• Besides reshaping Nigeria’s fiscal destiny, an audacious 77% IGR surge in IGR will help the nation to break free from dependency on external borrowing and transform the economy
In a landmark move that promises to reshape Nigeria’s fiscal landscape, the Federal Government has set its sights on a staggering 77 per cent increase in Internally Generated Revenue (IGR). This translates to over N22.3 trillion, a figure that dwarfs the current annual target and represents a bold gamble on transforming the nation’s financial future.
But beyond the sheer audacity of the target lies a carefully crafted plan, hinged on a customer-centric organisational restructure, technological innovation and a renewed focus on taxpayer experience. At the heart of this ambitious endeavor lies the Federal Inland Revenue Service (FIRS), an agency undergoing a metamorphosis fueled by a vision of revolutionising tax administration in Nigeria. Gone are the days of cumbersome processes and disconnected departments. The new FIRS promises an integrated tax approach, leveraging cutting-edge technology at every step. This paradigm shift signifies a move away from mere adaptation to change, and towards spearheading it, positioning Nigeria as a leader in contemporary tax administration.
The Executive Chairman of the FIRS, Dr. Zacch Adedeji, believes that “the cornerstone of this transformation is a customer-centric organisational structure.” This means taxpayers are no longer faceless entities navigating a labyrinthine bureaucracy. Ins tead, they are segmented based on their specific needs and thresholds, ensuring they receive customised services and streamlined interactions. Gone are the days of wading through a maze of departments for different tax categories. This simplified and tailored approach promises to not only ease the burden on taxpayers but also significantly enhance compliance. Technology sits at the forefront of this revolution. Digital platforms will be constantly refined, aiming to make filing, payment, reporting and communication seamless. A robust grievance redress mechanism will ensure the concerns of taxpayers are heard and addressed swiftly. Investments in staff capacity building will equip FIRS personnel with the skills needed to navigate the complexities of this new era.
But ambition alone cannot fuel such a monumental journey. Expanding the tax net is crucial to achieving the audacious target. This will involve data-driven sector analysis, leveraging automation to identify non-compliant individuals and businesses, and bringing them into the fold. Withholding taxes will be used more effectively, and targeted educational programmes will raise awareness about tax obligations across different segments of the population.
Of course, no tax regime can thrive without robust compliance measures. The proposed plan encompasses a comprehensive compliance improvement strategy for all taxpayer segments. Data-driven risk-based audit selection will prioritise high-risk cases, and closing out audits within defined timelines will ensure efficiency and transparency. Enforcement activities will be strengthened, and collaboration with strategic stakeholders will be crucial in tackling tax evasion and avoidance. This bold vision, however, is not without its challenges. Implementing such a comprehensive restructuring is a complex endeavour, and navigating potential resistance to change, both within the FIRS and among taxpayers, will require deft communication and unwavering commitment. Ensuring transparency and accountability throughout the process will be essential to maintain public trust.
Despite the hurdles, the potential rewards are immense. Achieving the 77 per cent IGR target would provide the government with the resources to tackle critical infrastructure deficits, bolster social safety nets, and invest in human capital development. This, in turn, would fuel economic growth, attract foreign investment, and create jobs, paving the way for a more prosperous and equitable Nigeria. The success of this endeavour hinges on collective effort. Taxpayers must embrace the new system, fulfilling their obligations effectively and honestly. The FIRS must execute the plan with meticulous attention to detail, ensuring efficiency, transparency, and taxpayer-centricity. The government must provide unwavering support and create an enabling environment for this transformation to flourish.
Nigeria’s 77 per cent IGR target is not merely a fiscal aspiration; it is a national mission. It is a bold declaration of intent to break free from the shackles of dependence on external borrowing and chart a course towards fiscal autonomy and sustained economic development. The road ahead will be arduous, but the potential rewards are worth the effort. This is not just an ambitious plan; it is a clarion call for collective action, a chance to write a new chapter in Nigeria’s economic history, and finally unlock the nation’s immense potential. The success of this audacious leap will not only reshape the fiscal landscape but also redefine the very fabric of the Nigerian dream.
Strategies for achieving the N19.4 trillion FIRS target
Amina Ado, Coordinating Director, Special Tax Operations Group painted a vivid picture of the strategies the FIRS will deploy in order to achieve the set target. Fueling this transformation is a multi-pronged strategy designed to not only meet the N19.4 trillion target for 2024 but also lay the groundwork for sustainable IGR growth in the years to come. Recognising the immense potential within key economic segments, the FIRS prioritises building stronger relationships and providing customised services to large taxpayers and sector contributors. Proactive engagement strategies will foster regular communication, ensuring these critical players feel heard and understood. Tailored services will address their unique needs and challenges, streamlining processes and maximizing revenue collection.
Additionally, the FIRS will enhance its understanding of key sectors and their value chains, allowing for more informed policy decisions and targeted interventions. The days of taxpayers navigating bureaucratic mazes are behind us. The new FIRS is committed to creating a seamle ss and user-friendly experience. Digital platforms will be constantly refined, making filing, payment, reporting, and communication effortless. A robust grievance redress mechanism will ensure taxpayer concerns are swiftly addressed, building trust and confidence in the system. Investing in staff capacity building will equip FIRS personnel with the skills and knowledge needed to provide efficient and professional service. Regular taxpayer satisfaction surveys will identify areas for improvement, further solidifying the FIRS’ commitment to customer-centricity.
Broadening the tax base is crucial to achieving the ambitious target. Data-driven sector analysis will identify potential non-compliant taxpayers, while technology solutions and automation will streamline the process of bringing them into the fold. Exp anding the use of withholding taxes will tap into previously underutilized revenue streams. Targeted taxpayer education programmes, delivered through various channels, will raise awareness about tax obligations and encourage voluntary compliance across different segments of the population. The FIRS will continue to develop and circulate publications tailored to the specific needs of various taxpayer segments, ensuring everyone has access to clear and accessible information.
According to Amina Ado, a robust compliance system is the backbone of any successful tax regime. The FIRS, she said, will develop and implement a comprehensive compliance improvement plan for all taxpayer segments, leaving no stone unturned. A data-driven risk-based audit selection system will prioritise high-risk cases, ensuring resources are targeted where they are most needed. Closing out audit cases within defined timelines will boost efficiency and transparency, while improved enforcement activities in line with relevant laws will deter tax evasion and hold non-compliant individuals and businesses accountable. Finally, the FIRS will actively collaborate with strategic stakeholders, including other government agencies, financial institutions, and professional bodies, to create a robust network that strengthens compliance efforts and fosters a culture of tax responsibility.
Nigeria’s quest for a robust IGR system hasn’t been a linear journey. For decades, reliance on oil revenue dominated, creating a vulnerability exposed by fluctuating global prices and limited diversification. Understanding the historical context of IGR challenges and previous reform attempts is crucial to appreciating the significance of the current 77 per cent target.
The colonia l era taxation focused on indirect taxes, with limited em phasis on income and corporate taxes. However, post-independence (1960s-1970s) oil boom propelled national income, leading to reduced focus on IGR. Reliance on oil revenue exceeded 70 per cent of the total budget. The economic crisis of the 1980 oil price slump exposed the dangers of overdependence on oil. IGR efforts intensified, with the introduction of Value Added Tax (VAT) in 1986 and various tax reforms. Between the 1990s-2000s, fluctuating oil prices and economic volatility highlighted the need for further IGR diversification. Reforms included the establishment of the FIRS in 2007 and the launch of the Integrated Tax Platform (ITP) in 2011.
The 1975 Udoji Commission recommended tax reforms, including increased reliance on direct taxes and improved tax administration. Implementation faced various challenges. The 1999 NEEDS Assessment identified the need for IGR diversification and emphasised tax reforms. Subsequent policies aimed at broadening the tax base and strengthening tax administration. The 2004 Tax Harmonisation Act aimed to streamline and simplify tax laws across different states. Implementation inconsistencies hampered effectiveness while the 2007 Establishment of FIRS centralised tax administration and aimed to improve efficiency and transparency. Early successes have been mixed, with challenges in enforcement and informal sector integration.
Challenges and persisting gaps
A significant portion of the economy operates informally, escaping the tax net. In addition, w eak enforcement, corruption and bureaucratic hurdles have been known to impede IGR collection. Cultural attitudes, distrust in government, and complex tax systems also contributed to low compliance rates. Reliance on a few major contributors made the system vulnerable to fluctuations in specific sectors.
Despite these challenges, the current 77 per cent IGR target represents a bold step forward. The customer-centric focus, technological innovations, and comprehensive strategies laid out offer a fresh approach to overcoming entrenched obstacles. Dr. Wahab Balogun of Ambosit Capital Managers said “The sheer ambition of the target sends a strong message about the government’s commitment to fiscal independence. The customer-centric approach and focus on technology are positive steps that could significantly improve tax collection efficiency and taxpayer experience. Leveraging technology and data analytics is crucial for modern tax administration. The proposed strategies for expanding the tax net and enhancing compliance, if implemented effectively, could unlock significant revenue potential” he said.
He added that “the proposed shift away from traditional tax categorisation is a progressive move. Tailoring services to specific taxpayer segments can simplify the process and potentially boost compliance, especially among small and medium businesses.” On a more cautious note, Dr. Balogun noted that “achieving the 77 per cent target will be a herculean task. Implementing such a comprehensive restructuring needs meticulous planning, effective communication, and strong political will. Addressing potential resistance from vested interests within the FIRS and among certain taxpayer segments will be crucial.”
Mr Gbolade Idakolo, Managing Director/CEO SD&D Capital Management Limited said “the federal government is embarking on a drive to make Nigeria a $1 trillion economy with various policies and measures aimed at expanding the economy. There has been positive developments in the oil and gas sector both upstream and downstream with Nigeria now witnessing more crude oil sales, the oil refineries are also coming on stream and major efforts are been made to curb corruption affecting tax revenues to government. The setting up of the presidential committee on tax reforms is a testament to the determination of the government to set the sector straight.
“The focus of this administration is to reduce borrowing and increase revenue to fund its activities and the FIRS being a major driver of government revenues is condemned to perform. The N19.4 trillion target set by the FIRS for this year is achievable if all bureaucratic bottlenecks are removed and the corruption surrounding tax collection is nipped in the bud. The Nigerian economy has the capacity to generate the projected revenue and more if deliberate policies to expand the economy are properly implemented”.
Overall, experts acknowledge the potential benefits of the 77 percent IGR target and the proposed plan, but also emphasise the significant challenges and risks involved. Success will hinge on meticulous implementation, stakeholder engagement, and unwavering commitment to transparency and accountability.
