The Federal Inland Revenue Service (FIRS) is also using technology and quality service to drive the improved revenue target set by its Executive Chairman, Muhammad Nami. The rise in tax revenue from N1.04 trillion in first quarter of 2019 to N1.12 trillion in first quarter of 2020 shows the effectiveness of the new policy plan.
Tax revenue has, for years, remained the backbone of growth and development in advanced economies. The huge infrastructural development in Europe, America and some parts of Middle East and Asia were built with tax proceeds.
For Nigeria, tax collections were for years relegated to the background, with the country’s Tax to Gross Domestic Product (GDP) of six per cent one of the lowest in the world.
But there is increased drive by the Executive Chairman of the Federal Inland Revenue Service (FIRS) Muhammad Nami to improve the trend and increase the country’s tax revenue for greater good of the economy and the people.
The FIRS has in recent months, initiated reforms aimed at bringing more people into the tax net and ensuring that right taxes are paid to the coffers of government through technology.
From the sensitisation of private sector businesses and individuals on the need to pay taxes to the simplification of tax collection processes and passage of the Finance Act 2019, the FIRS is delivering on its mandate as seen in its first quarter 2020 figures. The FIRS increased collection record in the first quarter of the year with tax collections up from N1.04 trillion in the first quarter of 2019 to N1.12 trillion in first quarter of 2020.
Nami, a Fellow of the Chartered Institute of Taxation of Nigeria, attributed the feat to the policy reforms and institutional re-organisation he initiated on assumption of office last December.
According to him, first quarter collection results have traditionally been notoriously low as a result of limited economic activities within the period, which business analysts trace to the festive hangover of the New Year’s celebrations, among other factors.
He said the feat was achieved despite the global fall in crude oil prices and shutdown of global economic system due to the COVID-19 pandemic.
Analysis of the collections showed that Capital Gains Tax recorded 568 per cent increase to N643.9 billion from N96.4 million, Gas Income Tax rose by 420 per cent from N2.97 billion to N15.4 billion while Petroleum Income Tax increased by nine per cent. The Companies Income Tax increased by 152 per cent to N102.6 billion, among other positive indicators.
In addition, Stamp Duty collection in the first quarter of the year stood at about N4.6 billion, about 36 per cent increase compared to the first quarter of last year’s figure of N3.38 billion.
The FIRS also recorded an 81 per cent increase in its collection of Education Tax, with N13.1 billion collected in the first quarter of 2020 compared to N7.22 billion in the corresponding period in 2019.
Both Nigeria Customs Service (NCS) and non-Import Value Added Tax (VAT) also increased by 11 per cent to N63.29 billion and N261.2 billion compared with first quarter 2019 figures of N57 billion and N236 billion correspondingly.
Besides, the recently signed 2019 Finance Act is improving the ease of doing business environment in the country, especially for small businesses, noting that the Act exempts businesses with a yearly turnover of N25 million and below from VAT.
However, these businesses would enter the tax net through continuous assessments. This Act is already impacting positively on small businesses as well as the economy.
Nami has continually advocated increased tax payment by the informal sector. For him, taxing the informal sector may also be a way of promoting good governance and political accountability of the state because tax strengthens the social contract between the citizens and the government.
“The informal businesses that contribute to tax revenue are likely to assert their rights to receive certain services from government, thereby ensuring national development and accountability. Paying taxes is likely to promote responsiveness by the state to the needs of the informal sector in a bid to encourage voluntary compliance. It is also likely to encourage collective action, collective political engagement and bargaining by the informal sector,” he said.
Other analysts insist that if Nigeria is to reduce its budget deficits and increase revenue mobilization, it must widen its tax base and the informal sector provides an opportunity to do so.
The FIRS leadership has, in its response to the impact of the Coronavirus pandemic on its operations, launched business continuity plan and measures to ensure the safety and well-being of taxpayers and other stakeholders.
It is projected that the country has a low tax base and will most likely face an unprecedented revenue challenge due to the pandemic.
To cushion the effects, the tax agency introduced some measures, which are designed to relieve taxpayers of the burden of tax compliance at this time while also ensuring the safety of its staff members, taxpayers and the public.
The agency has extended the time for filing VAT and withholding tax from the 21st of every month to the last working day of the month, preceding the month of deduction.
Also, the due date for filing company income tax returns has been extended by one month while taxpayers will be allowed to file returns using unaudited accounts. However, they must subsequently submit audited account within two months after the revised due date of filing.
The agency equally outlined some measures to reduce visits to the various tax offices and enhance operational efficiency.
The measures include extension of the filing deadline of some taxes. Taxpayers were urged to use available e-platforms for filing tax returns, including withholding tax, transfer pricing, and company income tax returns electronically.
The FIRS planned to publish information requests for desk reviews and tax audits on its website and create a portal where such information can be uploaded by taxpayers for online review by the service.
Nami is also building a motivated workforce that is committed to ensuring the commission achieves its N8.5 trillion target this year. The Domestic Tax Operation Group (DTOG) of the FIRS already pledged that with the new management’s determination to empower and motivate the staff members, the target would not only be achieved but would be surpassed.
The DTOG said the FIRS would keep track of the compliance behaviour of taxable entities, especially by integrating FIRS e-solution platforms with the Integrated Payroll and Personnel Information System (IPPIS), Government Integrated Financial Management Information System (GIFMIS), and the Taxpayer Identification Number (TIN) with Bank Verification Number (BVN).
The promotion of quality service delivery to taxpayers necessarily requires the adoption of technology. The Service was, therefore, admonished to intensify efforts towards completing the various ICT interventions, including the on-going VAT automation as well as the need to build a centralised taxpayer database to ease access to information”
Nami has met with officials of traders’ associations and unions as part of his public enlightenment to taxpayers and collecting agents on the provisions of the Finance Act.
The FIRS boss also visited some major markets in Lagos and other parts of the country to educate traders and marketers on the benefits of the Finance Act 2019 to them and their businesses, especially as small businesses.
Highlighting some public infrastructure being built by the Federal Government, Nami stressed that the President Muhammadu Buhari Administration was making judicious use of tax revenue, and charged the traders to continue to pay their taxes promptly so that the government could do more for them.
Nami also disclosed that more FIRS tax offices would be opened in markets nationwide to bring the service nearer to traders and make tax compliance easier for them,
He stated that the ongoing reforms at the FIRS have decentralised key operations of the Service to make it easier to do business with the FIRS, including filing for Tax Clearance Certificate manually for it to be generated electronically on the Service’s Integrated Tax Administration System (ITAS).
Speaking on the success achieved at the FIRS, Lead Consultant, Dshield & Buckler, tax and management consultancy firm, based in Lagos, Oludayo Adeosun, said the FIRS boss has taken strategic steps to lift the tax figures. He said the ongoing corporate segmentation of taxpayers by the FIRS would boost tax compliance.
He explained: “There are low, medium and large tax payers. There is appropriate segmentation of tax payers which is leading to improvement for tax collection for the nation. Tax segmentation in line with the new Finance Act, where companies with less than N25 million turnover are being exempted from payment of taxes. It is a new dimension, that never happened before. But this new revision, allows companies that are coming up to have time to find their feet, while those that have been in business will now be faced by the tax offices to ensure that adequate and correct taxes are paid”.
