The Chairman, Lagos Internal Revenue Service, Mr. Ayodele Subair, in this interview on ‘The Morning Show’ on Arise Television, stressed the need for tax reforms. Nume Ekeghe presents excerpts:
In the 2020 budget, Lagos state is targeting an internally generated revenue of N70 billion monthly, is that target feasible, and how much does your agency generate monthly presently?
We really believe that it an achievable feat. Presently we generate approximately N30 billion a month and with this increase, N500 billion is attributed what we are expect to collect and that works out at about of N42 billion a month and then the rest comes in as capital receipts, etc. Out of N60 billion that is expected to be generated internally, N500 billion comes from the Lagos Internal Revenue Service (LIRS) and we are very optimistic that we can achieve.
But what is the strategy in place for achieving that?
There are various strategies. We are majorly going to leverage on technology. I can assure you that there are no new taxes coming. Generally, there is a misconception by members of the public on this issue of multiple taxation. People take other types of levies, administrative charges and then they call them multiple taxes. But really and truly, we must realise that we have three layers of government – the federal, state and local governments – and each level is charged with different types of taxes. I can assure you that there is no way that the same type of tax would be charged for the same service by different layers of government. Half of the time, there are some direct services local government perform for instance and they have to make some administrative charges for those. There are also some other types of levies, but generally, everybody just calls it taxation. The LIRS is empowered to charge certain taxes as prescribed by the federal legislation and we don’t go outside what we are supposed to do. So, I can speak 100 per cent for the LIRS that we don’t introduce any type of foreign taxes into what is on the role already
Many Lagos residents feel that in spite of the high IGR recorded by the state through all the taxes and levies they pay, they don’t really get real value in terms of infrastructure and services, do you agree with this?
No, I totally disagree because the government is very responsible and as much as possible, there is a lot of infrastructure that is provided as well as qualitative social services. Lagos has been blessed with good administrators right from the time of Bola Tinubu, through Raji Fashola to Akinwunmi Ambode, and our present governor Babajide Sanwo-Olu. They have a lot of programs for the state and you can see Lagos is booming. We have approximately 24 million people in Lagos and so there is lot of people to cater for and it is difficult to satisfy everybody. But generally, you don’t need to drive very far in Lagos to see all the developmental projects that are all over.
And the LIRS tries to showcase what the government is doing so that people can earn the trust of government. They want to make sure that whatever they pay in taxes, they can actually see in terms of physical structures and services. So, I don’t think I will agree with that assertion. But of course, we know the government must always improve and do better. What we tend to do is that we benchmark ourselves with developed countries, but it took something for them to get to that point where the citizenry appreciates and know that there is civic duty and obligation for them to pay their taxes. And then there is a very high correlation between payment of taxes and development. So, the government would always try to do better.
Lagos is seen by residence and businesses as one of the most expensive places in the world to live in and this is partly blamed on the issue of multiplicity of taxes and levies. How exactly is the LIRS looking to streamline this or looking to improve the ease of doing business in terms of taxes this year?
In terms of revision of taxes, we are not really empowered to revise taxes. Taxes that we execute are basically federal taxes such as Pay As You Earn (PAYE), Personal Income Taxe (PIT), and all other taxes and they are all done by legislation and then we have no powers really to amend what is there. But, in terms of making life easier for tax payers, we continuously look at technology as a means of making life much easier. The ease of doing business is very key to the federal administration and Lagos also subscribes to that. So, what we have done is to have several types of solutions online to ease the payment of taxes.
We would continue to invest more in technology to make sure that tax payers meet their obligations at the minimal cost.
In 2018, there was a controversy around plan by the Ambode administration to review Land Use Charges in Lagos which I am sure is still lingering. Is there any plan by this administration to go back to that issue either to still revise or review the charges?
If you recollect, at the time the Land Use controversy was around, the government reversed itself and suspended the initial provisions and also gave some element of discount and reduction as well as completely exempting certain residents from paying this. But I will tell you that presently, the Lagos State House of Assembly is reviewing the Land Use regulations and I’m sure that before the end of this month, I think the new regulations would be passed and a lot of Lagosians would be happy.
Lagos has seen several industries relocate to the neighboring state, Ogun, what is Lagos doing to bring them back?
Lagos is the center of excellence and Lagos attracts all manner of people and businesses and it is expected that if there is some element of saturation or dissatisfaction of certain services it is a free world and people are allowed to move around the states. But in terms of what we doing, we are definitely not going to lobby businesses to come back to Lagos if indeed some have actually left Lagos, because we don’t have statistics on that. There are border towns between Lagos and Ogun state and many of these companies were always at the borderline and some were confused as to who were they to report to – Lagos or to Ogun? But with clear demarcation and with more efficiency on the side of Ogun State, we are able to reach out to more companies. More importantly, Lagos has always been in the forefront of taxation and Lagos has always been efficient and effective in collecting taxes. So, after some time, people and recalcitrant taxpayers would think that if they move from one area to another area, perhaps the tax people would not be so efficient which is what has really happened. But much credit to my colleagues in Ogun state as they are ramping up on all of their taxation strategies and very soon maybe these same people would run back to Lagos to come and join us. We encourage a lot of commerce in Lagos and our government supports businesses heavily. So, I believe that it a matter of time before all these businesses start to come back to Lagos.
You recently launched the enterprise tax administration system, E-tax, what is that all about and how does it work and how will it help generate more tax and revenue?
It is a new innovation on the part of the LIRS. It is an end-to-end digital tax administration solution and by that we mean that a lot of tax payers don’t really have to come to LIRS physical locations in order to carry out their tax activities. They can go online and it starts with registration, file their returns, generate and print assessments as well as make payments online. They can print tax clearance certificate and they can also track the progress of the tax audits that have been carried out on the various companies. And they can do all this from their homes and from wherever they are. At the end of the day, we want to improve the ease of doing business and we want to reduce the cost of people filing their taxes. So, it is win-win situation for all and we expect more traffic on the platform. Overtime, a lot of Lagosians would learn how to carry out all their tax activities. We are very optimistic it would work for everybody and help bring in more taxpayers.
President Buhari recently signed the Finance Bill into law and the reaction has been quite mixed. The objective is to help MSMEs, attract investments, expand the revenue base for the federal government and also for the states. What is your reaction to that especially as the increase in VAT would bring in more money to the states?
It is an excellent move by the federal government, because for too long, our taxes have just been static. So, it is refreshing to know that things are going to change. All the unfair tax laws are going to be reviewed in favor of bringing more developmental strategies in place.
The reactions have been mixed, some are happy while some are not so happy. All the multinationals that had issues with excess dividend policy would be smiling.
We have the citizens saying that the VAT rate should not have been increased. But it is debatable. On my own part, I would advise that the federal Government concentrates more on indirect taxation, than direct taxation which is what VAT is all about. And remember that the rates in Nigeria are quite low as we had one of the lowest rates in the world at five per cent and at the end of the day, the government needs revenue. If we want to have meaningful development, government must generate revenue. I think it is a good move and we hope that it would be an annual event like it used to be in the past.
Are you excited that Lagos would get more money from VAT?
In terms of direct collection, it is the Federal Inland Revenue Service that collects VAT, but at the end of the day, there is a sharing formula between the federal government, the states and the local government. So, we are excited that we would get a bit more. But as you know, Lagos is almost self-sufficient. We do not rely on receipts from the federal government, we generate our own revenue here. So yes, it going to be an addition to the pot, but not that significant for the state.
Talking about the tax base, the alarming statistics you mentioned earlier was that out of 24 million people in Lagos, only one million are paying taxes, what are the efforts being made to tap into the informal sector?
We have approximately 4.5 million registered tax payers and we intend to move this to an average of seven to eight million at the end of the day. It is a continuous exercise and unfortunately with the way Nigeria is, we have problems with identification of residence. And we are working on a lot of strategies to ramp up and increase the number of tax payers. So, it is a work in progress for us.
On a federal level, what can the government do to improve on tax collections in Nigeria?
If I was to consult for the federal government, there are a number of measures and one of the key things is to review tax laws which we have taken a step towards. But there are still a lot of other laws that really need to be reviewed.
Also, it is important to leverage on technology. The federal government can invest more in technology to help increase the tax base. Increasing the tax base is key both at federal and state levels. So rather that thinking of bringing in new taxes, it is much better to widen the tax net and bring more people in and that way you can increase revenue. There are also other issues that can be looked into like the issue of tax waivers, it is a major leakage area. So, reviewing tax waivers and reducing that to the barest minimum to ensuring that the impact of those waivers would be felt in the economy and not necessarily giving all the very rich people more means of getting more wealth.
In Lagos, in trying to meet your target of 70 billion monthly, what are the other expectations for 2020?
Generally, from 2018, we invested a lot of money in technology and we hope that we would sustain that and even bring in more solutions. The other thing we are getting very big on right now is integration of data because that is part of the problem in credible data. We are hoping to collaborate with other ministries, departments and agencies both at the state level and at the federal level. And then we are hoping we would able to share information more at the federal level in terms of exchange of information on a global level, we need to be able to profile tax payers in a much better manner.
Do you have a strategy in place for engaging taxpayers because there are cases where tax officials lock up people’s businesses and there is still distrust towards paying tax?
We have a lot of strategies in place in terms of enlightenment of residents of states and quite a bit of our resources go into these enlightenment strategies. We have teams that go out and when people talk about harassment, that is not entirely true because there are processes in place before it gets to the point of locking or sealing up businesses a lot of things must have transpired in between. And it is always the last resort for us. Even for us to seal any business, we usually would refer to the law courts and we obtain warrants of distrain before we take such actions.
But before then, we constantly communicate with taxpayers and have reconciliation meeting. Some don’t even show up and those are the few exceptions. As much as possible, we want voluntary payments by members of the public. We don’t want a situation where we have to carry stickers to chase people. And that is why we have also invested in technology. With technology, people can log in themselves and the human element is totally taken out and reduced. They can just go onto the system and do anything they would ordinarily do when walking into a tax office. And in terms of trust, we try to build the trust because any taxation system that is devoid of trust is not truly worth anything. We try to showcase the programs of the state government as much as possible.