Cyril Okafor writes that the FIRS and Customs Service are working hard to meet the challenges of the time
In political circles, the common saying is that “money is for spending”. Nothing confirms this again than the action of federal lawmakers and their counterparts in Lagos few days ago. In passing their budgets – albeit belatedly – at separate sessions in Abuja, the legislators unilaterally topped up the budget estimates submitted by the executive branch.
Whereas the federal budget was raised by almost N90 billion, N21 billion was added to that of Lagos. The Abuja lawmakers were more forthcoming on why they hiked the federal appropriations bill. The reasons, we were told, include provision for the severance pay for lawmakers and legislative aides as well as a special intervention of N10 billion in Zamfara due to the ongoing security operation there to curb the upsurge in criminality.
Well, that is the easy part. Budgeting as we already know is merely a declaration of intent to spend. The real challenge is how to generate cash backing for the huge figures appropriated.
Looking ahead, experts are agreed on very modest growth forecasts in the global economy in this financial year. One, the mammoth production lines in places like China are yet to return to the high levels recorded few years ago. The implication for mineral-dependent countries, therefore, remains at best tepid.
Since President Muhammadu Buhari came on board in 2015, there has been heightened effort to reduce the country’s over-reliance on oil by formulating deliberate policies to boost agriculture. But the truth of the matter is that it takes a fairly long time for the seed of reforms in agriculture to mature into visible fruits. It certainly requires not only coherence but also consistency of a whole range of policies to make the magic happen.
To be honest, the Buhari administration has been getting less accolades for not only navigating the national economy from perhaps the worst recession in a generation within two budget cycles without an oil windfall, but also getting the leadership mix right in some revenue-yielding agencies such that returns from such organizations have risen astronomically.
Perhaps the most dramatic has been the Joint Admissions and Matriculation Board (JAMB) which, for the first time in its more than 40 years of existence, remitted a record N5 billion to the national treasury.
So, by and large, the performance of the budged passed by the National Assembly will still largely depend on how far the big “cash cows” are ready to up their game. Coming on the heels of the increase in minimum wage from N18,000 to N30,000, the times ahead will certainly tax the financial creativity of governments at federal, state and council levels.
To meet the challenge, the agencies that readily come to mind are, of course, the Federal Inland Revenue Service (FIRS) and the Customs.
With the no-nonsense Colonel Hammed Ali (rtd.) calling the shots at the Nigerian Customs, the revenue threshold of N1 trillion was crossed for the first in 2017. And the figure for 2018 is also in excess of N1 trillion.
In 2011, 2012, 2013, and 2015, Customs had generated N741.8billion, N850.8 billion, N833.4billion and N904 billion respectively.
While the figures of the last three years may appear handsome, some experts however believe the full potential of the Customs are yet to be fully tapped. If the ports operations can be made more efficient, the income accruable to the Customs will only increase.
For instance, access to the nation’s premier port – the Apapa ports – has remained a nightmare while the cargo-clearing process is, at best, still problematic.
But much more spectacular is the FIRS. In the last three years, the revenue generated by the tax board has grown exponentially. From the N3.3 trillion generated in 2016, the tax board achieved N4 trillion in 2017 and raised it further to N5.3 trillion in 2018. Why this growth has been described as very impressive is because it came at a time when the national economy was supposed to be contracting as a result of the recession that befell the country.
Industry experts are optimistic that the figures could, in fact, double within the next two or three years if the management of the FIRS under Mr. Tunde Fowler is hard-nosed enough to sustain its current bouquet of reforms.
Part of the challenge, therefore, is to continue to explore means to synergize with state authorities through the Joint Tax Board under Oseni Elamah as the Executive Secretary for better results. For, higher return by FIRS simply means there is a bigger pile to share between the federal government and the states at the end of the month.
Already, there has been a raging debate on the feasibility of raising VAT to boost revenue at this point. But the preponderant view is that raising VAT shortly after a “token” wage increase will only impoverish the vast majority of the populace.
What is, therefore, recommended is rather to widen the tax net such that more and more people – particularly the hitherto elusive super affluent – are not only captured but also made to henceforth pay rate commensurate to their wealth.
Here, Fowler has undoubtedly brought his rich experience in Lagos to bear to grow FIRS’ revenue. As the chairman of the Lagos revenue board, he was credited as helping to grow the state’s IGR from a miserly N600 million at the inception of the Bola Tinubu administration in 1999 to around N8 billion by 2007. Under Fowler’s watch, the figure grew further during the Fashola administration to over N20 billion by 2015.
It is quite instructive to note that today, roughly 70 per cent of the revenue FIRS has generated in the past three years comes from Lagos. The good news is that more durable structures are being erected to institutionalize the process such that in the nearest future the system is no longer man-driven but system-propelled.
Already, the Voluntary Assets and Income Declaration Scheme (VAIDS), the board floated last year, has started bearing fruits as many folks have decided to take advantage of a unique official window to regularize the titles or the names on assets hitherto disguised. In any case, with FIRS working closely with financial institutions like banks, there is really no more hiding place for the affluent who would rather not pay taxes.
To bring such high-net worth individuals into the tax net, the board has to intensify its engagement with them to mutually agree on the terms of compliance. With more and more of such quiet interactions ending happily, it is believed that FIRS will announce more fantastic figures in the new financial year.
Even more beneficial has been the deployment of technology to substantially automate the processes and ensure more efficiency in operation and cost. The old tax auditing system has been abolished in line with global best practices. Duplication or multiplication of taxes is eliminated by unifying the process for all taxpayers across the country. Another innovation is the electronic tax pay solution, a self-service channel available on all commercial banks internet banking platforms to ease the cumbersomeness associated with the existing manual method.
Also noteworthy are the administrative reforms which have ensured that the cost of operation is drastically reduced. Gone are the days when heads of hundreds of FIRS offices across the country received a lump sum monthly over which they had discretion to spend on petrol, diesel and ancillary matters. Audit by the management after assuming office in 2015 had revealed a pattern of abuse which, in fact, impeded productivity rather than aiding it. Revenue officers who failed to meet target had a ready excuse: lack of petrol in their vehicles or blackout in the office because of lack of diesel for their generators.
To check that, what Fowler did was to introduce a new inventory system such that officials are now only required to sign off a voucher to have their operational vehicles fueled at designated filling stations across the country. At the end of the month, the filling stations compile the vouchers and forward directly to the FIRS for payment. The result has been astonishing: operational costs have fallen by more than 60 per cent.
More of such creative measures are surely required to further grow the FIRS’ revenue in the times ahead.
Dr. Okafor, a financial analyst, wrote from Port Harcourt