The new tax collector in town

The Federal Inland Revenue Service (FIRS) chairman, Muhammad Nami, has swung into action as Nigeria’s No.1 tax collector. Ladies and gentlemen, fasten your loins; a new sheriff is in town. On Sunday, he was reported to have offered a 30-day opportunity to enable tax payers to obtain their tax clearance certificates. In the statement titled “Facilitating 2020 Tax Clearance Certificate Issuance,” Mr. Nami says the offer is to ease issuance of tax clearance certificates. The statement reads in part:

“Following the numerous complaints received from our esteemed taxpayers with respect to difficulties encountered before obtaining Tax Clearance Certificate (TCC) and the fact that taxpayers need TCC to enable them to, inter alia, seek and obtain contracts and loans, renew permits, registrations, franchises, agreements and/or licences that will invariably generate revenue from which taxes will be paid, Management has looked into the above complaints and has taken steps to ease the process of obtaining TCC.”

Machinery has been put in place to relieve taxpayers of the burden associated with the issuance of the certificate which they may take advantage of from 2nd January to 31st of January. Whoever knows how difficult obtaining simple documents from our bureaucracy will appreciate the caring gesture of Mr. Nami. Having said this, I need to be educated on the categories of taxpayers he is referring to. Great multitudes are taxpayers. Is Mr. Nami referring to only the federal taxpayers?

Under the current Nigerian tax law, taxation is collected by three tiers of government, that is, the federal, state and local government. Each has its sphere clearly spelt out in the taxes and levies collectible. The taxes that go to the Federal Government are the following: Company income tax; Withholding tax on companies; Petroleum Profit Tax; Value Added Tax; Education Tax; Capital Gains Tax—Abuja residents and corporate bodies operating therein; Stamp Duties involving corporate entity. The others are Personal income tax in respect of Armed Forces personnel; Police personnel; residents of Abuja FCT; and External Affairs officers.

Individuals other than those exceptionally listed in the foregoing pay their taxes to the states in which they are resident for at least 183 days in a fiscal year. Personal income tax generally known as PAYE from companies, organisations etc goes to the states. So do vehicle licences. Bicycle and liquor licences—on and off licences— shop levies, market levies etc all go to local Governments.

The way Mr. Nami has spoken, it is easy to have the impression that all taxes now go to the federal and only the Federal Government is the issuing tax clearance certificates authority. That will be unacceptable; we are in a federation. Why will the states not have full control of their own tax administration which should include tax clearance certificates?