Business

Analysis… #Budget 2016: Where will N4.9tn tax revenue come from?

In from Ali Smart . . .

It’s no more news that Nigeria is in dire financial straits and as such, is looking at ways to bridge the funding gap as a result of the dwindling receipts from the sale of crude oil, which currently oscillates between $31 and $30 globally.

For Nigeria, one of the avenues it hopes to service the economy is through imposition of taxes.

The projected revenue the federal government hopes to generate from taxes this year alone is N4.957trillion. Expectedly, the Federal Inland Revenue Service, (FIRS) is saddled with the responsibility of generating this revenue.

Modus operandi

Paired into specifics, the projected revenue to be generated by the FIRS would be collected as follows: N2trillion from Value Added Tax (VAT) and Company Income Tax (CIT) is expected to generate N1.87trillion while Petroleum Profit Tax (PPT) is projected to bring in N800 billion just as Education Tax will contribute N180 billion and the National Information Technology Development Fund (NITDF) will rake in N20billion.

This is not a joke. We need everybody to do his/her beat to ensure that everybody contributes to the achievement of the target. I look forward to the excellent ideas that will improve revenue generation

A blessed assurance by FIRS

The Executive Chairman, FIRS, Mr Babatunde Fowler who has since become the poster boy for tax matters is quite optimistic that the agency can achieve the utmost.

Speaking in Abuja on Tuesday, Fowler said: “We have proposed a revenue target of N4.957 trillion for 2016. This target is largely dependent on non-oil collections and in particular, VAT will account for N2 trillion and CIT is expected to account for N1.87 trillion. Between them, these two taxes are expected to provide almost 80 per cent of our collection in 2016. We therefore have our work cut out and there is no room for complacency.”

But is the target achievable?

Fowler offers a plausible explanation. He recalled that in 2015 fiscal period, the agency was able to generate a total sum of N3.74 trillion out of its target of N4.57tn.

“In 2015, VAT generated the sum of N767.33 billion out of a revenue target of N1.28 trillion. From the targeted N1.48 trillion for PPT, the Service was able to generate N1.28 trillion while in the area of CIT, Fowler said the service collected a total sum of N1.29 trillion from the projected N1.51 trillion.”

I know your chairman as an achiever. He did very well in Lagos. Work with him. He will do well here. He is one person who has the welfare of staff on his mind

The FIRS Executive Chairman noted that since the level of voluntary tax compliance was still low, the service had introduced a number of initiatives aimed at improving compliance to about 90 per cent this fiscal year.

Fowler lamented that “the above performance is clearly unacceptable and is not a reflection of our capacity. I am particularly not pleased with the very poor VAT collection, which, based on my previous experience at the state level should be of higher yield and easy to collect.”

The FIRs boss then reveled that revenue generated from CIT last year would have suffered the same fate as the VAT but for his timely intervention. According to him, “even the relative good performance of CIT is buoyed by the fact that an initiative directly overseen by my office in the last the months of 2015 accounted for a collection of over N122 billion, without which the performance for CIT would have been less than 85 per cent.”

As part of efforts to reduce complacency, the FIRS, Fowler said has introduced an enhanced system of performance management to ensure that it meets its target.

“As part of this enhanced performance system, we have increased the threshold for payment of performance bonuses from 60 per cent to 70 per cent.”

Fowler then urged staff of the FIRS not to only meet this new target “but surpass this 70 per cent threshold because if we meet only 70 per cent of our target, then government will be unable to fund the 2016 budget.”

The FIRS boss also hinted of plans by the tax agency to undertake a nationwide Value Added Tax and Withholding Tax Monitoring exercise and nationwide taxpayer registration exercise anchored by the FIRS Federal Engagement and Enlightenment Tax Teams, (FEETT).

The FIRS Executive Chairman noted that since the level of voluntary tax compliance was still low, the service had introduced a number of initiatives aimed at improving compliance to about 90 per cent this fiscal year.

Read also: FIRS targets N4.9trn in taxes to fund 2016 budget

A clarion call obey

Perhaps as a way of giving its imprimatur of support to the FIRS, the Minister of Finance, Mrs. Kemi Adeosun had on Wednesday held an interface and discussion session with officials of the agency.

The event was the 2016 Annual Corporate Strategy Retreat of the FIRS.

In a statement from the FIRS signed by Wahab Gbadamosi, Head, Communication and Servicom Department, Mrs. Adeosun, reportedly warned the FIRS not to leave any room for failure. “There is no room for failure over FIRS’s attainment of its 2016 target of N4.97 trillion to the Federal Government. Please ensure you deliver. The nation will depend on FIRS to fund the budget. We need the money to stabilise the economy.”

For emphasis, she added: “This is not a joke. We need everybody to do his/her beat to ensure that everybody contributes to the achievement of the target. I look forward to the excellent ideas that will improve revenue generation. In addition to your professional pride, and the satisfaction you may derive from working for FIRS as a professional, please note that you are also building the nation by realising the target and by being professional, honest and dedicated in the way you do your work. This is what the nation needs now.”

While acknowledging the giant strides made by the FIRS thus far, especially with the coming of Fowler at the helms of affairs, the Minister appeared smitten.

“I know your chairman as an achiever. He did very well in Lagos. Work with him. He will do well here. He is one person who has the welfare of staff on his mind.”

Target very possible but…

In the view of Taiwo Oyedele, a partner in PwC Nigeria, the target is practicable to the extent that the tax reforms are pursued without let or hindrance.

According to him, the reforms would ensure that incidence of insider dealings by some unscrupulous FIRS officials are largely curtailed.

No doubt, with the pressure on the present administration to deliver on its electoral promises, government needs the finances from the tax to compensate for the loss from oil revenue, as Nigerians wait expectantly for the dividends of the votes they cast for a President Muhammadu Buhari-led government.

RipplesNigeria …without borders, without fears

Ripples Nigeria

We are an online newspaper, very passionate about Nigerian politics, business and their leaders. We dig deeper, without borders and without fears.
www.ripplesnigeria.com

Join the conversation

Opinions

About the author

Ripples Nigeria

We are an online newspaper, very passionate about Nigerian politics, business and their leaders. We dig deeper, without borders and without fears.
www.ripplesnigeria.com

Do NOT follow this link or you will be banned from the site!