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How Edo And Oyo States Tackle Dwindling Revenue

By Alemm-Ozioruva Aliu, Benin City and Iyabo Lawal, Ibadan
25 October 2015   |   2:14 am
WITH dwindling revenue, orchestrated by the downward slide in the price of the crude at the international market, government at all levels in the country are now fashioning out new revenue generation ideas, with more emphasis on internal sources.
Ajimobi

Ajimobi

WITH dwindling revenue, orchestrated by the downward slide in the price of the crude at the international market, government at all levels in the country are now fashioning out new revenue generation ideas, with more emphasis on internal sources.

While the Federal Government is looking at the diversification of the economy, to earn more money, the states and Local Government are planning effective tax regime to buoy their revenue base and to de-emphasise reliance on the Federation Account.

In Edo State, the government has re-invigorated its tax drive business, which was first started in 2008. Shortly after the reinvigoration, the Internally Generated Revenue (IGR) grew from a paltry N200 million to 300 million monthly. It rose to N1.4 billion monthly at a point.

The increased IGR contributed immensely to the infrastructural development programme of the state and its continuous ability to meet its basic obligations of prompt and regular payment of salaries. It also introduced other taxes to shore up the revenue base of the state.

But with financial downturn in the country, the Edo Inland Revenue Service (EIRS) had since commenced the enforcement of tax regulations, particularly as they affect private business concerns.

Recently, the Department of Tax Intelligence and Enforcement of the EIRS sealed off over 23 establishments in the hospitality industry in Ekpoma, Uromi and environs in Edo Central Senatorial District for non-compliance with the Hotels and Event Centres Occupancy and Restaurant Consumption Law of Edo State, also known as Consumption Tax Law.

Speaking during the enforcement exercise, the leader of the enforcement team and director, Tax Intelligence and Enforcement Department, Victor Okube said, “most hotels and eateries in Esan West Local Government Area were found not to be in compliance with the consumption tax law, and were subsequently sealed off. The exercise is not punitive, but rather, it is to ensure that operators in the hospitality industry, who are also Agents of Collection, comply with the consumption tax law.”

Okube expressed displeasure over the recalcitrant attitude of managers of hotels, eateries, restaurants, event centres and their feigning ignorance of the existence of the Consumption Tax Law.

“Before the law became operational in November, 2011, the EIRS had a stakeholders’ meeting with all operators in the hospitality industry, where they were registered as Agents of Collection, sensitised and educated on the administration and processes of the law in other to have a hitch free implementation and wondered why they claimed not to be aware of the law.”

He took time to educate operators and managers of hotels and eateries on the operations of the tax law, saying that “consumption tax is five percent of total sum paid on goods consumed or services rendered in hotels, eateries, restaurants, use of hotel facilities or event centres in Edo State.”

But many of the victims and others complained of multiple taxation, as they said paying for several activities and items has made their business now look like they are slaves to the government.”

But the chairman of EIRS,Chief Oseni Elamah said: “multiple taxes exist, but whether people suffer double taxation is what should be addressed. There are multiple taxation because you talk about Consumption Tax, Value Added Tax, and you find out that there are two main stream of taxation. There is direct and there is indirect taxation. Direct tax affects persons directly. It is collected from earned income. It is to support government in meeting up with social obligations and to create an enabling environment for businesses . Indirect taxes are targeted towards certain aspects of the economy in order to ensure there is even distribution of income and fairness to all.
Those are avoidable if you want to avoid them. They include motor vehicle licenses, levies from shops and others. If you don’t own a shop, you don’t pay. We are all faced with multiple taxation on a daily basis. The misconception they were giving is that there were so many taxes. You cannot pay income taxes twice. That is why we came up with the Joint Tax Board to harmonise. Every adult that works and earns income must pay income tax. What has happened over the years was that for any tax to become due, it must be certain, specific and commiserate with the income you earn. The challenge is that we do not have a national identifier for us to know those qualified to pay under the law. Just like in America, where they have the social security number, which serves as tax identification. We introduced the Tax Identification Number so that you have an identity to show when you pay tax anywhere in Nigeria. A lot of people who earn income are not properly accounted for or reported and therefore we are not able to ascertain the income the person earns. Nigerians find it difficult paying tax. Multiple taxation exists, but we want to work towards eradicating people subjected to paying taxes more than once on the same income,” he said

Oshiomhole recently took a practical step to boost the IGR of the state by inaugurating the Edo State Internal Revenue Service
Board.

The Governor said there was the need to build strong institutions rather than strong individuals if the country is to make progress in the comity of nations.

“We have since established the Edo State Board of Internal Revenue and the whole idea is to create an institution that is not
going to be bogged down by the usual civil service bureaucracy. We do need to be able to collect taxes and to collect efficiently and to ensure that taxes collected are all reflected in the accounts of Government.
“The taxes we collect, small as it is, has even reduced and yet government is still working on projects in various areas.

THE government of Oyo State has been battling to meet its financial obligations to the citizenry. In 2011, the federal allocation to the state stood at N4.2 billion, while salary and wages summed up to about N2.9bilion.

But since then the statutory allocation, had been reduced to between N2.5 billion and N3.2billio monthly. Yet monthly wage bill had is said to have risen to about N5billion. The dwindling alloca­tion from the Federation Account to the state has resulted in irregular payment of workers’ salaries and wages by the state since October 2014. The Internally Generated Revenue (IGR) of the state government, which is about N1.2billion every month, could not bail the state government out of the monthly N1.8 billion deficit or more.

The government has taken the first measure to bridge the gap in revenue earnings.It reduced ministries from 23 to 15 in an attempt to block leakages in line with the plan to re-engineer the economic structure of the state.

The government has also initiated other plans to earn more revenue from tax enforcement. In line with this plan the state’s Board of Internal Revenue would be restructured to collect tenement rates and taxes. Revenue from these sources would supplement subvention from the Federal Government and address the issue of irregular payment of salaries.

“Our salaries and wages, when we came in, was N2.9 billion. We increased a lot of wages and salaries more than double. As of now, our wages stand at N5.4 billion, so there is no way we could meet payment of wages and salaries.

“Without subvention from the Federal Government, we cannot pay salaries. The only way to be less dependent on the Federal Government is through engineering of our economic system. And, to increase IGR, we have to block leakages. Today we have 23 ministries, we will not have more than 15 ministries,” governor Abiola Ajimobi said recently.

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