Many Nigerians are looking up to the Federal Inland Revenue Service to bail the country out of the current revenue crisis, owing to the fall in oil revenue, what strategies have you put in place to raise your tax collection?
It is all about our common interest because we are all affected. If Nigeria does not have enough revenue, it would not be able to execute government programmes. But you know that the life line of the revenue source of this country is oil. If it does well, you would not know there is problem in all the other sectors. But how do you do effective tax administration in the face of the present tax system? A good tax system is based on the law, the policy and the administration.

The last Minister of Finance had anticipated that the oil price would be on the declining end and suggested a list of new surcharges.
They thought it would be sufficient to block the leakages and assist the budget deficit but that has not been realised. On our part, we keyed into it because we saw it as a veritable source towards addressing the declining revenue.
But we have not been able to collect. The reason is that Nigeria lacks the policy and law that support it. We are revenue administrators but we do not have that enabling law. There are sources of revenue but what is needed is to understand what is driving the tax collection and remain focus.
Whatever we do have to be within the national Tax Policy. For us in FIRS, I can only improve on my limit.
I have to follow the tax administration and can not influence the Minister of Finance. The Minister had proposed a new VAT ( Value Added Tax) rate but the question is, are we prepared to implement this new rate? We are not because the power to do that lies with the executive as advised by the minister of Finance. I can only provide technical inputs. If we make all these policies become laws, it will help the economy.
We go to the National Assembly through the office of the Minister of Finance and Attorney General of the Federation, still the laws are not considered. That was what happened to the PIB, but we all know what PIB would have done for the economy. They have demonstrated the figures but three years on, the National Assembly is still on it. What we are doing now is to look at the laws as they exist today and see areas that can give us quick wins.
What are these “quick wins”?
We started off with the structure of the FIRS. Before now, we used to have the Tax Offices performing the functions of revenue collection and returns processing. We have the same Tax Offices doing audit work and we have the same Tax Offices doing debt management and at the same time doing tax payer education.
So, we felt that we had to restructure and allow the office to focus on education of tax payer, going out to bring in more tax payers and encourage them to keep books of account and not only that ensure that they bring in their returns when it is due as we are doing now. We free you of all other burdens. Let somebody else or group focus on auditing those companies. It is not a punitive step but a corrective step with a view to changing the system.
So, we are emphasising the need for engagement with tax payers because we can not do tax administration all by ourselves alone. We want to partner with tax payers and if they get it right, our job becomes easy and more focused. But we have not been promoting all these in the past. The old way had not helped us.
We are segregating all the activities relating to audit and giving it to experts, those who really understand the language of accounting, those who understand the tax laws, coming together in what we call audit environment. That will help us, improve transparency and accountability. They can then give report to management from time to time, on a monthly basis what they are doing.
We have a group whose responsibility is debt management. There are huge debts out there uncollected, what we do now is that if a particular group failed to collect their debt we send a different group to go and collect them and all they will be doing is to pursue debts. What we have done there is to create 10 regional debt management offices across the country. Their jobs will be to pursue every debtor in their region.
Are you saying you do not have all the tools needed to discharge your duties?
Yes, I will say we have not all but we are engaging relevant agencies of government. We were still talking to all of them. It was still work in progress when they ( last administration) were leaving.
Could that be why the Luxury items taxes regime has not yet started?
Yes, levy on private jets, for instance, was proposed but remember that when it comes to levy on luxury goods, we will not be the only one to collect them. Customs, NCAA and FIRS will do some parts. It is a collective thing. For instance, customs will collect the surcharge on luxury goods being imported, NCAA will work on private jets but we needed to work together to agree on the basis of the revenue collection.
What is worrisome on that is using weight to determine how much anyone who has a private jet will pay. But the question to ask is, for the fact that a man has brought a private jet for himself, is it right to levy N100 million on him? And is it weight that should determine how much he should pay? So, we engaged them on this. Many of them own platforms here but do not own jets.
They use the platforms of foreign planes flying and they will register those private jets against their names and at the end, we discovered that they do not own even one private jet. Some of them use those private jets for business purposes not for luxury after registering with the revenue agency and pay income taxes and also remit VAT on them.
So, there were a lot of issues with the administration. We were also to levy N15,000 on those flying Business Class. We thought that will start in July, but how ready are we without enabling laws.
There is this believe that big men do not pay tax, how true is this?
That is a general perception but you have to put your facts on the table. Tell me one man you know, who does not pay tax? But the first challenge is that we do not have centralised tax collection system. So, it is difficult to say this man is not paying tax and I want to run after him.
At a point we created a department called High Networth Individual Group in the office of the Chairman. But some members of the National Assembly whom we engaged came back to us and said ‘we are not earning all the money you see against our names.’ They said some of the money paid into their accounts were for constituency, accommodation and other allowances. At the end of the day, the facts were staring us in the face.
We lack central tax collection system in this country. That is not to say that Fiscal federalism is not okay. The states can be allowed to retain their revenue but we can work together under MoU and we help them do the collection. Constitution allows it, Canada also has Fiscal federalism, America has it. Let us work together.
But if you create silos in different states and leave the centre, we are exchanging information. But we need to capture every tax payer. When we say big men do not pay tax, we should realise that some countries have gone flat rate in tax collection. We do not want to rattle anybody or disrupt businesses because one single tax system may serve the purpose
In fact, we are bringing Presumptive Tax System very soon. The idea is to enable us register every individual and businesses and determine how much they will pay. But first of all, we need to know who our tax payers are. If a tax man does not know who his tax payer is, it is difficult to get them to pay So, we are getting it right now.
We are developing tax identification platform, which we hope will bring everyone into the platform. Looking at the success recorded in Lagos, even though they do not have the law, they started with cobblers, shoe shiners, taxi drivers and brought them into the tax system. The amount may be too small and does not disturb their business but when you put them together, it gives you the critical factor, the critical mass you need.
Because they have the data on them now, when a shoe shiner suddenly buys a machine, with the central data system, he is upgraded because his data will be seen. That is what we are trying to do with every individual. We can’t do effective tax administration if we do not have a data base of all our tax payers.
I have already met with the CBN Governor and he was happy to work with us. We have a team right now at the federal level. We have only requested states to drive it at their own end but compliance is poor, no one is following. The implication is that, if we do not have a robust data base, there is no way we can do effective tax system.
We have asked the CBN Governor to mandate all banks to ensure that no individual or corporate entity is allowed to operate his account until they have a TIN. We are working with NIMC also, so that all information they have in their databank can be uploaded into our platform, irrespective of who is involved, as long as, they are on that platform. For us, it is a huge revenue potential if we are able to get it.
But you know, it is ICT that will drive it. ICT today is an expensive venture, but we are ready to go by it. By the time we do it, nobody will come to remind us that somebody is not paying tax. In every country, the informal sector is the engine of growth but if you do not partner with them, you may not be able to access anything from them.
One good thing government did was to establish the Developmental Bank of Nigeria. That bank is now giving out loans to individuals and cottage industries. You grant them loan and it comes with moratorium period. That is for the next eighteen months, you are not required to pay back at all. In addition to that, it is at a low rate of interest.
If government has done that for you, it becomes easier for the FIRS to walk in there and demand their books of account and file in the accounts and then collect their tax. That is why I keep saying, we can not do it all alone without the people.
Taxation in every country is every one’s responsibility. Nigerians should support us, the legal people, judiciary, National Assembly will be there, giving us information about people who should pay and those who should not pay. We need information, but imagine that a tax man is there and you see people doing business and refuse to pay tax from them.
There are people whose tax es are deducted by their employees but when they request for tax clearance they are not given, how are you working to make sure that workers’ taxes deducted are remitted to you?
That is a very good one but I would not want you to see it from the perception that nothing is happening. Something is happening which tends to promote compliance. I can tell you that the level of compliance from last year to this year has improved.
For those of us in the federal civil service, we have the Integrated Personnel Payroll System, IPRS platform in the office of the Accountant General. It does the calculation of pay as you earn. All you need to do is to fill in your information. There is no civil servant who is on that platform that is not captured. We have about 64 agencies integrated into this system. The number grew from 24.
The idea is to make sure that all federal government parastatals key into that platform. So, what that does is that you do not even have any control over it. The MDAs themselves cannot do it, someone is doing it for them. For those in the private sector, that is where the problems is. The banks do the deduction but often times, they do not remit correctly. What is important to us is to ensure that they are in our data base.
And with the kind of monitoring we are doing in the recent times, we are reaching out to them and mandating them to ensure that the money they have deducted gets into our accounts. If it is filed late, we impose penalty. At least we know them. The number of agents coming into the platform is increasing, but we are saying if every individual can do his own thing, the better for us.
Let everyone account for his tax by himself but let us agree. I think, every worker has a responsibility to report to us if his employer is not remitting his tax to us. That is why we are emphasising engagement and collaboration. We are sending our people out for tax enlightenment. There will only be problem with us when your tax is remitted to us and we fail to issue the clearance to your employer.
How do you handle tax evaders
We insist they must pay. We use all our debt management staff to get them to pay. We use banks. It is a tripartite arrangement. We told the banks, you are collecting revenue for us , it is a collective responsibility. This tax payer is not complying. He is owing us so much, can you place a lien on the account of that tax payer?
They do not have a choice, they will do it and it is happening. That is better than to say because you have not paid, let us go to court. Why am I going to waste my time in the court? At the end of the day, when judgment is given, we are still coming to sit down together. So what we are doing on debt management right now is promoting compliance.
There is no sense in going to seal up businesses anymore.
You owe me so much. I am not going to kill your business. You need to remain in business so that we can continue to recruit our children and I need you to continue to contribute to the GDP, so tell me how you are going to pay. That is debt management today. There is no sense in going to seal up businesses anymore.
Let me see your cash flow projection and then I say ok this is how much you need for your expenses- for your business to continue to run but tell me you must have to pay some, then we sign an MoU,- you sign and I sign and then the bank signs and I have you make payments every month. That is what modern tax administration that yields results does.
Tax payer service, before now we were doing it from the headquarters . We need the Tax Offices to do tax payers service- just help fill forms. Now we said no. let headquarters alone be responsible for developing technical materials that will go to the fields.
At the Regional level, 10 Regional Officers throughout the country, let them be the ones that will be organising stakeholders engagement with associations, with trade groups, interface with our officers there to undertake tax enlightenment programmes. It is happening at the same time across the country.
No one needs to be told that this is a new reawakening that is going to change the way we do things and we are engaging more with tax payers- they can feel us now. For the communications companies, airlines, power companies, what we are doing now is to ensure that we take our money upfront. Why do we have to encourage you to hold back our money and hold it for sometime before remitting to us. We have told them and they have assured that they will cooperate with us.
Do you still have issues with banks holding bank your money for some period, do business with it before remitting to your accounts?
Those were delay matters. They collect this money, and because we allow them then, some of them were holding back. But we have sanitised that area and as at today they are reporting as at when due. In fact right now, no fund stays longer than 24 hours in any bank.
What about the use of consultants?
They law says no revenue agency should engage consultants for tax administration. Assessment collection and accounting for it. We use consultants here but for training and ICT. We use consultants to build capacity but not to raise revenue. We are the one that tax payers should see in the front.
We need the knowledge, the capability to collect revenue and we have done this for two years. Now we have seen that we can do it on our own and so we do not need them any longer. Let them go back to the background and rest. If they have better ideas in the future, they can come back and sell to us. But it is only in those peripheral areas.
But it is still a problem at the state and local government levels?
The last government did a lot to sanitise these problems. States and local governments can no longer just wake up and put spikes on the road. There is a Bill, we will present to the new National Assembly, the document went through a lot of negotiations. Some states that were authorised by the former Act to collect 13 taxes, suddenly expanded it to 69.
We have to sit down with them- the Ministerial Implementation Committeee- called their members and said, this is bad administration. What do we do? So they traded off some, so the ones on which they passed laws at their state level, we allowed them to keep.For others they also introduced those taxes or levis to help grow their IGR. What we have today, I can assure you is a single document that prescribes to each tier of government , the kind of taxes it can collect.
There are issues with Tax Holidays. If a Nigerian company buys an existing business, is such a company supposed to enjoy tax holidays through the pioneer status policy?
It is not just the pioneer status exemption. It is looking at the incentive regime in totality. I am an advocate of the government giving some level of incentives to attract investment into this country. Remember , we are not a capital exporting country but capital must flow into our country.
Let me give you an example, those years when we had a lot of DFIs coming into the country, those capital inflows kept our foreign exchange in check. For those four or five years, we were moving between N140 and N150=$1. And we were celebrating. The moment those foreign investments stopped coming into the country, you can see the repercussion today.
There are other things that have contributed to the current foreign exchange situation but that is one critical point. What are we saying about incentives? There is a law. That law says this 73 sectors will enjoy pioneer incentives. It says investors are entitled to three years tax holiday and additional 1 year plus another one year, subject to satisfactory performance.
What has happened is ,I think 2004, when the IMF started talking about the need to minise costs, reduce tax payers burden and encourage compliance, those were the period they were it emphasized Economic Reform and Governance Project, ERPG, that they brought in a lot of funds to support the Nigerian government.
They interviewed us, they interview CAC and NIPC. We collect taxes, CAC registers companies and NIPC promotes investments. They question they ask NIPC then was, after the first three years investors come back to you and apply for another two years, what do you do. Oh they come with voluminous documentation.
They went to ask, “has been an occasion when a company applied and you rejected?” NIPC said “no”. so it means it was automatic that they will get it. Why then are you demanding for this voluminous documentation? I think it was that 2004/2005 that they just made it five years at a stretch.
What do you lose?
We need to encourage people to bring investments to our country but let us sanitise the regime. Don’t just give away taxes all on the account of you are buying one investment. But the consideration here is if you bring investment into the country, investment represented by foreign exchange, DFI. That is where we are now. When McKenzie joined us it was discovered that the regime had been bastardised and there is need to sanitise it.
No comments:
Post a Comment