James Emejo in Abuja
The Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami has said the adoption of electronic taxation (e-Tax) will help minimise revenue leakages, limit tax evasion and significantly improve fiscal position of state governments amidst the current economic challenges.
Speaking at the 146th meeting of the Joint Tax Board (JTB) with the theme: “Leveraging Technology Solution for Enhanced Administration of Indirect Taxes,” at the weekend, Nami, who is also the chairman of the JTB, said a lot of people are presently making monies privately without remitting appropriate taxes.
He said the adoption of technology will harness the various taxes by individuals and plug leakages especially for state governments who are presently in dire fiscal challenge.
Noting that gone were the days of brick and mortar tax administration, he said eTax could be a game changer in resource mobilisation going forward.
Nami said: “Your wife could be at home, in the kitchen and with just a telephone and a computer or just an electronic gadget, your wife or a member of your family would be rendering service to a customer right in the kitchen or the comfort of the bedroom, pay for those services, receive money for those services, and spend them without leaving the house.
“So when you carry guns and the police or law enforcement agencies to go and enforce such business entity, how would you get it done? So that’s the need for technology.
“People continue to make money every day….we are not able to generate commensurable taxes from those revenues and until we are able to do something otherwise, those that we serve would continue to borrow money to fund their budgetary requirements.”
He told THISDAY that the essence of the meeting was to among other things ensure that technology is deployed at various levels of government to drive revenue collection, adding that the “concept of brick and mortar business model is no longer obtainable.”
He said: “People do business and we no longer see them physically and so in order for them (revenue agencies) to generate revenue that would be used by their respective governments to fund their budgetary requirements, there is the need for them to deploy technology to exchange and data and to be able to raise assessment that they can enforce for purpose of revenue generation for their respective states.”
However, in her lead presentation to the gathering, Director, Change Management, FIRS, Ms. Chiaka Okoye said the e-Tax solution being proposed will automatically take out relevant taxes and remit directly to be it the federal or state/domiciled accounts.
She warned that unless technology was embraced to administer taxes, with a minimum wage implementation by some states, their fiscal positions could “look bleak.”
She explained that the move was to further ensure that all payments to vendors which relevant taxes are deducted from them and “not just deducted but remitted to the designated TSA accounts among other things.”
Justifying the place of technology in modern tax system, Okoye said Nigeria’s tax to GDP ratio is about 6 per cent compared to African average of 17.2 per cent as well as OECD which is about 26 per cent.
She said: “Nigeria is ranked 139 out 190 countries in ease of doing business by the World Bank, when it comes to ease of paying taxes, we are ranked 159 out of the 190 countries.
“And if you compare this to South Africa which is a much smaller economy than Nigeria, South Africa’s annual collection is about $85 billion which is about 400 per cent higher than Nigeria’s $17 billion.”
According to her: “Looking at the national tax system, the total revenue collection for 2017 was N6.2 trillion had become $7.8 trillion in 2019.
“If you take the federal scenario as an example, while the ratio of debt to GDP is acceptable, our revenue versus actual budgeted and expenditure is not acceptable.
She said in 2019, the federal government had a revenue budget of N7 trillion but the actual collection was N4.8 trillion adding that the expenditure budgeted was N8.9 trillion, while the actual was N9.4 trillion.
“So while we are spending more than we budgeted, we are collecting less than we budgeted,” she said.
According to her: “In 2020, we already have a budget deficit of about N2 trillion by looking at the aggregate revenue of N8.16 trillion and expenditure of N10.33 trillion. Now, this is with the assumption that oil production will be 2.18 million barrels per day with oil price of $57 per barrel and exchange rate of N305 to dollar and GDP growth rate of 2.93 per cent with targeted inflation of 10 per cent plus.
“Now, we all know what’s happening in the country and whether these assumptions are real or not. Now, looking at the states, it’s not even better. Whereas the states total budget in 2019 was N8.9 trillion, only about 40 per cent of that came from IGR and FAAC. And then, with a minimum wage implementation having started in some states, it’s even going to look more bleak.”