The Federal Inland Revenue Service (FIRS) performance in the first quarter of 2020 showed N156 billion rise in tax revenue to N1.2 trillion. It was a pointer that reforms instituted by FIRS Executive Chairman, Muhammad Nami to reposition the service, bring more people into the tax net and improve Nigeria’s tax revenue is working. The FIRS is implementing small businesses -friendly tax policy that temporary exempts operators with annual turnover of N25 million and below from charging Valued Added Tax while deploying technology to ensure continued quality service delivery to taxpayers across every segment of the economy, writes COLLINS NWEZE.
Tax revenue has for centuries remained the backbone for economic growth and development in advanced economies. The huge infrastructural development in Europe, America and some parts of Middle East and Asia were majorly built with tax proceeds.
For Nigeria, tax collections was 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 new and increased drive by the Executive Chairman of the Federal Inland Revenue Service (FIRS) Muhammad Nami to reverse the trend and increase Nigeria’s tax revenue for greater good of the economy and the populace.
The FIRS under Nami 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 seamless 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 under Nami is delivering on its mandate as seen in its first quarter 2020 figures.
The FIRS set a new revenue collection record in the first quarter of 2020 with total tax collections up by 15 per cent to N1.2 trillion. The figure was N156 billion higher than N1.04 trillion received in the corresponding period of 2019.
FIRS boss Nami, a Fellow of the Chartered Institute of Taxation of Nigeria, Institute of Debt Recovery Practitioners of Nigeria and Associate Member of Nigerian Institute of Management (Chartered) and Association of National Accountants of Nigeria, attributed the feat to widespread policy reforms and institutional re-organisation he initiated on assumption of office in December 2019.
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 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 2020 stood at about N4.6 billion about 36 per cent increase compared to the first quarter 2019 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 and non-Import Value Added Tax (VAT) also increased by 11 per cent to N63.29 billion and N261.2 billion respectively 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 Nigeria especially for small businesses, noting that the Act exempts businesses with annual turnover of N25 million and below from charging Valued Added Tax.
However, these businesses would eventually 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 revenues 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.
Making Tax Collection Seamless
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 Nigeria as a country has a low tax base and will most likely face an unprecedented revenue challenge due to the coronavirus pandemic.
In order 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, taxpayers and the general 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 physical visits to the various tax offices and enhance operational efficiency.
The measures include extension of the filing deadline of some taxes. Taxpayers were encouraged to use available electronic platforms for filing tax returns, including withholding tax, transfer pricing, company income tax returns and so on 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.
Building Motivated Workforce
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, the target would not only be achieved but would be surpassed.
The DTOG said the FIRS would keep track of the compliance behavior of all 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”
Sensitization of traders, others on tax payment
Nami has regularly met with officials of traders’ associations and unions as part of his public enlightenment tour to sensitize taxpayers and collecting agents on the provisions of the Finance Act.
The FIRS boss also personally visited to major markets in Lagos and other parts of the country in order to educate traders and marketers on the benefits of the Finance Act 2019 to them and their businesses, especially as registered small businesses.
Highlighting some public infrastructures currently 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 can 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 decentralized 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).
Stakeholders speak on FIRS Leadership
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 meant to lift the Nigerian 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 now 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”.
He commanded the FIRS for the continuous sensitisation to let the people know that payment of their taxes, is a civic responsibility.
He said: “With the regime of Federal Revenue Service, with the reconstruction of the service now, it will be very very hard, for someone to evade tax,” he said.
Also, Chartered Institute of Taxation of Nigeria (CITN) Vice President, Adesina Adedayo, said there was need for Small and Medium Enterprises (SMEs) to have effective information exchange with tax authorities to guide decisions on taxing them.
“SMEs should know what they achieved in a particular year. If you cross a N25 million threshold in 2019, you can tell the tax office on the basis of openness, I achieved N25 million plus in 2019, whether you will be able to achieve it in 2020, is subjective. That information management will become the basis for dealing with you and you need to be transparent, truthful and straightforward,” he said.
Adedayo advised that the way SMEs share information with the tax authorities must be based on the truthful part of their transaction. “There could even be a year that you did not do any business in a large part of the year, you also need to inform the tax authorities. The challenge is when business owners want to play a fast game on FIRS, which has enough capacity now to determine how you are able to make income and ensure you pay the right taxes,” he said.
