The Guardian
Email YouTube Facebook Instagram Twitter WhatsApp

Lean options, as government moves to ramp up revenue from taxes


Babatunde Fowler, FIRS Boss

Babatunde Fowler, FIRS Boss

Reviews Tax Policy, Cut Down On Excessive Spendings

As Nigeria continues to reel under the pangs of revenue slump, making it impossible for the realization of the expected funding target for the 2016 Federal Government N6.07t Budget, the Central Bank of Nigeria (CBN) has reported that a whopping over N1.134t has so far been recorded as deficit or shortfall, in projected revenue, in the first five months of the 2016 fiscal year.

The implication of the development is that the implementation of the 2016-spending plan is greatly threatened and the only option is to source for revenue from fresh sources or raise the lid of the N1.8t approved borrowing plan band for the fiscal year. Already, an estimated N60b has so far been raised from the domestic market by the Debt Management Office (DMO) out of the earlier planned N800b to N900b borrowing arrangement.

However, a Research professor of Economics and former Director General of the Nigerian Institute of Social and Economics Research (NISER) , Prof. Olu Ajakaiye has advised President Muhammadu Buhari to effectively tackle the restiveness in the Niger Delta region to halt the drift, so as to raise revenue for the delivery of the well-intentioned 2016 fiscal plan.

The country is reportedly loosing an estimated huge sums of revenue running into billions of naira on a monthly basis, no thanks to spillage and shut -in activities by the oil producing companies, as a result of the vandalization of oil facilities by the militants in the Niger Delta.

On the non-oil revenue side, the story is not different as both taxes and Customs duties have not performed any better, creating a wide gap between revenue projection and actual receipt of the 2016 plan, which totaled a little over N1.3t between January and May this year.

According to the CBN, which profiled the revenue deficit in its monthly Economic Reports, the country recorded a whopping N725.18b in the first quarter of the year; yet another sum of N193.23b for the month of April and another whopping sum of N215.86b for the month of May this year, all totaling N1, 134.27t.

The CBN First Quarter Economic Reports on the revenue slump within the quarter read in part: “At N1, 268.59b or 52.5 per cent, total federally-collected revenue was N48.1b and 18.0 per cent lower than the quarterly budget estimate and the preceding quarter’s receipts, respectively. Gross oil receipt, which stood at N666.13b, was lower than both the provisional quarterly budget and the receipts in the preceding quarter. The development was attributed to the persistent fall in receipts from crude oil/gas export arising from the continuous drop in the price of crude oil as well as a series of shut-ins and shut-downs at some NNPC terminals owing to pipeline vandalism.

“ Non-oil receipts, at N602.46b or 47.5 per cent of the total, fell below the level in the fourth quarter of 2015 by 16.0 per cent. Federal Government retained revenue was N505.07b, while total expenditure was N1, 230.25b, resulting in an estimated deficit of N725.18b in the first quarter of 2016, compared with the 2015 quarterly budget deficit of N260.25b.”
Apparently worried by the development, the Federal Ministry of Finance has since early this year embarked on a number of initiatives to cut down on frivolous spending in the public service, including the establishment of an Efficiency Unit dedicated to the checking of abuses by public servants, to save funds for the implementation of key priority projects of government. The initiative has resulted in the barring of all government functionaries, including Ministers from traveling first class when on official duties, whether locally or internationally. An estimated, a little above N13b is expected to be saved from first class travels by public servants alone in a year, according to the Head of the Efficiency Unit, Ms.Patience Oniha recently.

Also, on the cost-cutting and efficiency drive in the utilization of public funds, the Federal Government recently banned the procurement and distribution of conference bags, T-shirts and other souvenirs at events and activities such as conferences, workshops and seminars organized and funded by Ministries, Departments and Agencies (MDAs).

The new measures, according to Alhaji Salisu Na’Inna Dambatta , a director in charge  of Press and Public Relations in the Federal Ministry of Finance were approved by President Muhammadu Buhari following recommendations by the Efficiency Unit of the Federal Ministry of Finance, and conveyed to the Secretary to the Government of the Federation, the Head of the Civil Service of the Federation and the Ministers of Finance and Budget and National Planning, by the Chief of Staff to the President, Alhaji Abba Kyari, for implementation.

To ramp up more revenue, the Finance Minister, Mrs. Kemi Adeosun penultimate week revealed that government has identified some 1000 new revenue sources that can be tapped, but which have remained dormant. She has also set up an eight -man panel to review the current National Tax Policy to simplify tax collection, as well as, induce voluntary tax compliance, as a way of moving the country from over dependence on oil mineral resources.

The review, which apparently is to ultimately grow Nigeria’s tax to GDP ratio, which currently stands just at about six per cent far below average level of most sub-Saharan African peer countries like South Africa, is expected to be completed, in four weeks.

The Team has the following as Terms of Reference: Review the National Tax Policy document; Recommend a list of tax laws and regulations that need to be reviewed or amended; Recommend policy to ensure inter-agency cooperation between the Federal Inland Revenue Service (FIRS) and other revenue agencies toward enhancing the IGR of the Federal Government; Expand the treaty network of Nigeria to include, our major trading partners and review the existing Double Taxation Agreement; Ensure that tax laws are reviewed from time to time to minimise avoidable hardships to taxpayers;

These efforts notwithstanding, the former NISER boss Prof. Ajakaiye who is now Executive Chairman, African Centre for Shared Development Capacity Building Ibadan, described the revenue shortfall as a heavy challenge, pointing out that government has no option than to dialogue with the Niger Delta militants to shore up production volume, after which, other solutions can be taken from there to diversify the economy from the over dependence on oil.

His words: “ There seems to be no option than dialoguing with the militants in the Niger Delta region, because the option of raising taxes is not going to be helpful as studies have shown that when you raise tax rates, like if you were to double the VAT, it gives incentives for people to actually evade tax and the net yield would be as discouraging as you would possibly imagine. In the meantime, the few that are paying would face the higher burden and it could be regressive.

“That is one side, the other side is that the nonoil revenue is actually oildriven, because you see the bulk on the non oil revenue, is customs duties and there can be no customs duties unless you can import and if you cannot import because there is no foreign exchange, then there would be nothing for them to tax. That is why you are seeing the dwindling oil revenue affecting the capacity to import. The capacity to import is in relation to your foreign exchange earning. So when your earnings are down you can’t import enough to tax.

“In the meantime, most of the companies, their half year reports are showing declining profits and of course the greatest revenue of the FIRS is Companies Income Tax. And the reasons the profits are failing is the lack of access to foreign exchange, which is affecting their production plans, and therefore their output, their employment, their profits and therefore their income tax, including their pay roll tax, which are all decking because when companies are not able to sustain production, their next action is to sack people.

“ What I hope would be done is, first successfully manage the challenge in the Niger Delta region, around these oil facilities and so on, so that the production side, at least, will revamp, because even the global oil price is not encouraging, it’s now around $40 because of so many factors, which has the tendency of increased glut.

“ Again, the major demand of oil, not only from Nigeria, but globally, that is China, India and other emerging markets, they are also not growing very well. So, when there is no growth, no demand for oil, the demand side is not expanding and the supply side is pushing, you have a situation of glut. Therefore, the only option left is for us to deal with the problem in the Niger Delta region because unless you have foreign exchange, you cannot import and there would be no customs duty, production in manufacturing, CIT collapses and the like, all of these are driven by imports

“My strong advice is that all stakeholders do the best possible to manage the challenges of militancy, that to me is the sort of respite in the meantime; then when that happens we can work on how to engineer the Nigerian economy out of oil dependence because you cannot diversify without foreign exchange as well. Because everything in Nigeria is import dependent.”

Receive News Alerts on Whatsapp: +2348136370421

No comments yet