The Federal Capital Territory (FCT) is making so much money from revenue collection that it believes it can fully fund its budget from its Internally Generated Revenue (IGR). The nation’s capital has set a target of generating N300billion annual revenue by initiating several measures to harvest revenue. In this interview, the Executive Chairman of the FCT-Inland Revenue Service Haruna Abdullahi sheds light on the Service’s revenue drive with Assistant Editor, Nduka Chiejina
How are you coping with the challenges that come with running an organization that is saddled with the responsibility of going after taxes or revenue?
I mean, this is quite valid. So maybe I will start with the second in terms of the challenges. I mean, running institutions like this, especially at the national level, because we are sub-national, but then you are in Abuja, so you are seen more as a national body. Whatever we do, other agencies come to look at it. So we have that as a notion, but there are significant challenges. And revenue issues are political issues, you need the political support, the political will to overcome a lot of these challenges. And that’s why I mentioned the fact that the Honorable Minister now is supporting the service politically. And that has really lessened the burden. The other ones are general operational issues, misunderstanding, lack of information in terms of clarity of what happens and what’s supposed to happen. We face significant challenges from many stakeholders. The kind of letters we receive here, but we try to as much as possible to deal with them. But now with the minister who has come and now showing that revenue issues are in the forefront for him. I’m sure you’ve read that, we have been taken out of the TSA strictly for revenue issues. So all stakeholders, I believe now in the city, see that the political will is there. And even internal stakeholders, our colleagues and all have seen that, look; this is the direction of the bureaucracy of the administration. And certainly you would not joke with it.
You mentioned something about bottom line, how is the targeted IGR going to impact this bottom line? So, is it going to impact the bottom line positively or negatively?
Over the past few weeks, significant initiatives have been approved by the Honorable Minister, poised to substantially alter the landscape. Recently, a draft proposal for FCT property tax regulation was submitted and approved. The FCT-IRS Act empowers the minister in this regard. Collaboratively, we aim to review existing laws and literature on property tax to refine the drafted regulation. Once signed and gazetted, this move will notably impact the city’s revenue.
In addition, a committee has been inaugurated to enforce the capital gains tax law, which was previously scarcely adhered to. The Minister’s approval has set the stage for interagency collaboration to implement this tax comprehensively. Pairing this with the implementation of sections 85 of PITA and 31 of the FCT-IRS Act, we now necessitate a tax clearance certificate for various transactions and permissions, significantly influencing activities like vehicle registration, building permits, land acquisition, and more.
The adoption of technology to verify tax clearance certificates has streamlined the process, reducing verification time to just one minute, enhancing efficiency and reducing forgery risks. These pivotal initiatives are projected to boost our current activities by 50 to 60 percent, representing a substantial positive impact on revenue. While these impacts might not be immediately visible, ongoing capacity-building efforts within the FIRS are integral to support and sustain these changes.
You talked about Capital Gain Tax (CGT), in a country like ours that does almost of its transactions over the counter, what kind of mechanism are you going to use to execute this? And for the two years that you have been here in practical terms, can you give us a sense of what that has accrued to the FCT-IRS in terms of the bottom line? What did you meet? What is it like today? And what are you looking at in the short term to long term?
The implementation of section 85, you know, sometimes you have to give people a reason to do something. Section 85 has been in existence for ever. When you go to register your vehicle, let’s say from January, they’ll ask for your TCC? So, you have a reason now to come to the tax authority to say, look, I need a tax clearance certificate. Previously it’s not your business. You don’t even know where the tax authority is. So I think the role of government and tax administrators is key in all of this. So now you have given citizens a reason to do this. Coming now to CGT, you know I can just do transactions. Normal thing: I and Mustafa make transfers and conclude our transaction. But today I’m saying that there are other things that are happening. The system is becoming more digital. You have to give reasons.
Recently I’m sure you’ve seen the issue around ground rent and all that. Most of these issues are what you have to give people reason for. So you must transfer your title. And now, even before transferring title, part of what we are saying now as the committee, is to say you can’t transfer title without evidence of payment of CGT. But now we’re taking it further to say there are huge revenue areas in FCT. What is the IGR here? It’s the lands and the properties that are here. So we have to make sure that everything is attached to that and that is now where a lot of things are now linked to your compliance to TCCs, to taxes. Okay, you’ve done transaction. Have you paid CGT?
The campaigns around TCCs, you know this is also transferring this power to the normal person on the street. So I think the CGT fits into section 85. You now have a reason where you must pay, and you know it’s also a civic duty, sense of patriotism, what part am I playing? Am I adding value to the country or am I just saying that these political leaders are just doing whatever they like? So, but at the end of the day, I pay my taxes, I’m proud of what I do, I can see how I’m supporting the growth of the economy. Then you are also now empowered to ask deliberate questions, and I think that would also, in the long run, support political decisions and conscious society that understands its obligations.
Still talking about growing the bottom line and the target, can you shed some light?
So, I give you an example: You know, previously the Federal Inland Revenue Service was responsible for personal income tax in the FCT. The FCT-IRS Act was passed in 2015, but operationally we did not start till January of 2018. So as at that time, as at 2017, what FIRS used to collect was on the average N40 billion per annum. As at today, we have done about N145 billion. The last report was about N140 billion, but that was two weeks ago, you know that’s huge and that is just even without these tax types that are not performing – property, CGT, and now with section 85, so we expect to see more in terms of direct assessments, the PIT aspect. So that is a huge leap for an institution. I don’t like talking about the numbers, but at that time the FCT-IRS was about number six nationally. Today we are hovering between two and three. It depends on so many factors. So, in terms of these numbers, but I don’t like focusing on the numbers- yes that is our responsibility because when you need to build an institution, you need an institutional framework for these numbers to grow.
With regards to the short- and long-term goals, in 2021, our focus was building capacity of these new employees. We had about just three offices. We needed to reach out, so today we have about 16 offices in the city. So, our priority became to build an institution that is sustainable, and when you have a sustainable institution that is driven by technology, a lot of these things will just find a way of falling in to place.
And we also realised that not many people knew or know the FCT-IRS. They refer to us as FCT FIRS. But we needed people to know that this is an independent agency. This is totally out and this is the role and responsibility of this agency. As at today, people can differentiate: if I need this, I should go to FCT-IRS. If I need this, I should go to Federal Inland Revenue Service. So these are all institutional growth kind of thinking and creating a sustainable platform.
Also, as part of building an institution, the FCT-IRS staff know their responsibilities, they have their job descriptions. They can say yes, “this is my career path, this is what I want to do, this is what the service will do for me”, and all that. A motivated institution with so much that, at least you can’t do everything, but at least you have staff that, in terms of health, in terms of so many issues, they know that they are being catered for. For me, though, that was a priority in the first one year when I was leading this organisation, to say let’s build an institutional framework that will now be sustained. The issues of sustainability now came up, but I was thinking: if you leave today, you come, whoever comes is going to start from point zero. All right, why don’t you do something that whoever comes will start from point 99.
So I think we have moved in terms of the numbers, we have moved in terms of our capacity: employees from 35 to about 600. We’ve moved from one office actually to 16, and hopefully, by the end of next year, we should have about 20 offices, because right now we don’t have an office in Kwali and Abaji, which is our intention to move to those places. Subsequently we are going to talk about the harmonization. I think they’re going to give you some detail, because we are now hoping to conclude the harmonization process wherever, it will involve all the area councils. We also want to have presence in all area councils that will support what we do.
As you try to implement these three key initiatives which you hope will grow your revenue base by 50 percent or even more. Nigerians want to hear: as paying my tax is what I’m supposed to do, it’s an obligation to me. Now, what do you think residents in the FCT are going to benefit? We know it’s going to take time for you to implement it, but when you start implementing it, people start complying, what are some of the gains, which my readers will see, if they start paying this, this is what I’m going to benefit as a result?
This is a popular question, especially if you have been following the activities and discussions regarding the need for revenue in the country. If you observe the city, you will see that things are happening. However, there are larger issues that need to be addressed, such as security, social services, and healthcare. In some areas, residents are taking matters into their own hands and building roads to their estates. Despite these efforts, there is still a need for collective responsibility. We all have a civic duty to contribute to the betterment of our society. Sometimes, we fail to take action or even make the situation worse, and then we turn around and blame the government. However, we are the government. By fulfilling our obligations, such as paying taxes, even if it is a small amount, we gain a sense of purpose and can actively participate in shaping our communities. Revenue-generating agencies should provide transparency by reporting how the money is being utilized. They should be accountable for the funds they raise. As citizens, it is our responsibility to not only pay our dues but also ask questions and demand answers from the government. Over time, through this accountability and engagement, improvements can be made within the democratic system. Although progress may not have been as expected since 1999, we have still made some advancements. While there is still work to be done, we are not where we used to be. Hopefully, this clarifies some of the concerns.
There are two main concerns: revenue generation and synergy. How will you address the duplication of roles and intimidation by Area Council officials in revenue generation efforts and how do you address establishing synergy to encourage people to willingly pay taxes and reduce multiple taxations?
Our priority is to improve the ease of doing business in the FCT. Despite Gombe State being the first in terms of ease of doing business according to PEBEC’s report, the FCT is not performing as well as it should be. We have been working on harmonisation issues over the last few months and have signed an MOU between FCT IRS, FCTA, and the six area councils to harmonize our taxes. However, tax collections between area councils, states, and federal are a constitutional issue, and there are overlaps. Through harmonization and collaboration with revenue-generating agencies in the FCTA, we hope to make living in Abuja easier and improve the federal capital’s ranking in ease of doing business. Local councils are entitled to 10% of IGR, and we have clarified with the area councils that FCT is remitting these funds. We hope to harmonise kiosk and business premise taxes and make it easier to do business all over the city. Internal inter-agency collaboration is now taking place amongst revenue-generating agencies driven by the FCT IRS, and we work together and support each other for the common goal of improving revenues. Our hope is that the next ease of doing business report will reflect an FCT that has bettered itself.
How can individuals who don’t reside in Abuja and have their head offices located outside Abuja, reconcile the process of obtaining Tax Clearance Certificates (TCC) from outside Abuja and still be able to apply for various procedures in Abuja?” Can you provide more context or any specific details related to this issue?
Tax issues are based on residency. That’s one. So we have institutions that their head offices are out of Abuja, right? But they have offices, let’s say for example, you have an head office, let’s say punch now, for example, head office in Lagos, but you have an outlet here and they pay salaries, just an example. And your staffs live in Nasarawa, they work in Abuja. The taxes will go to Nasarawa State because you are resident in Mararaba. You live in Mararaba, you work in Abuja, and your head office is in Lagos. When your head office is paying your salary, your deductions will go to Nassara State Internal Revenue Service, not to FCT.
How do they tell you that?
Well, that’s how it’s supposed to be. When you are filling whatever form as an employee, you write your address and your employer should not take your address if it’s outside of where you are. That deduction of your payee should go to that board of internal revenue. So when you come to apply, you are going to Nasarawa State Internal Revenue Service to apply for your TCC. That’s how it should be. But of course, if you live in Abuja, that is the normal thing to do. But I give you an example. Today in the banks, before part of implementation of section 85, there are issues around forex. So if you are traveling abroad, is it BTA, right? And then you are paying school fees. When you apply for BTA, if you remember previously, you only need your ticket and your visa and the bank will give you, what was it? 4,000 or whatever they used to give. Today, try it out. If you go to any bank, as part of their process, is of course ticket, visa, and tax clearance certificate.
So just to take this question forward, does it then mean, for instance, if I can show you Nasarawa State TCC, I can get the Abuja paper?
Yes, you can. But it has to be verified. So the law says verified, in fact that’s the key word. So as of today, our verification process is one minute. Some other states, I think we even have a scenario that somebody came. Okay. If you are talking about Nasarawa, that is next door. Somebody came, let’s say from Jigawa, also from northwest, with the Jigawa State TCC. In fact, we have to verify. Probably that agency is not on the technology platform that we have. So their verification is manual. So the bank now would have to write to Nasarawa State Internal Revenue Service or Jigawa, attach that TCC to say, look, can you verify that this came from you? This would take a month.
So we don’t have a harmonised platform like the BVN where you can just verify all TCCs?
I think that’s what the Joint Tax Board is trying to do. A more harmonized platform to verify TCC – so that would make it easy nationwide for that verification.
How can we improve tax compliance in a more respectful and organised way, considering the concerns of residents who encounter ununiformed individuals demanding taxes in an aggressive manner?
I am a victim. We are all victims of this. We’ll give you the details on the harmonization. You see, well, we even give you the MOU we signed with the area councils. Most of these people you see are called technical partners, probably consultants working with a lot of these area councils and we know these types of things are what made the FCT in terms of ease of doing business, not just business, even ease of living, that’s what’s taking us. If you read our concepts around, the harmonization is to take these things out of our road. You know you have your obligation. People want to pay. You know the way you are asked to. If you have a system where it’s very easy- it is on your phone, WhatsApp or wherever you have your receipt, and then, for example, now some of these things you can attach them. Let’s say, when you come to renew your vehicle registration, as long as your vehicle registration is really there, some is a road tax or something that is attaching- so you pay and you know people. When you are registering and you are renewing, you pay. You don’t need somebody to now come on the street because at the end of the day, even at the end of the year, if you don’t, you will still go, but we just have to make sure we have a system wherever we monitor the cars are on the streets and their registrations are up to date. Well, we’ll make it easy for you to go to a very conducive environment. Pay at the beginning of the year and that’s it. Not for someone to be stopping you on the road to just– I mean, I’ve seen it. I’ve seen, in fact, some of the ones we saw. There was a time we were passing; we saw some foreigners being– you know, this type of image. Of course, I’m not saying they are more special, whatever, but you know, this time this is a type of image that we wouldn’t want to portray out there. So this is a very valid concern, which we are all victims of, some of these things that happen in the city. But hopefully, when you read through what we have been doing with the harmonisation, I think a few months ago we signed an MOU- the FCT, IRS- with Kuje Area Council to take over some of their responsibilities, to make it easier. As these things are being implemented, you see that. And then, of course, Governor Wike has really said that he’s not going to tolerate some of these things happening on the streets. So, with that political will and political support, you see that, yes, I’m sure the area councils will now come also to enhance the collaboration so that we take out all of these things from the roads.
I would like you to also throw a bit more light on the whole idea of getting the presidential approval to delist you from the TSA. What was that supposed to achieve? Because the whole story around the TSA was trying to block loopholes. Why was it necessary for an exception to be granted the FCT for a removal from that platform?
I think on the issue of TSA, this is more of an administration question, not an FCT IRS question. So for us, I think these are policy issues that are not discussed on this table. For us, it’s to implement policies. And I think the Honorable Minister has spoken well in terms of the reason why he had to get that approval from the president. But for us, this is a policy issue. Administration has decided it’s a policy they want to pursue. And we, as administrators of people that implement policies, we have to put our act together to now fit into the policy. So I’m not sure the FCT IRS chairman or leadership is in a position to say why. Because it’s a policy issue. We are not members of the cabinet. So I also think the minister has really spoken to the reason why he needed to get this presidential approval to take FCT out so that they can begin to have relationships with commercial banks. I think that is more of a question regarding the administration.
I want to take you back to this property tax matter. You said you have submitted a draft report. Can you give us an insight into what this draft is all about? How much should we expect? I know that the minister, might at the end of the day, decides to increase or reduce, maybe, the fees, or what people are going to pay or when do you think it might likely take off?
So, first of all, the FCT’s oil is in its land and property. So, whatever you need to do with the existing laws, you’re not bringing any new, because we are conscious of multiple taxation, we are conscious of so many issues around. No, we are not bringing anything new that is not been provided for in the law. Right, you are probably implemented. Like I said, section 85 has been in existence forever, but in a way it’s not being implemented. So now it’s nothing new to say people should go and file their taxes. The minister has approved an interagency committee suggested by the FCT IRS. So before a committee begins work, it has something to work with. So we internally came up with something, just a draft, now that interagency committee has a responsibility to co-opt and I think now, talking about this, I think we might even co-opt some of you. As part of the process, you are understanding, you are telling, this question might not even come up if you are part of the system. The committee has been approved, yes, and the committee, as part of his term of reference, it can co-opt other members. And it’s also important for us to get this clarity out there. So at the moment, we know that this must be done. So that is the stage that we are at.
Tuesday next week, I think that’s when the mandate secretary will formally inaugurate the committee. And I will think that probably we will think about inviting one of you to just be a part of that until the last, and you would raise very valid questions. Apart from the committee internally, when it finishes it works, it’s also going to take it to the public. And it will still be a draft to say, this is it. And then professionals, of course, journalists like you also will study it, you have it in the public domain, you study it, you critique it, and come back with an opinion that will make it right.
So at the moment, there is nothing specific. I can’t tell you that I’m going to charge 1% or 10 percent, no. But at least you see the political will is there to explore this revenue head because it’s already provided for in the law.
Now, speaking broadly, how soon until we begin to see an FCT that can completely depend on its internally generated revenue?
The Federal Capital Territory (FCT) can fully fund its budget from its internally generated revenue (IGR). The FCT has taken steps to increase IGR by making it easier for people to file their taxes and pay their dues. These steps include launching a self-service portal and improving the efficiency of the Integrated Payroll and Personnel Information System (IPPIS) and the Government Integrated Financial Management System (GIFMIS).
The FCT has also implemented new measures to collect taxes from businesses that operate in Abuja. These measures include ensuring that withholding tax deductions are sent to the FCT IRS and that businesses that do business in Abuja register for and pay their taxes in the FCT.
The FCT is committed to optimising its IGR and believes that with political will, it can achieve its goal of fully funding its budget from IGR.
As we round up this conversation, I know you don’t like talking about the figures. What would you say is the level of compliance if you have to put it in terms of percentage. How far have you come? What’s the level of compliance?
We have an internal portal. So we have about 700,000 Nigerians on our portal [inaudible]. So this is how we compute the compliance level. And that was why a few years ago, I said we have less than 10%. So out of that 700,000, we had compliance, we have people that paid less than 10% of that number in terms of filing. But today, especially this year, and especially, I can tell you, from the day the Honorable Minister resumed and signed the implementation of Section 85, this is even in the middle of the year, we have seen that compliance level increase. Like I said, our offices couldn’t take the number of people that turned. In fact, next week, when I launch it, we should publicize that aspect of it. So that compliance level is now growing. And now, because the Minister has linked some certain services to your compliance. So that’s why, remember I said you have to give people reason. Because all of us don’t want to pay taxes. But now you have a reason, because you want some services.
I can assure you, if we have this conversation, God willing in April or May, 2024, I will give you some interesting numbers.
This DRTS, is it a revenue generating agency. They are more of a revenue generating agency. I want to get clearance on that?
It’s VIO. We call it Department of Road Transport Service. If you go to any other state in Nigeria, you’ll find VIO under the Board of Internal Revenue Service. Right? But you know, I told you, the FCT IRS is the youngest member of the Joint Task Force. So even before the existence of FCT IRS, the DRTS was existing, was doing what it needed to do. So with coming of the FCT IRS, these are not things that will just happen one day. You know, but today, we work together with them. We have an API that we are working with. We attend trainings with their staff. We are doing so much together. In fact, our priority area for implementation of Section 85 is even the DRTS. And we are sure you will see their numbers growing. As long as their numbers grow, whether they are an independent agency, they are under this, they are under that, what happens, what is important, is the bottom line that comes to FCTA. So we are working with the DRTS. It’s not the usual thing when you go states; they are under the Board of Internal. Maybe it may happen in the future. But at this moment, it’s not our priority. Our priority is to see a sustainable FCT IRS that becomes a big brother to other revenue-generating agencies that supports them and have their numbers also growing. So at the end of the day, when everything is consolidated, you see a huge IGR for the FCT.
