Improving Tax Collection

Dike Onwuamaeze

The major reason the federal government launched its Strategic Revenue Growth Initiative (SRGI) was to shore up its revenue, especially from the non-oil sector.

The key elements of the initiative includes sustainability in revenue generation; enhancing existing and creating new revenue streams; cohesion in the revenue ecosystem; and cost optimisation and liquidity enhancement.

Its overarching goal is to raise the country’s revenue-to-Gross Domestic Product (GDP) ratio to 15 per cent by 2025.

In order to shore up the country’s non-oil revenue, the World Bank had advised the federal government to focus on low-hanging and revenue-yielding fruits. These, the bank stated would help the government achieve substantial gains, grow Nigeria’s tax-to-GDP ratio to about seven per cent and rake in about N10 trillion revenue in the next three years.

Specifically, among others, the bank advised the government to remove loopholes in tax laws and improve tax compliance with more disciplined revenue administration.

It also noted that tax revenues were necessary to run essential services, provide security to citizens, help tackle hunger and poverty, and deliver critical health and education services.

Furthermore, the Washington-based institution stated that the COVID-related economic slowdown and the steep fall in oil prices in 2020, brought into clear focus the need to increase non-oil revenue in Nigeria, even when investment, jobs, and growth also needed to increase.

“This calls for a carefully calibrated set of policy and administrative measures that can grow revenues without discouraging investment.

“That rules out any increases in traditional ad valorem taxes like the value-added tax but it does afford an opportunity to fully apply tax policies already adopted and reform tax administration to seal compliance gaps.

“In the longer term, fundamental reforms of the tax system will be necessary to stimulate post-pandemic investment and economic growth. As Nigeria tries to “build back better” after the COVID crisis, a more strategic approach to revenue mobilisation will also be necessary: not just taxing more, but taxing better; not just how much to collect, but how to collect, what to collect, and from whom,” the bank added.

Indeed, this was one of the reasons the Minister of Finance, Budget and National Planning, Mrs. Zainab Shamsuna Ahmed, in June this year, approved the Tax Appeal Tribunal (TAT) (Procedure) Rules, 2021 pursuant to her powers under Section 61 of the Federal Inland Revenue Service (Establishment) Act, 2007 (as amended).

The rules, which replaced the defunct TAT (Procedure) Rules, 2010, enables the Tribunal to deal justly, fairly and expeditiously with appeals and encourages and promote the settlement of disputes among parties.

Other sections of the rule requires taxpayers to pay 50 per cent of any disputed amount into a designated account of the TAT as security for prosecuting an appeal, prior to commencement of appeals.

It also involves modification of some old definitions, and interpretation of additional terms such as “appeal”, “notice of appeal”, “decision of the Tribunal” etc; recognition of service of documents or processes carried out by email or such other electronic means as the Tribunal may permit; and recognition of virtual/ remote hearing of applications and delivery of rulings by the Tribunal.

Additional, it also included introduction of a six-month timeframe from the date of commencement of trial for the TAT to conclude and provide a decision; and provisions for hearing of ex-parte and non-contentious applications in Chambers as well as summary appeal procedure for liquidated money demands.

Although the TAT (Procedure) Rules, 2010 was effectively replaced, the rules allows for “anything done” under the defunct 2010 Rules to remain valid, as long as such is not inconsistent with the provisions of the new Rules, thereby grandfathering existing matters and ensuring a smooth transition.

To Partner and Head, Tax Regulatory and People, KPMG, Wole Obayomi, the implementation of the new rules emphasises the federal government’s commitment to improving Nigeria’s tax landscape, which commenced with the enactment of Finance Acts, 2019 and 2020.

According to him, the amendments to the TAT (Procedure) Rules, which was the initial forum for formal tax adjudication in Nigeria, align with changes in global tax administration systems and would ensure that the TAT’s procedures are up to date and give taxpayers increased confidence in the system.

He further pointed out that the role of the Tax Commissioners are not those of “judges” in the constitutional sense and so, rather than becoming a part of the judiciary, the TAT should be preparatory to, and supplementary to the formal judicial system.

On their part, analysts at PwC noted that: “The new procedures took effect from 10 June 2021, but taxpayers generally became aware of it end of September 2021.

“The rules are intended to make the TAT more efficient in the dispensation of justice.

“They are also a reflection of the current realities given the wide adoption of technology in the administration of justice. With the powers to order costs, the TAT now has powers to penalise erring parties for unprofessionalism and unnecessary delays.”

The Federal Inland Revenue Service (FIRS), the country’s revenue generating agency has over the years continued to take steps to increase the country’s revenue.

The amendment to the rules would clearly help in the drive to ensure that defaulters, especially as in the case of some multinationals that are presently under investigation, would be made to comply with their tax obligations.

FIRS, Muhammad Nami said the agency has a projection of N10.1 trillion revenue generation for the country in 2022. According to him, of the total amount projected, N2.053 trillion will be remitted to the federal government, while the balance will go to the states and local governments of the federation.

Nami, told lawmakers recently that the FIRS generated N4.9 trillion revenues in 2020, which was about 98 per cent of its set target for the year, said there was the possibility of surpassing the set target for revenue generation in 2022.

He assured the lawmakers that after some investigations and audit, which will be carried out by the agency in 2022, government revenue was expected to increase significantly in 2023.

The Chairman, House Committee on Finance, Hon. James Faleke, commended the agency for its efforts in generating revenues, urging them to do more.

Therefore, Nigerians must support the FIRS to ensure that ongoing tax reform in the country bear fruits so as to see much larger gains.