Collecting taxes and fees is a fundamental way for countries around the globe (Nigeria inclusive) to generate public revenues that make it possible to finance investments in human capital, infrastructure, and the provision of services for citizens and businesses. Tax collection is primarily to raise revenue for government expenditures, although they serve other purposes as well.
According to the World Bank, taxes play a key role in making growth sustainable and equitable, especially in the context of current external disruptions and domestic structural problems led by widespread insecurity, runaway inflation, high cost of living and dwindling crude oil revenue.
Government’s determination to meet her burgeoning fiscal deficits in a period of revenue shortfall has forced the authorities into fighting tax evasion and avoidance. Without taxes, governments would be unable to meet the demands of their societies. Taxes are crucial because governments collect this money and use it to finance social projects.
Tax experts have argued that much of government financing gap can only be met by increased private-sector investment in sustainability.
Taxes are used for payment of salaries of public servants, procurement of security weapons for the protection of lives and properties; provision of basic and social amenities including roads, power, clean water, effective and affordable health system and provision of quality education.
In Nigeria, when taxes are collected from both individuals and organisations by the Federal Inland Revenue Service (FIRS) on behalf of the federal government, they are remitted into a central account of the Federation Account Allocation Committee (FAAC) for monthly disbursement to the federal, state and local governments. That is a major source of revenue to the three tiers of government for payment of recurrent and capital expenses.
To carry out the mandate of revenue collection, the FIRS has deployed several initiatives that include the deployment of technology and blocking leakages to generate more revenue to fund the budgetary needs of local and state governments as well as the federal government.
A report by the revenue watchdog showed that the service contributed over 59.45 percent of the revenue shared by the FAAC monthly in 2021. To a large extent, the survival of the nation is dependent on tax revenue as the highlights of the revenue profile of the country in 2021, showed that the FIRS had contributed a monthly average of 59.45 percent of revenue shared by FAAC.
It is clear the FIRS is living no stone unturned to provide more revenue for the country with a focus on reducing the nation’s need resort to constant borrowing by the government at all levels is unsustainable.
A breakdown of the FIRS monthly contribution to FAAC for 2021 showed that in January, it contributed 65.71 percent N388.54 billion to FAAC account; while in February, N361.26 billion or 60.57 percent of the total revenue was generated by the FIRS. In the following month of March, N501.32 billion, representing 60.01 percent of the total income for the month was raised through the FIRS. April 59.74 percent – N403.70 billion; May: 59.66 percent – N359.77 billion; June 65 percent – N664.30 billion and July: 52.03 percent – N397.95 billion.
Other months included August: 55.46 percent – N403.85 billion; September: 58.8 percent – N516.57 billion; October: 57.13 percent – N333.82 billion; November: 58.17 percent – N496.19 billion and December: 60.43 percent – N470.90 billion.
The report also showed that in the past three years, the FIRS had been making steady progress in terms of revenue collections as it garnered N5.262 trillion in 2019; N4.952 trillion in 2020 (obviously due to COVID-19) and N6.405 trillion in 2021. It was glaring that the FIRS has been gradually making progress despite the impact of Covid-19, the instability in the oil and gas sector, insecurity in the country and economic downturn.
To say the obvious, all hands should be on deck to support the tax system and make it function efficiently. Not a few people agree that tax evasion should be treated as economic sabotage, owing to the significant role tax revenues play in economic development. Those who belong to that group are of the view that government should also put measures in place to make tax avoidance extremely difficult.
As it stands, the revenue service is not only counting on its revenue generation for provision of infrastructure to Nigerians, especially in areas where alternative sources of funding, including public private partnerships are available to help reduce Nigeria’s huge fiscal deficit.
For instance, recently, chairman of the FIRS said the federal government’s road infrastructure tax credit scheme is a noble initiative that should be applauded by everyone. The scheme is designed to tackle Nigeria’s infrastructure deficit.
The scheme provides for public-private partnership intervention in the construction, refurbishment and maintenance of critical road infrastructure in the country with participants being entitled to tax credits against their future company income tax (CIT).
NAMI made the argument at the Senate public hearing on the 2023 Medium-Term Expenditure Framework (MTEF) and fiscal paper held earlier this week at the Senate chambers, according to a statement that was issued by the agency yesterday. “I think one of the greatest innovations of the government of the day is the Executive Order 007, which was signed into law in 2019,” Mr. Nami said.
The NNPC through its subsidiary for instance is investing in about 1,824 kilometres of roads across the 6 geopolitical zones in Nigeria.
Such alternative project funding initiatives are indeed, helping to complement efforts of FIRS and other revenue generating agencies of government to bridge infrastructure gap. For example, the road leading from Suleja to Minna for instance was awarded some 11 years ago to a company for over N20 billion. Ironically, annual budgetary provision in our National Budget every year stands between N150 million to N200 million per annum. If federal government completes that road, going by the annual budgetary provisions it would take an average of 35 to 40 years before it would have been fully executed.
Among other beneficiaries of the federal government-initiated project funding scheme is the granting of tax credit approval to various companies including Dangote Group and The Nigeria Liquefied Natural Gas Limited (NLNG), one of the companies undertaking the construction of roads under the Road Infrastructure Development and Refurbishment Investment tax credit scheme.
NLNG received its tax credit certificate from the Federal Inland Revenue Service (FIRS), for the construction of the Bonny – Bodo Road, in Rivers State last week. The certificate was received by the Company’s Deputy Managing Director, Mr Olalekan Ogunleye, who represented the CEO NLNG, Mr. Philip Mshelbila at the handover ceremony on Thursday, 18th August, 2022 at the FIRS Headquarters, Abuja.
While issuing the tax credit certificate, the Executive Chairman, FIRS, Muhammad Nami commended the NLNG for its increased investments in Nigeria. “The service has faith in your company and the increased investments it is making in our country. We look forward, with optimism, to the completion of your train seven project for it to join the country’s tax revenue streams,” Mr Nami noted.
He also used the opportunity to highlight how the service was improving on its relations with stakeholders, as well as building a customer-centric tax authority for improved revenue generation. “In order to efficiently deliver on our mandate, the Board and Management of the Service is focused on the following strategic planks and action areas: we are energising our consultations and regular engagements with stakeholders; we are building a customer centric and data centric organisation while also restructuring the administrative framework and processes of the Service; we are driving towards full automation of core tax operations.
“You may recall that the FIRS started with the development and deployment of an in-house digital solution – The Taxpromax Solution. This solution allows taxpayers to sit in the comfort of their offices or homes to file returns, pay taxes and conduct all forms of tax processes with us.
“At the heart of our customer-centric reforms is the setting up of a multi-lingual Call Centre for enquiries and report from taxpayers.
“Consequent upon these strategic moves, the Service recorded an unprecedented collection of over N6trillion in 2021 and has set its sight on higher performance this year. There is no doubt that the Service can achieve its targets with taxpayers like the NLNG. I wish to assure you that the Service is ever ready to attend to any issue that will enable you and taxpayers like you to comply with statutory tax obligations,” the FIRS executive chairman noted.
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