A revenue target without any basis or link to the state of the economy destroys the integrity of the tax system. Revenue forecasts based on sound verifiable factors and data is a useful benchmark for monitoring collection, stimulating effort, and measuring the performance of RAS.
Public agencies

The RA is usually dependent on a number of public agencies, such as the Police, Customs, Immigrations, the Attorney General and other MDAs for executing its functions. The quality and timeliness of assistance provided by these agencies has a major impact on the RA’s performance. Further, access to information about taxable transactions available with other government agencies is crucial for monitoring taxpayer behaviour and investigating tax evasion. Most of the MDAs render services that have bearable influence on IGR. Unfortunately, rather can cooperate with RA to raise the State’s IGR profile, they see the RA as irritant and meddlesome resulting in monumental loss of revenue to the state. Relevant data that could assist in profiling tax payers exist in different silos, not connected.

The legal framework
Tax laws makes tax policy enforceable. Wrong translation of policy into law might result in complicated tax laws which becomes difficult to implement and create fertile ground for inventing interpretation that favours tax avoidance. This might also lead to unending legal issue at huge cost to the revenue agency.

Most of our revenue laws are simply archaic and out dated. Tax laws defines the powers that revenue authority can exercise to enforce the laws. Weaknesses in the power to collect information about taxpayer transactions, take coercive action to gather evidence of tax evasion or collect tax arrears, and impose penalties for noncompliance have a telling effect on the overall effectiveness of revenue agencies.

For instance, no State can initiate and execute criminal process against individuals that failed to pay Personal Income Tax unless the Attorney General of the Federation grant/ transfer such power to the State.

Current trend in technology and impact on revenue administration
Currently, certain technologies are all having a huge impact on tax administrations, Taken individually or together, these trends have the power to increase taxpayer satisfaction, empower tax agency employees, optimize operations and modernize services. These trends include Big Data, Analytics, Artificial intelligence (AI), Machine learning, The Internet of Things (IoT), Mobility and cloud computing

Globalisation and digitisation
There is an increasing recognition that digitalization and the exploitation of digital data have the potential to revolutionize the operation of economies well beyond the minor disruption seen so far. Digitalization is affecting not just how good and services are produced and consumed but also the very goods and services that are required.

With the development of virtual and cryptocurrency technologies, new business models are blurring the distinctions between traditional forms, and challenging the fundamentals of taxation while they are at it. The digital economy is leading to a brave new future in which it is increasingly difficult to assess the point in the supply chain at which value creation actually happens.

Evaluating revenue agency
During the period of implementing new structure, process and procedures, that are fundamental for sustainable IGR, quantum of revenue collected might not increase exponentially. Sustainable Revenue is a marathon and not short distance race.

In order to properly evaluate RA’s Institutional Framework, the authors of World Bank Technical Paper No 472, A Diagnostic Framework For Revenue Administration, rightly suggest five years’ trend analysis of (i) Total revenue collected / Annual revenue collection target, (ii)Total revenue collected /GDP; (ii) Tax gap= 1- total revenue collected/Potential revenue; (iv) Number of tax declarations filed / Number of registered taxpayers; (v) Number of tax declarations received on time / Total number of tax declarations filed; (vi)Amount of taxes paid voluntarily by taxpayers/ amount of taxes payable on the basis of the declarations; (vi) Additional taxes assessed after investigation and audit / tax liability declared; (viii) Amount of additional assessed taxes upheld in appeal / amount of additional assessed taxes in appeal; (ix) Amount of additional taxes collected / additional taxes assessed; (x) Amount of arrears recovered / total amount of tax arrears at the beginning of the year; (xi) Number of cases of taxes evasion; (xii)Perception of taxpayer regarding, Risk of detection of non-compliance and severity of consequences; (xiii) Quality of assistance provided by the RA to enable taxpayers to comply with the obligations; ( xiv)Effectiveness of the RA in resolving taxpayer problems (xv) Public perception regarding the degree of corruption in the RA(xvi); RA morale and self-image(xvii) Number of taxpayers/ number of RA employees and (xvii)Administrative costs/Total revenue collected.

Given that over the years’ revenue administration in Nigeria has witnessed commendable reforms, however, Tax to GDP ratio is low compared with similar economy. This is due majorly to incoherent approach to revenue generation by different agencies of government, restrictive legal framework for revenue generation, lack of robust and reliable taxpayer database, high level of tax evasion by a good number of taxpayers, low compliance by the informal sector,lack of effective revenue collection mechanism and enforcement.

It is incumbent therefore that while the reform efforts focus on revenue generating agencies and processes through deployment of appropriate technology, harmonization of revenue, collaboration amongst various government agencies, data integration, right legal framework; the external environment must be given serious consideration and effects built into the reform programme.

Failing which the reform will not archive desired results.

Concluded

Alli is former chairman, Oyo and Osun States Board of Inland Revenue.