The recurring inability of government to achieve its projected non-oil revenues over the years points to the need for urgent structural reforms, a report by Guaranty Trust Bank Plc (GTBank) has stated.
The bank stated this in its 2020 macroeconomic and banking sector outlook, obtained yesterday.
It stressed the need to adopt measures that would shore up government’s revenue.
The financial institution pointed out that in 2019, the Federal Inland Revenue Service (FIRS) was reported to have generated a total of N5 trillion, against a projected revenue of N8.8 trillion. This represented a 56.8 per cent revenue performance.
According to the bank, given the changes made to tax laws as contained in the Finance Act, the federal government was expected to ramp up its tax revenue.
“In addition, the amended Deep Offshore and Inland Basin Production Sharing Contract Act (DOIBPSCA), which regulates the operations of oil and gas Production Sharing Contract (PSC) in the Deep Offshore and Inland Basin, was signed into law by the president.
“Specifically, the Act was amended to attain a higher royalty of 10 per cent to be paid on PSCs on fields operating in water depths greater than 200 meters,” the report stated.
President Buhari signed the National Assembly amended 2020 appropriation bill into law in December 2019, paving the way for a return to the January – December budget cycle.
The budget was increased by N264 billion from N10.33 trillion proposed by the Presidency, to N10.59 trillion by the National Assembly.
The Senate had explained that the increase was targeted at offsetting the infrastructural deficit and cater to interventions in security, health, road and other such critical areas in the country.
President Buhari also introduced and signed the 2019 Finance Bill into law – making it an Act – after it had successfully scaled through the scrutiny of the National Assembly.
The legislation aims to reform domestic tax laws to mirror global best practices.
The objective of the Act includes to promote fiscal equity, introduce tax incentives for infrastructure and capital market investments, support MSMEs and increase government re6.
The report added: “In light of the much debated concerns raised by private sector practitioners, foreign commentators and economists about the rising sovereign debt profile and the potentially unsustainable nature of the cost of servicing – with government’s debt service to revenue ratio estimated at over 50 per cent as at June 2019 – we expect to see increasing concerted efforts by the government aimed at increasing its revenue base in the coming months.
“There is however a need for government, and its agencies to adopt a holistic approach towards driving the fiscal policy activities required to achieve this objective.
“Policies and pronouncements must engender private enterprise and lead to increased business activities which can then enhance revenue generation through tax efficiency.”