Published On: Sun, Jul 22nd, 2018

2018 tax revenues may top N5trn

By FELIX OLOYEDE

Nigeria’s fiscal authorities are poised to rake in the nations highest tax revenue in history if it sustains  current collections. The Federal Inland Revenue Service (FIRS) recently disclosed that it generated a thumping N2.5 trillion in the first six months of the year. If this trajectory continues, fiscal sector analysts  project that total year end revenue will be in the region of N5 trillion.

Kemi Adeosun, Finance minister

Local Public Finance experts note that Nigeria’s tax revolution seems to have been borne out of a doctrine of necessity, following the drop in fiscal revenues between 2015 and 2017 when crude oil  prices tumbled from a towering $108 per barrel  in 2014 to below $27 per barrel in January 18, 2016. The drop was the result of a glut in  international markets on the back of disruption by shay oil producers. This saw the country slide into an 18-month recession, which  eventually reversed in June 2017.

Economists have noted the need to pursue alternative revenue sources has propelled the government to widen its tax nets and go after tax evaders through the introduction of a Voluntary Assets and Income Declaration Scheme (VAID) in June 2017. President Muhammedu Buhari through an Executive Order No. 4 of 29 June 2017 created an amnesty window for defaulting tax payers to make up their outstanding tax obligations from 2011 to 2016 in return for waivers of penalties and  criminal prosecution. Analysts note that VAIDS ran for almost a year (July 1, 2017 – June 30, 2018). The government said that those who failed to declare their assets would be named and shamed and then prosecuted.

The initiative seems to have paid off as Babatunde Fowler, Chairman, Federal Inland Revenue Service (FIRS) recently declared that the agency  generated  a beefy N30 billion through VAIDS in 11 months as at June 2018, noting that the N3 billion stumped up came in from the tax amnesty programme which collared an additional N3 billion above the previous N27 billion recovered a few months ago.  The agency has equally succeeded in ramping up nthe umber of taxpayers from 14 million to 19 million. This is despite having about 70 million taxable adults in the country.

“One of the outcomes of the scheme, whether directly or indirectly, is the growth of the national taxpayer database from under 14 million pre-2016 number to over 19 million in 2018, and we are confident that these numbers will translate into a positive growth in the country’s tax revenue to GDP ratio when the official percentage for 2017 are released,” Fowler told newsmen last month.

“Some progress have been made in the area of tax policy with the new National Tax Policy approved in February 2017 by the Federal Executive Council. This helps defines an overall direction for the tax system,” Taiwo Oyedele, Head of Tax and Corporate Advisory Services, PwC Nigeria told Business Hallmark through e-mail.

He added that the government has made significant in raising the level of tax awareness has increased as a result of the just concluded voluntary assets and income declaration scheme (VAIDS).

“In addition, the efforts by the Presidential Enabling Business Environment Council (PEBEC) to improve the ease of doing business resulted in some improvements in Nigeria’s ranking from 182 to 171 with respect to ease of paying taxes,” Oyedele also noted.

Before the launch of VAIDS,  Nigeria’s tax to Gross Domestic Product (GDP) was one of the lowest in the world, standing 6 per cent. But the government is now bent on changing this and  aiming to increase to 15 per cent in the next two years. It is now making frantic efforts to diversify its main source crude oil, which was generating over 70 per cent of government income and over 90 per cent of the country’s foreign exchange due to the volatility in the crude oil market.

The sustained, relatively high oil price in the international market contributes significantly to the improvement in tax collections recorded by the FIRS. So the momentum will be ascertained if oil prices remain at current levels, Oyedele explained.

The government did not stop at the introduction of VAIDS; the FIRS also implemented a 5 per cent spread on the benchmark interest rate, which was 14 per cent to determine the interest payable on past due taxes – bringing the applicable rate  to 19 per cent , effective from July 1, 2017.

In a move to strengthen tax administration, the Federal Government last week inaugurated the Tax Appeal Tribunal, which would sit in the six geo-political zones of the country. It is a specialised court that would adjudicate on tax matters.

The Tax Appeal Tribunal would help promote confidence in the nations tax system and givestaxpayers access to independent arbitration for  tax disputes, explained Yomi Olugbenro, Partner & W/A Tax Leader, Deloitte Nigeria said while speaking on Channel TV’s Business Morning programme. He reasoned that the government has made tremendous programme in its tax administration, though it has not been a complete overhaul, which the system requires.

Oyedele believes the tax authority should now focus on reviewing obsolete tax laws, many of which are no longer fit for purpose and thereby inhibiting economic development and innovation. “A comprehensive, robust and forward looking changes are needed to address the various anomalies in the tax laws including the Constitution.”

He expects the FIRS to generate about N2 trillion in the second half of the year making a total collection of N4.5 trillion, which be an improvement over prior year revenue collection.

The state of the country’s economy would be pivotal in FIRS’ ability to achieve N5 trillion tax revenue mark. If the economy grows in a faster pace in the half of the year, more businesses and individuals are like to pay more taxes.

“They need to sit down and do a forecast of other sources of tax revenue they are expecting for the year and look at how they can improve on the revenue drive,” Charles Ogun, Partner, Teasel Consulting told Business Hallmark.

He argued that VAIDS has succeeded in creating the consciousness of the need to pay their taxes in the minds of a lot of Nigerians.

He, however, admonished the government to accelerate economic growth and further improve the operating environment for businesses to thrive, which would automatically translate to higher tax revenue to the government.

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