AYODELE SUBAIR: Domestic Resource Mobilisation is the Only Way States Can Avoid Economic Challenges


Since his appointment in 2016, the Executive Chairman, Lagos Internal Revenue Service, Hamzat Ayodele Subair, has significantly increased the state’s internally generated revenue, by executing various pioneering programmes and implementing strategies that have positively impacted revenue collection. In January 2020, the state generated N34.5 billion, which was a record achievement since the creation of the agency. In this interview with Obinna Chima, Subair reveals that despite the disruptive impact of  COVID-19, the state has remained on the path of achieving its revenue targets for the year. In addition, he sheds more light on the States’ Fiscal Transparency, Accountability and Sustainability programme that was recently organised by The World Bank and Nigeria Governors’ Forum. Excerpts:

How has the COVID-19 affected your agency and its 2020 revenue generation drive?

The Lagos Inland Revenue Service (LIRS) exists within a certain space; so the COVID-19 has affected all economies globally, the Nigerian economy and Lagos being a sub-sector of the national economy is also affected. So, we can’t operate in a vacuum. Definitely whatever affects Nigeria affects Lagos, being the heartbeat of Nigeria. So, coming down to how it has affected our agency, our revenue has taken a hit. In the first quarter of the year, by then the outbreak of the virus was on. We sat down at the LIRS and constituted a COVID-19 taskforce and this was borne out of our initial design of a business continuity plan. We sat down and came up with a business continuity plan. We knew that sooner or later, there was going to be a lockdown and to try and mitigate against that lockdown, we set up certain systems from the business continuity plan which centred on the provision of digital services. Luckily, late last year, we had launched an end-to-end tax administration solution called e-Tax. What e-Tax does is that all taxation process that you can think of, would run through that platform. That means that taxpayers do not have to physically go to any of the LIRS locations, but can remotely access same types of services that they would come here for. So, we set that up and we made sure that we strengthened all the structures around that platform, to ensure that we operate optimally, even with the lockdown. The other digital platform that we strengthened was our contact centre – 0700 CALL LIRS. Now, we knew that during that lockdown, a lot of taxpayers would have a lot of enquiries from LIRS, based on their transactions with us. So, we had to make sure that we had a viable contact centre, even though there was lockdown. We even had to buy laptops and phones for the officers in the contact centre to use. We also had to provide internet connectivity in their homes. All these were just to ensure that all our remote services would continue to function effectively. So, with these two major platforms, we were able to keep the business of tax collection viable and active. Now, you recollect that the lockdown was basically in April and May, prior to this, our collection rate was about 80 per cent. But in the month of April, it nosedived to about 61 per cent and in June, it started to move up again. So, by June and July, we were able to consolidate on all the various measures that we put in place. Yes, it had an impact on our revenue, but with all the measures we put in place, we were able to minimise the impact. So, we only dropped by about 21 per cent during the COVID-19 lockdown, in the real sense of it.

Can we have the actual figures that were generated in the first seven months of the year and the targets for the respective months?

In January, we generated about N34.5 billion; the target was N42 billion. In the first place, the target was a tall order. But it was based on certain strategies and certain dependables that we had hoped to implement during the year. But just about when we were settling down to actually implement some of these measures, was when the pandemic came in. That N34.5 billion was an all-time high. The agency had never generated anything close to that. In February we generated about N32.5 billion again; in March it was N32 billion and of course, in April it dropped to about N25.5 billion, May we generated 28.5billion. So, you can see that with the measures fully kicking in and of course with the phased re-opening, things started to get better.

In June, we were able to generate N28.5 billion and in July, about N31 billion. So, it is on the upward trend based on all the measures that we put in place. But to also go back to what you asked, you know with the pandemic, both the federal and Lagos State budget had to be revised. So, the target in the Lagos State budget is N30 billion monthly, which is what is going to be looked at throughout the year. So, you can then say that making N34.5 billion is well above the budget and at the moment we have come back to N30 billion. So, we are on track.

Considering the difficulties posed by the pandemic, what forms of palliative did the LIRS put in place for both individual and corporate taxpayers?

In view of the pandemic, it was obvious and clear that we would need to put in some tax incentives and reliefs for the various taxpayers, many of whom were struggling. Certain sectors were hit, but some were hit harder than others. But the palliatives we have brought out are quite broad. It is not necessarily targeted at any one sector, because even the thriving sectors also would have players that are not doing well at all. That is because some were able to quickly adapt their businesses. So, talking about the relief package, one of the first things we thought of was the impact of COVID-19 on the cash flows of the various businesses. So, hitherto, we used to get bullet payments for outstanding liabilities. So, we decided to allow taxpayers to pay us in installment presently, on a case-by-case basis. That is because some businesses are doing we and they really do not need to pay certain liabilities in installment. But, just to be fair to everybody, when you come on a case-by-case basis, we look at it and come up with a payment plan for you. Also, for the back duty, that is the cases going through tax reconciliation, we decided to waive the penalties and interest payments that are due for tax audit, between 2009 and 2015. So, all the various taxpayers who are owing us and who are still reconciling their accounts can take benefit of that palliative. The other one we did was the waiver of penalties on late filing of annual returns. Individuals are expected to file between January 1 and March 31. But this was extended and eventually we allowed late filing up to July. But the month of the lockdown, which was April, we have said that all the taxes that were deducted in April, May and June, that could not be remitted to various logistics problems, the taxpayers can actually remit them and they would not be charged any penalty or any interest for the late remittances of those deductions. Then for late filing, there would not be any fine or penalties for such. Also, we thought of the various taxpayers who have been so kind and who have donated, either in cash or in kind, some through commodities, to support the COVID-19 fight. So, to recognise and encourage them, we have also said that we would allow up to 20 per cent of the value of those donations to be set out of their taxes in 2021 year of assessment, of course with a cap of 35 per cent of what is due next year. Again, we thought of it that due to the medical advisories and protocols around COVID-19, we would also allow tax reconciliation exercises to be done virtually, so that taxpayers won’t really need to come into LIRS offices physically to reconcile their accounts. So, we allow virtual reconciliation and that has proven to be quite popular. Prior to the pandemic, a lot of companies would tell you that their Managing Directors are not in the country. But, with the virtual reconciliation exercise, no matter the part of the world that they are, they can participate in the reconciliation exercises. Another measure that we took was to increase the payment channels for taxpayers. We looked at the ease of doing business and thought that if we increase the different platforms from where they can pay, that would also be useful. That is also a component of our e-Tax platform. It allows multi-payment channels. So, these are the various tax reliefs that we have introduced.

So looking at the incentives and the innovations that the LIRS has put in place, can you say it has increased the level of acceptance of tax payment in Lagos?

Yes, I would definitely say that the success of these platforms have shown that there are lots of tax payers who are ready to modernise the way in which they transact their businesses. So, we have a lot of Lagos residents who have registered on e-Tax because of the filing period that we just went through. There are a lot of Lagos residents who actually filed their annual returns through that platform. Yes, a lot of people are very enthusiastic and they are pleased that all the efforts that the Lagos State government, through the LIRS has put in place to ease doing business. The response is good and it is still an ongoing exercise. We urge tax payers to continue to avail themselves of the various platforms from the comfort of their homes. Even if they don’t go through the contact centre, once they log into the e-Tax channel, we also have a chat on the e-Tax platform through which they can be very interactive with the agency.

Often times, tax payers in Lagos complain about multiple taxation, how are you addressing the issue?

That question comes up often. At every tax forum that we go to, people want to vent their frustrations over the seeming multiple tax situation on the ground. But we look at it from a different perspective at the LIRS. First and foremost, there are three tiers of government – the federal, state and local government. At times, you would be seen as going beyond your powers when you want to intervene in issues around the local government finances. Rather, we want to educate taxpayers. The federal and state taxes are embedded in legislation, so you cannot vary it. It is only an act of the National Assembly that can change that. The National Assembly also has an Act which is the Approved Taxes and Levies Act that dictates what should happen. Now, there is a difference between a tax, an administrative charge, levy or fine. But unfortunately, taxpayers mix up everything and call it taxes, when they are either administrative charges, levies, fines or penalties, designed to deter offenders. Again, some are for the provision of certain social services. For instance, LAWMA would give you a bill if they clear your refuse and there are other agencies like that and we also have some from the local government who provide specific services and they demand specific charges. So, what I would just tell tax payers is that if they feel like they have been hit by multiple taxes, they have a right to complain. They can write to LIRS which is the main tax agency in the state, or they can also write through the office of the Commissioner for Finance, if they feel that. To me, multiple taxes would be if our tax station in Mushin that you are registered, issues you with an assessment and then another tax office at Ikoyi or Victoria Island also issues you with an assessment for your Personal Income Tax. But it is unlikely that, that would happen. There is a possibility of that happening, because a lot of tax payers register in different tax offices, when they are supposed to be domiciled in only one tax office. That is why we have solutions like the e-Tax. The e-Tax is premised on a unique identifier, which is the Bank Verification Number (BVN).  So, with the BVN, we are able to narrow down who the tax payers are; with that, the occurrence of two different stations sending you two different assessments for same period is unlikely to occur. So, it is a general misconception by members of the public when they talk about multiple taxes in Lagos. Lagos is very conscious about multiple taxation and we are trying to totally eradicate it. It might please you to note that at the state level, we are presently compiling a sort of revenue code, which is going to make sure that the taxes are known and that they are certain. This would be publicised state-wide. It would be on our website.

So, when would the revenue code be publicised?

We are hoping that we can achieve that before the end of this year. So, it is work-in-progress right now. It would help disabuse the minds of members of the public. In most of the climes, business men want to know all the tax liabilities that would come their way during the year. So, we don’t see any reason why we cannot achieve that. With Lagos being in the forefront, we want to achieve that this year.

Can you shed more light on the States’ Fiscal Transparency, Accountability and Sustainability (SFTAS) programme that was recently organised by World Bank and the state governors, which  talked about states offering tax relief for individuals and businesses?

It stemmed from the effects of the COVID-19. But prior to the COVID-19, when oil revenues started to dwindle, it was very clear that a lot of states would be to improve on their Internally Generated Revenue (IGR). In the past, it was alleged that various state governors would always head to Abuja cap in hand, to try and get some revenue allocation from the centre. But the pressure at the centre has encouraged even the federal government to advocate to all the states to improve their IGR, so that they are able to perform as viable states. So, likewise, there has been a partnership between the World Bank, the Federal Ministry of Finance and between the Nigeria Governors’ Forum. They set up the SFTAS programme and under the programme, there are a lot of awards being given to all the various states. There is what is called the Disbursement Link Indicators (DLIs). With the DLIs, certain categories have been created. Now, what you read in the newspapers recently, was that $2.5 million is going to be awarded to all the states who come up with tax incentives and reliefs. This programme has been ongoing, but is now being given a lot of publicity. But the real aim is not for the federal government and the World Bank just to give handouts; the want to teach a lot of the states how to be more viable and how to increase their IGR. That is because without increasing their IGR, it would very tough to meet the basis of civilisation, which is the provision of infrastructure and social services. So, the programme is a laudable initiative and it has been well embraced by all states, including Lagos. We are interested in ensuring that we are able to access all the awards that have been presented in this programme. At the end of the day, all the states are going to be better off, because they would imbibe global best practices as far as revenue generation is concerned. Domestic resource mobilisation is the order of the day and any state that does not embrace this concept definitely would run into economic problems.

What is LIRS doing to widen the tax net in Lagos and what is the actual number of tax payers in the state?

A lot of people are interested in the number of tax payers that we have in Lagos for various reasons. At the moment we estimate it to be at about 4.5 million. I used the word estimate. With technology you should be able to determine things with certainty. Unfortunately, because we did not adopt biometrics as our unique identifier in the past, we made it easy for Lagosians to be able to pay their taxes. Banks, for instance, were enabled to issue pay identity and allow payments to happen. But, we have looked at that strategy and we have stopped it. You can no longer just go to the bank without any taxpayer’s ID to make payment. As much as possible, we try to ensure that you have a payment reference before you can make tax payments, so that we are able to collate such information better. So, we estimate that there are 24 million residents in Lagos, some might say it is 22 million and others might say it is 26 million. So, it is a guesstimate really. We do not know with certainty. It can only be known when we conduct proper population census. But, we know that there is an influx of people into Lagos all the time. It is estimated that on a daily basis, a minimum of 85 Nigerians come in Lagos State. So, it is imperative that rather than look at the option of increasing tax rate, the proper thing to do is to widen the tax net so that we don’t lose collection performance. To that end, we have looked at the informal sector as one of the areas that have a lot of gaps and filling the gap means getting more people into the next. Now, we have a fairly large coverage of that sector already in actual fact. It is just that in the past, many of these residents have been given presumptive taxes. We were trying to encourage them to get into the tax net. So, maybe as low as N5, 000 is allowed. But you know us Nigerians like to enjoy things from the lowest level of discomfort. So, we would want to pay the N5, 000 annually. So, we looked at it that the presumptive regime is just a penetrative strategy and we need to curtail that. The only way we can do it is by creating a situation whereby we can actually identify people in the informal sector, so that we can enumerate. With the enumeration, we can get a higher tax number. But people in the informal sector are highly mobile; it is very difficult to really pin them down. For instance, somebody might be in Daleko market on Monday, if you go back on Wednesday, he has moved to Lekki market or to Computer Village. So, they are very mobile. Secondly, they usually do not have fix addresses. What I mean is that, maybe somebody is here in January and by December, he might have moved twice within that period. Also, their mobile phones are changed regularly. They don’t think that there is any stake in keeping same numbers. So, it has been very difficult to pin down tax payers within this sector. But we have come up with a strategy and designed an electronic platform known as IBILE Hub. We were about to launch it in April, before the virus came into Nigeria. So, we had to suspend it. As you are aware, one of the protocols of COVID-19 is social distancing. For that reason, the state government has deemed it fit to allow markets to only open on certain days, so that there would not be too many people and to avoid the spread of the virus. So, we are hoping that with the phased re-opening of the economy, in no time we would be able to launch fully. IBILE hub is based on the acronym that represents the divisions in Lagos – Ikorodu, Badagry, Ikeja, Lagos and Epe (IBILE). So, we are going to have our staff go into these various divisions. Of course we can’t do it alone, so we are doing it in collaboration with the heads of the market associations and the unions. We are going to advocate to them and let them know that they are also stakeholders in this collections. It is something we have to do together as a state, so that we are able to improve on our finances and make the money available for the use state government. We have a very hardworking and forward-thinking head of executive, in the person of Governor Babajide Sanwo-Olu. By the way, talking about how we were able to sustain our collections, we also attribute it largely to the leadership that was provided by our Incident Commander, who is Mr. Governor. He was very active, he was on the news daily, giving all the directives and with the opening of all the isolation centres and other measures to contain the virus. A lot of Lagosians saw this and it was clear to them that it was tax payers’ money in action. So, it created a lot of goodwill for the state. That also accounted for our success. Of course, apart from all the hard work that management and staff of the LIRS also put into it. We are also having a lot of collaborations with various Ministries, Departments and Agencies, both in Lagos and at the federal level; and the whole idea is to try and improve on the data base that you have and bring in as many new tax payers as possible, so that we can shore up our revenue base.

In terms of domestic revenue mobilisation, what lessons do you think the federal government can learn from Lagos?

It is not part of our custom for a younger brother to criticise a parent. But in terms of providing advice, the federal government has a few lessons it can learn from Lagos. Lagos, even though it is a sub-national, is the fifth largest economy in Africa, which means we are doing something right in Lagos, when it comes to domestic resource mobilisation. The key thing to look out are: Firstly, the legislative environment needs to be looked into. There are lots of tax laws bordering on commerce that are outdated. So, there must be a continuous review. We thank God for the Finance Act, it is moving in the right direction. There was also the push by PEBEC that led to the review of the CAMA. So, we have seen some changes. So, it must be on continuous basis, so that all the old laws would be reversed.

Secondly, they need to look at leveraging on technology. You can’t do very much without relying on technology. I know that the FIRS and the Customs have also made a lot of move in improving their services through the deployment of various solutions, just like we are doing in Lagos. Another area the federal government can also look at is capacity building. One of the things that have helped us in Lagos, apart from formulating the policies, is to ensure that we impact knowledge in the people who are going to be the major drivers. It is the most important factor of production. So, human capital development would be important. There is also another factor which is the political will to support all the various institutions that support revenue mobilisation. So, it comes from the head of the hierarchy and this does not necessarily mean Mr. President. The other thing that we have been talking about is identity management. We have a situation whereby identity management has been a major constraint towards planning and development. We know that at the federal level, there is the BVN, there is also a very conscious effort by the federal government to improve on the national identity card and also in the area of issuing passports is done with biometrics. So, with all these factors, once they are improved upon, the government would be in a better position to improve domestic revenue mobilisation.