Indeed we are raising the bar in revenue generation initiatives, says Ogunsanwo
Olufolarin Ogunsanwo is the Chairman of Lagos Internal Revenue Service (LIRS). With passion for economic empowerment, Ogunsanwo has initiated several tax reforms in Lagos State, in his push for higher Internally Generated Revenue (IGR), to reduce further the state’s reliance on allocations from the Federal Government. In this interview with Business Editor, ADE OGIDAN, he stresses the need for strategic thinking outside the proverbial box, to ensure the realization of economic diversification away from crude oil. Excerpts.
Since you assumed duties, what has been the operational profile of LIRS?
Basically, it is a continuation of what my predecessor did. We were granted autonomy. A lot has been done in carrying out reforms. What we have done is taking it further, trying to see, improve the collection process, assessment process. We have been trying to simplify the areas of filing of reports and trying to simplify the area of tax payment as well. We have also been trying and retraining our members of staff to ensure that they acquire the best skills that are required for the job, in line with international best practices. And then, we have also initiated a lot of checks and balances and internal controls with a view to ensure that all loopholes and leakages are blocked, more particularly with the introduction of treasury single account. We have tried to strengthen that aspect with strong internal controls and checks and balances, so that whatever that is meant for the government is remitted accordingly.
How about the need to simplify tax returns?
Yes, in that area, we have introduced a new form. Hitherto it used to be a six page form that we found to be very cumbersome and not user-friendly, but what we have done is to compress the form into a two pages, with a guide to help in completing it. Because we realise that a lot of our tax payers are actually the informal sector, many of them are not too literate, so what we have done is to simplify the form into a two-page one, in different languages- English, Yoruba and pidgin English, so that we can carry people from the informal sector along. Added to that is that before now, you can only make payment of taxes and revenue in the state through the banking hall, but we are also leveraging on the advancement of technology and IT to open up other platforms of payment. For instance, we have deployed POS terminals to all our tax stations and mini tax stations.
We have about 38 tax stations in Lagos State. We also have about 40 mini stations located in the markets. In Nigeria today, almost everybody has an ATM card, so that they can make use of the cards to pay taxes and other revenues to the state government. Also, in other to bring the tax office closer to the people with increasing population on daily basis, we have realised that so many places have developed that we also need to make things easier for them. We have embarked on creation of additional tax offices. So far, we have created offices at Tejuoso, Surulere and Sangotedo in Lekki axis. We are still going to open up places like Ojo, an office in Satellite Town that will take care of that axis. Same at Alimosho. In Ikorodu, we have only one, we want to create additional tax office there. This has to do with the level of development that has taken place since the time those ones are created and this present time. These are some of the things that we have done and doing and still doing to ensure that we improve tax administration in the state.
Specifically, what are you doing to expand the tax net, with the informal sector in view?
To strategically achieve that, we have created the Directorate of Informal Sector and Special Duties. Our belief is that we have a population that is about 20 million people in Lagos State and out of that, our research shows that 8.5 million to nine million of them are actually taxable adults but as we speak, we have about five million people on our data base, which implies that we have about 3.5 million people out there. Further research shows that about 70 per cent of this figure are actually from the informal sector, so towards that end, His Excellency, the Governor of Lagos State approved the Directorate for Informal Sector and special Duties to actually cater for that area. In doing so, we have gone ahead to segregate them into three groups.
They are the market men and women artisans group; micro medium and small scale enterprises; and the third deals with household domestic workers. With this, we intend to drive the informal sector and bring all these people that are still out there into the tax net. You will agree with me that internally generated revenue is very key to many state governments in Nigeria right now, no thanks to the dwindling oil price and the skyrocketing exchange rate. Many state governments are now looking inwards. Even at the federal level, same dsposition is at play with a view to expanding the tax base in order to increase the yield in revenues, as well as trying to ensure that there is efficiency in tax administration, to ensure that taxes are collected optimally. So, Lagos State, being the pace setter for all other states in the federation, has been going ahead to ensure that whatever that is due to the state government in terms of tax are being collected through all the measures.
How about the challenges being faced in respect of tax clearance?
We now have electronic tax clearing card. We discovered that even when the card is missing, the request for N2, 500 with police report and affidavit as well as other documentation should not be the case. The process should be less stressful. So, what we have done is for you to be a tax payer in Lagos, you must be a resident in Lagos and we have what we call the Lagos State Residential Registration Agency (LASRA) card. For you now to replace your lost card, all you need to do is to provide evidence of registration of LASRA card which already has all the data concerning that resident including biometric capture. Once you make a copy of that available and you pay a thousand naira to the bank, that is all that is required.
And then, even for tax clearance card as well, we have mandated all clients who produce the cards on our behalf to ensure that all applications are granted within two hours and if any tax payer in Lagos State does not get his or her card on application after 72 hours, we have provided a platform for them. We have our emergency customer care line which is 0700CALLLIRS where they can actually ventilate and make their grievances known. For that also, we ensure that those that would respond, they can actually respond in English, Yoruba and pidgin English and then in all our 38 tax stations, we have opened customer care desks where people can go and make enquiries on how, when and where to pay their tax. So, all these are things that we have been trying to do to ensure that one, we improve tax administration, two, we enlighten tax payers, we have also embarked on a massive campaign with view to letting them know the exact thing to do in terms of paying their taxes and then all these efforts is aimed at ensuring that whatever that is due to the state government is been done and then also part of it is to ensure that the tax payer base is increased.
With these initiatives, to which extent have you been able to record voluntary compliance with tax payment?
Basically, in terms of voluntary compliance, for corporate bodies who by law has been appointed as agent of collection, section 81 and 82 of the personal tax income Act has appointed the employers of labour to be responsible to the state government to be the agent of collection and responsible for the taxes collected on behalf of the government. So far, so good. The level of voluntary compliance to the tax risen to 95 per cent. The people have responded very well and the yield has actually increased, because they know that we have a very smooth process in place and procedure whereby if there is any form of infraction or wilful default or whatever as a result of their insensitivity or not within the tax laws. We have a robust enforcement in place whereby after all that we have done, if a tax payer refuses to pay, we would invoke a section in the law which talks about disciplining tax defaulters. When the residency policy was effected, a lot of workers working in Lagos State but living in Ogun State, had their taxes having paid to Ogun state to extent that Ogun state celebrated the windfall, to which extent have you lost in residency policy?
To which extent have you been able to prosecute defaulters?
Without enforcement, tax payers would not take any tax administration seriously. For us in Lagos State, the issue of enforcement is very key our success story. Nobody wants to pay tax even in the best system around the world. Once the laws are not obeyed, the next line of action for any proactive revenue agency is to embark on enforcement. For us in Lagos State, after we have gone through the due process, our enforcement process is usually done within the ambit of the law. We don’t embark on undue harassment or overzealous way of doing things. However, having gone through the whole due process and then, if the tax payer still remains adamant and refuses to pay whatever that they are owing that is when the companies or corporate bodies would levy a warrant of distain to them. Even that one too on the either issue, what the law says is that we should actually take away their goods of the company. But we don’t do that because if we do so, that entity would not be able to exist for us to continue to collect taxes from them. The only thing we do is we look them up and make them to pay and add percentage of the liability and after dues reconciliation; they give an account of undertaken of how they want to pay the outstanding balance.
How are you addressing the challenge of multiple taxation?
Nigeria is running a federal system of government and all tiers of government have been empowered by the constitution to collect their own taxes. We have the federal, state and the local government tiers of government. But the truth of the matter is that it is an interesting topic, when we talk of multiplicity of taxes. The very nature of Nigeria, there is what we call usage taxes, rates and levies. The simple definition of taxation is that tax itself is a compulsory levy that is paid to government without any direct benefit to that person. If you use water in your house and you are asked to pay, it is usage charge and not tax because you benefit directly from it. Then, if you put a signpost in front of your office and you are asked to pay the advert rate, definitely it is a levy. Then is somebody chooses to block the road for a party, instead of renting a hall, inconveniencing your neighbors, and they ask you to pay something to the local government, called merriment tax, it is not a tax, but a charge. Or registration of birth and death.
In the real sense of it, we do not have multiplicity of taxes, I think tax administrators should go a step further to categorize what taxes, levies, usage charges and so on are.
Act 21, 1998 actually lists what taxes are collectible by each tier of government. So, if there is any tax collected that does not fall within the approved list for collection, then it can be escalated to the Board of Internal Revenue of the State, or to the Joint Tax Board, so that the person that is charging you will have to explain the rational or basis for charging the tax. In all, there are just 61 items. So, anyone outside the list is not acceptable and is illegal collection. Even out of these 61, a significant number are actually usage charges, rates and levies and not actually tax.
Some people believe that they are not getting the impact of such payment on their lives. How are you going to address the issue of incentives for the tax payers?
That is not the story in Lagos State. For us in Lagos State, there is transparency, there is integrity, and there is accountability. For instance, in Lagos, both this administration and the ones before this one, in the last one year, most particularly, everybody can see what tax payers money are being used for.
There are so many projects that Lagos State government has embarked on, and there are still many that are in the pipeline. For instance, you can see what the governor has been doing. You want to talk about operation light up Lagos project, where you can go about your business at any time. It not government’s money, it is people’s money that is being put to use.
You can see massive constructions, flyovers at Abule Egaba, and Ajah, pedestrian bridges all over the place, even traffic control alone. We have effective traffic control. Even the governor has said the Memorandum of Understanding for the fourth Mainland Bridge will be signed even before celebration of the first year anniversary. You can see the launch of equipment for security personnel and the N25 billion Employment Endowment Fund, first tranche which amounts to N6.25 billion has been released. The fund will be given at low-interest rates to small businesses. The businesses will create jobs.
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