its executive chairman, Muhammed Nami.

It is the first time that the Service would cross the N10-trillion in tax revenue collection. According to data, Nigeria’s tax revenue to GDP is one of the lowest in the West African sub-region.

Even the vice-president, Yemi Osinbajo, alluded to the fact while speaking at the Chartered Institute of Taxation 40th anniversary lecture last year, said the country tax to GDP at 8 per cent was the lowest globally.

“Nigeria’s tax to GDP ratio is one of the lowest in the world. It is at about 8 per cent while our comparators are in the neighbourhood of about 15 percent to 25 percent. Even in Africa we can surely do better. This is symptomatic of undue reliance on oil revenue as a result of fiscal imbalances in our nation’s financial landscape,” he had said.

Also, the International Monetary Fund (IMF), in its financial monitor report released October 2022, asked the government to improve domestic revenue mobilisation to withstand global economic shocks.

Division chief, fiscal affairs department of the IMF, Paulo Medas, said Nigeria’s revenue generation is extremely low and puts the government in a tight corner to deliver basic services and respond to global headwinds.

He said: “I would say, Nigeria’s case was where tax revenues are really low. And this really undermines the capacity of the government to react to shocks and provide key services. So I would say in the case of Nigeria, the priority is to increase domestic revenue generation. You need to increase the state’s capacity to address the needs of the country and these will also help make fiscal policy more consistent to ensure economic stability.”

Breakdown

However, things seem to have improved especially with the cherry news by the revenue agency that it almost achieved its tax collection target for 2022.

According to its Performance Update Report of 2022, the FIRS collected a total of N10.1 trillion in both oil (N4.09 trillion) and non-oil (N5.96 trillion) revenues as against a target of N10.44 trillion.

“Companies Income Tax contributed N2.83 trillion; Value Added Tax N2.51 trillion; Electronic Money Transfer Levy N125.67 billion and Earmarked Taxes N353.69 billion.

“Non-oil taxes contributed 59% of the total collection in the year, while oil tax collection stood at 41% of total collection,” the report noted.

The Service further clarified that included in the total revenue sum is the sum of N146.27 billion which is the total value of certificates issued by the Service to private investors and NNPC for road infrastructure under the Road Infrastructure Development Refurbishment Investment Tax Credit Scheme created by Executive Order No. 007 of 2019.

According to the report, the N10.1 trillion is exclusive of tax waived on account of various tax incentives granted under the respective laws, which amounted to N1,805,040,163,008.

Providing perspective

Experts have said that the various reforms embarked upon by the Muhammed Nami-led management of the Service has started paying off due to the increase.

According to the Executive Chairman, the four point agenda of the management which includes administrative and operational restructuring; making the service customer-focused; creating a data-centric institution; and automation of administrative and operational processes, was part of the effort to raise the country’s low revenue collection.

Nami said between 2020 and 2022, the reforms bordering around these four-point focuses have started producing results. Other reforms the Service introduced in this period focused on the detoxification of the tax environment by ridding it of mutual mistrust, negative tax morale, and tax evasion, through effective taxpayer education, open engagement with stakeholders and improved services.

“The reforms introduced at different times from 2020 are gradually yielding fruits.  By the close of 2022, the Service had fully restructured the administration of the Service for maximum efficiency and achieved internal cohesion such that all functional units are working in unison towards the achievement of set goals. 

“As a result of conducive environment created for staff, officers of the Service are pulling their weight on the global stage with international recognitions and awards;

“The Service had also automated most of the administrative and operational processes.  A major leap was the full deployment of the TaxPro Max for end-to-end administration of taxes in June 2021.  The module for the automated TCC went live 1st January 2023 while taxpayers had already downloaded over 1,000 TCCs this year without having to visit the FIRS office,” the report read.

It also noted that the Service had operationalised its data mining and analysis system thereby allowing for data-backed taxpayer profiling.

The FIRS boss said the record amount was made possible through “dogged implementation of strategic reforms over the past two years; a renewed commitment by officers of the Service, accompanied with a boosted morale; as well as the innovative deployment of technology for automation of both tax administration and operational processes.”

“This collection was possible through collaboration with our stakeholders, from our colleagues at the Executive branch of government, to the members of the judiciary, to our brothers and sisters at the National Assembly, as well as the tax advisory committee, professional bodies, unions, and most crucially our taxpayers.”

Going forward

Nami said the Service intends to maintain, and even improve on the momentum this year. “We have peaked, but this is not certainly our peak. In fact, my hope is that this would be the least sum the Service would ever collect going forward.

“Our goal is to identify more areas where we can improve on the delivery and efficiency of our collection; and plug loopholes, while deploying innovative reforms in data and artificial intelligence.

“Ultimately, we believe that the FIRS can shoulder the responsibility of providing revenue needed for the governments across the Federation to cater for the needs of the Nigerian people through taxes.

“This is feasible once we get the much-desired support from the three tiers and arms of government, as well as all stakeholders.”

Nigerians speak

In a chat with Blueprint Weekend, the managing director of SD&D Management Limited, Gabriel Idakolo, lauded the effort of the Service achieving 96 per cent of its 2022 target.

He said, “The projected collection of over N10 trillion as revenue in 2023 is good, however the taxpayers are facing serious challenges that the government also needs to ameliorate to enable taxpayers the capacity to comply with their obligations to FIRS.

“Many companies are facing serious challenges as regards energy, forex scarcity, insecurity and general high cost of doing business. Government should pay attention to challenges businesses are facing in order to get the best out of them.”

Also speaking, the Multimedia Publishers Association of Nigeria (MPAN) commended the Service for collecting over N10 trillion in tax revenue in the year 2022, as against a target of N10.44 trillion.

MPAN’s national chairman, Malam Gambo Jagindi, described the development as a laudable achievement and urged all patriotic Nigerians to commend it.

He said the Service was able to achieve its height in spite of the global economic crunch and Nigeria’s dwindling economy, adding that the FIRS has demonstrated that even in the midst of many difficulties, with determination and commitment, nothing can stop anyone from achieving a set goal.

“This collection represents an over 100 percent leap from the tax collected by the Service in 2020—the first year of the current management of the Service.

“MPAN, therefore, wishes to congratulate FIRS on this giant stride, and urges all Nigerians and those doing business in the country to cooperate with the Service so it can achieve more in generating revenue that will create a meaningful life for all citizens,” he said.

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