There is a new man at the helm of affairs at the Federal Inland Revenue Services (FIRS). In one month, he has initiated his own reforms and vowed to go after tax defaulters using ICT. Muhammad Nami looks like a sheriff with his own agenda to generate revenue and fund infrastructure development. Assistant Editor NDUKA CHIEJINA reports on what Nami has been up to one month on the saddle.
The Federal Inland Revenue Service (FIRS) is very critical to the development of Nigeria’s revenue generation exercise.
This is made more pressing with the passing and signing of the 2019 Finance Bill which now requires non-oil revenue generating agencies to generate more money for the government.
In December, 2019, Muhammed Nami was appointed Executive Chairman of the FIRS after his predecessor’s tenure expired.
100 days Reform
At his inauguration, Nami presented his agenda first by admitting that “the FIRS is a work in progress which needs continuous improvement because the service has had its fair share of challenges, some of which it has been able to withstand so far.”
Nami said in his first 100 days, he plans “building members of staff capacities for service delivery to make doing business easier for taxpayers and collection target will be easy to achieve.
Within that period, he has vowed to close “all lien cases in order to build new enforcement strategies. Restructure and reposition audit function.”
Under him, the Service has commenced the review of structures for optimal performance which was unveiled at the FIRS Corporate Strategic Retreat. For the first time in seven years, the FIRS held its Corporate Strategic Retreat to define roles and target setting.
The Service wants to engage its members of staff in capacity building on Finance Bill and other Tax programmes; Review Tax Clearance Certificate (TCC) administration process which started with January TCC issuance programme and revamp the Integrated Tax Administration System (ITAS) operations, starting with adopting the current capabilities and upgrade to next version of the solution.
The new man at the FIRS has started by offering a 30-day window to enable tax payers to obtain Tax Clearance Certificate with ease.
Mr. Nami personally signed the public notice with the aim of assisting tax payers meet their obligations as they might need TCC by putting in place machinery to issue 2020 TCC for all eligible tax payers from January 2 to January 31, 2020.
He warned that the FIRS will not fail to invoke the provisions of the Law; including enforcement and imposition of lien should it be apparent that a tax payer has misled the FIRS to issue a TCC.
Nami said: “The Service may not hesitate to use enforcement activities, including imposition of lien on bank accounts of such defaulting companies to recover any outstanding debts when it discovers that the tax payer has misled the Service in its duty to observe tax compliance.”
The issuance of TCC he said, “is to ease the burden of tax payers in line with the provisions of Section 101 (1) of CITA LFN 2004 and in conformity with Self-Assessment Regulation, 2011.”
The issuance of TCC to tax payers has been a thorny issue which past Executive Chairmen of the FIRS had tried to tackle; Nami is standing in the cusp of time to be the one who perfected the ease of accessing TCC by tax payers.
Capturing the informal sector
At the African Tax Administration Forum (ATAF) meeting in Abuja recently, tax administrators from the continent raised the alarm that ensuring that the informal sector pays tax may be taxing because of the shenanigans of politicians.
Nami lamented that “making the informal sector to pay tax is viewed as politically unpopular and politicians are unwilling to risk losing the high number of votes represented in the sector. This is because politicians promise informal workers protection from taxation in exchange for their votes.”
Such businesses, he said, “also operate on a cash basis and maintain poor or no accounting records. Most of the businesses in the sector are also small and fragmented, making it inefficient for the revenue administrations to enforce compliance.”
However, African tax administrators led by Nami have agreed to design ways to drag the operators of informal businesses into the tax net.
To support the planned capture of the informal sector into the tax net, Nami and others agreed that “enforcing taxation on 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. Thus, informal businesses that contribute to tax revenues are likely to assert their rights to receive certain services from government thereby ensuring accountability.”
“Paying taxes”, he said, “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.”
Nami stated that “if Africa is to reduce its budget deficits and increase revenue mobilisation, it must widen its tax base and the informal sector provides the opportunity to do so.”
The Executive Secretary of ATAF, Mr. Lorgan Wortt stated that over the past four years ATAF has helped eight member countries trace $1 billion in taxes $300m of which is already in the bank.
He said: “These days the world is gathering over this period to discuss how to tax the digital economy. Nigeria is a massive market, e-commerce and social media platform is widely used in this country and it is widely used in other continents, mobile cell phone is the biggest on the continent. What does that mean for revenue and for economic activity now that companies can do business in our countries without having a presence here?”
As an organisation, ATAF, he said, has, in the last 10 years, trained 16,000 tax officials who have trained 500 tax auditors, have graduated 85 Master’s degree students in tax who were trained in English Master’s degree offered through ATAF.
They have published more than 300 academic policy and administrator academic papers through the African Tax Research Network and have produced formidable tax statistics publication anywhere on African traveller’s tax statistics.
At the meeting, it was revealed that imposing tax on the informal sector may yield low returns in the short run, but the benefits are worth the effort. Bringing the businesses into the tax net, they said, instils a tax-paying culture in the businesses, which ensures tax compliance when the businesses expand.
Demanding tax from the informal sector is considered critical in ensuring a perception of fairness in the tax system. “Those who operate in the formal sector deem it unfair to have to pay taxes while those in the informal sector do not. This impacts their tax morale and can result in low tax compliance among those in the formal sector.”
They lamented that “furthermore, in some instances, enterprises within the informal sector create unfair competition for those operating in formality. This reduces the income generated by the formal firms and consequently, reduces the taxes paid.”
Blocking $10 billion leaks
Coming back to Nigeria, FIRS has moved to block $10 billion tax leaks through illicit profit shifting by multinational corporations operating in the country.
These monies would have been applied to critical infrastructure development by the three tiers of government.
Quoting the African Union Illicit Financial Flow Report, Nami said: “Africa is losing $50 billion through profit shifting by multinational corporations and about $10 billion of this amount is from Nigeria alone.”
To block this and other identified tax avoidance schemes by individuals and corporate organisations, Nami said he has launched a comprehensive, ongoing tax collection reform process “anchored on four cardinal pillars of rebuilding FIRS’ institutional framework; robust collaboration with stakeholders; building a customer or taxpayer-centric institution and making the FIRS data-centric institution.”
The FIRS Chairman, his board and team have also set a target of improving the Service’s performance over the next four years by a “minimum target of $5 million staff-to-revenue- ration and a 10 per cent tax-to-GDP ratio.”
Showing that the FIRS is gradually weaning Nigeria off its dependence on oil revenue, Nami revealed that non-oil taxes “accounted for 60 per cent contribution to the total collection” of taxes in 2019.
Projecting into this year, Nami stated: “For the year 2020, we have a target of N8.5 trillion. This is broken down into oil tax of N3.7 trillion and non-oil taxes target of N4.8 trillion.”
FIRS failed to meet tax target
Non-discretionary tax waiver grants, illicit financial flows abroad and high overhead costs have been adduced as major reasons why the Federal Inland Revenue Service (FIRS) had failed to meet its tax revenue targets in recent times.
Mr. Nami, told the Senate at an interactive session with revenue generating agencies, which was aimed at improving the Internally Generated Revenue (IGR) of the Federal Government through non-oil revenue sources.
Nami said: “Nigeria loses a lot of revenue through tax waivers granted to large companies which otherwise would have been taxed to buoy up government revenue.
He, once again, identified illicit financial flow as a major cause of revenue loss to Nigeria.
Coupled with this is the operational cost of the FIRS which he said is high compared to the statutory provisions for the running of the organisation. Nami revealed that upon his assumption of office, he discovered that, among others, this factor contributed to making the FIRS unable to meet its target in recent times.
Consequently, Mr. Nami canvassed better official discretion in granting tax waivers, even as he assured that he is working hard at the FIRS in collaboration with relevant government agencies to stem illicit financial flow, especially via profit shifting by multinationals operating in the country.
The FIRS chief urged the National Assembly to assist the FIRS in this regard in order to increase government’s revenue towards the modernisation of public infrastructure.
Senate President Ahmed Lawan urged the revenue-generating agencies to do better, stressing that “the revenue profile of the country is going down.”
Lawan added: “We believe that revenue generating agencies of government can do better. The National Assembly wants to help you in terms of legislative support and even with some incentives to ensure that your targets are met.
“Revenue agencies must meet their targets. They must aim higher. When they are not able to meet their targets, we ask them questions. There should be no reason why targets should not be met. But if anyone has any reason, we can also listen to him to know how genuine it is.”
Chairman, Senate Committee on Finance, Senator Solomon Adeola stated that “it is our belief that revenue accruable to the government will increase when we have interactive sessions such as this. The interactive session is going to hold quarterly. But subsequently, we will have the sessions in smaller groups to enable better interactions.”
Going after elite tax dodgers
Those who make more from the system will have to pay a more equitable share of their income as tax towards the public good, especially in lifting 100 million Nigerians out of poverty in the next 10 years.
A clear roadmap to achieving this national imperative was outlined in Abuja on the final day of the Federal Inland Revenue Service (FIRS) Management Retreat by paper presenters, discussants and the audience who discussed the 2019 Finance Act in a deeply stimulating debate.
The Lead Paper of the day delivered by Mr. Taiwo Oyedele entitled “Strategies for Implementing the New VAT Regime” dismissed erroneous public apprehension that the new 7.5 per cent VAT would impact negatively on poor Nigerians.
Oyedele made it clear that the “well-to-do” would now pay their fair share of taxes in the country unlike before.
He argued that the key to building this fair, equitable tax system lies in transparency, accountability, integrity, work and objectivity to build confidence in tax payers and stakeholders in the tax sector.
To accomplish this, the FIRS 2020 Corporate Plan was also unveiled and subjected to a robust, on-the-spot debate.
Intelligence system to track tax evaders
The Federal Inland Revenue Service (FIRS) under Nami has also launched a national intelligence gathering system to gather data and track all tax evaders and defaulters, with a view to bringing them all to justice and make them pay their fair share of taxes to the country.
Nami said the Service is restructuring and revamping its system to enable it to meet and even surpass its 2020 revenue target of N8.5 trillion.
According to Nami, the intelligence gathering system is Information and Communication Technology (ICT)-based and is being implemented in close collaboration with the ICPC and other anti-corruption agencies.
Financial institutions have also been drafted into the programme to tackle economy-based crimes, including money laundering.
Nami said: “We are improving our collaboration with the ICPC to track tax fraud and block all revenue leakages to ensure that we raise the revenue for the government to fund its budget.”
He added that the Service needs the data and intelligence which the ICPC has to help it track tax evaders and bring them into the tax net.”
Chairman of the Independent Corrupt Practices and Other Related Offences Commission (ICPC), Prof. Bolaji Owansanoye said the ICPC was open to share data with the FIRS to track tax evaders, defaulters and tackle illicit financial flow in Nigeria to raise the revenue profile of the government.
He said: “The collaboration between the FIRS and the ICPC is very important to Nigeria. One of the cardinal objectives of this Board of the ICPC is to widen the tax net.
“When we come across any company that is not tax compliant, we refer such companies to the FIRS. We have referred over 500 companies to FIRS. We want them to be captured in the tax net so that they continue to pay their taxes” he said.
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