By Simon Ebegbulem
Dr Ese Owie, an Oxford University Â Â Â trained lawyer,is the Chairman , Edo State Board of Internal Revenue. He is one of the young technocrats in the administration of Governor Adams Oshiomhole of Edo State. Until his appointment the state could not boast of more thanÂ N300million per month as internally generated revenue. That figure has now risen toÂ N1.2 billion, a development he credits to theÂ support of the governor. He is even confident that at the rate the board is moving the state should be financially strong by 2012.
You are barely one year in office and the Internally Generated Revenue of the state has increased from N300 million to N1.2billion. How were you able to achieve that?
We give thanks to the Comrade Governor for his encouragement and support. That is the major secret ofÂ our success. It has been very challenging but extremely rewarding. Because we came at the time of aÂ very serious crisis, given the global economic melt down at the time. The Edo State share from the Federal coffersÂ was about N1.9billion a month and as soon as the Comrade Governor came in, we were faced with the challenge to fund our projects. At that time the Internally Generated Revenue was about N250million. But today in about my one year in office it has grown byÂ over 300 per cent. We are currently generating about N1.2billion. Although we have not met our targetÂ I will say we have done well and with the support of,Â and the encouragement of the Comrade GovernorÂ we are succeeding.
What strategy did you adopt in ensuring that the people pay their taxes?
Well, I need to clarify issues: Edo State was peculiar. It was not as if our people were not paying their taxes then. People were paying taxes but over the years these taxes found their way into private pockets. We also hadÂ another challenge: people were under paying taxes and that appliedÂ to corporate bodies who remitted what ever they felt they wanted to remit to government. So, whereas the Personal Income Tax Act is clear as to tax deductions and there after you determine what the payee code should be. Most corporate organizations refused to comply with the law. Before now there were people who failed toÂ pay at all. So what we did was to ensure that all revenue ends up in the treasury. We had to block all loopholes and eradicate inefficiency.
Secondly wasÂ that every body should comply with the law, the provision of the Personal Income Tax Act, asÂ it relates to Pay As You Earn, withholding taxes and all that must be complied with and not as if the state government imposed fresh taxes on any body. So all we have been doing in the last one year is to tell all corporate organizations that you must pay the correct tax. And like I keep telling them, taxation is a civic responsibility and it is not subject to collective bargaining. You can negotiate wages, you can negotiate terms of employment, but you cannot negotiate taxation. The third issue was to expand the tax net. So for those people who were not in the tax net, our challenges were to bring them into the tax net and that has been our strategy.
You must have stepped on some toes with your action. Any negative reaction from the people?
Quite frankly, I have not had any threat to my life because my hands are clean. I tell people if you are doing this job you must be above board. So for me there are no negotiations but I always advise people not to meet me for any thing but just go and pay your tax. I was able to do what I am doing because we are lucky to have a Governor here who gave us hundred per cent support to go out and collect our taxes. So that is why they cannot even blackmail me. But in terms of operational challenges, we have encountered a whole lot because given the nature of the Nigerian economy, you have serious problems in coordinating taxation. And all over the world they generally acknowledge that taxation in emerging economies is very difficult because of the largely informal business sector. You find that for most businesses, the owners are not able, for either fraudulent reasons or outright ignorance, to keep proper book, so they are hardly able to distinguish between profit and the operational fund for the business. So from the onset it becomes a challenge to actually ascertain what a trader at Mission Road will pay as tax because he cannotÂ actually open his books for you to see but the book remains firmly closed because you really cannot determine what is what at that point in time. So for us, the challenge of doing that kind of direct taxation has been very enormous.
Because for Pay As You Earn for government and organized labour , it is different, you know what their salary structures is, and you agree at the taxable income and what the tax should be. But the challenge is that for most of these big businesses, it is always difficult to actually determine what they should pay. Another challenge is corruption and bureaucratic bottleneck. The corruption in the civil service is so bad that driving reforms requires more than just political will. You need to remain a step ahead of these guys who engage in sharp practices otherwise, you find out that you identify a problem and you hit the problem, in the first one month you are seeing result, you are happy that you have blocked that loophole.
Three, five weeks down the road, these guys device a new strategy. So for you to actually sustain reformsÂ you must consistently remain a step ahead of them because guys who are into counterfeiting have been doing the business for a long time. They have business, a lot of assets. So you coming to tell them that it is business unusual, they will fight back. So for us we have a twin problem of a largely informal sector that requires more sophisticated analysis and the issue of corruption and an inefficient bureaucratic system that makes your reform agenda a bit slow, but we have done our best and I think we are making progress.
At some point you were locked in aÂ serious confrontation with some Federal Government agencies such as the University of Benin (UNIBEN) and others over alleged tax evasion, what is the situation now?
For these corporate organizations, the challenge for us was that it was a very very complicated problem. We had two distinct levels of abuses by these institutions. The first abuse of the system was that they vehemently refused to comply with the Personal Income Tax Act as relates to the deduction of Pay-as-You- Earn. Rather they sat down and arbitrarily decided what to pay to the government. But beyond that, a more serious abuse was that even when they sat down and arrivedÂ at the figure to deduct, what ever that was deducted was not fully remitted to government. And when they are acting arbitrarily, the arbitrary sum they deducted from their workers did not get to government. And we have had to do remittance audit in a couple of these organizations and we discovered that the PIT they have been deducting, they have not be remitting in full to the government. But we told them clearly, that our government is a government that will enforce the Personal Income Tax to the fullest. The fact that successive governments refused to implement that law does not make the law null and void. And we told them, irrespective of their misgivings as to the appropriateness of the law, the law remains law until it is declared invalid by a court of competent jurisdiction or is amended by a competent legislature. And in the absence of these, we shall enforce the law and failure to comply; we will resort to judicial process.
And that is what we have done, we have about 20Â of them in court and they are all coming to negotiate but I said no it is not for negotiation, if you have refusedÂ to comply let the court determine. But I have always told them, you cannot beatÂ a tax man because a tax man is always guided by the law. NABTEB is in court, we have the Benin Owena River Basin Development Authority in court, Rubber Research Institute of Nigeria Iyanomo in court, we have the Usele Psychiatric Hospital and a host of others. We are very confident that the court will give judgment in our favour because we followed the due process.
What is your target?
We are hopeful that by 2012 we should be able to grow our current Internally Generated Revenue (IGR) by 25 per cent each year. Right now, our target for the year is N18billion and we are hoping that by 2011, we should be able to grow another 25 per cent of the N18billion. And that by 2012 which will be the terminal date for our first term in office, we would have been able to grow another 25 per cent, which means that we are looking to do another N9billion on top the N18billion we hope to do this year.
So that gives us over N27billion IGR by the end of the Governorâ€™s first term in office. And what that signifies is that we will then be turning the will. Because before the Governor came into office, we use to depend 90 per cent on allocation from Abuja . But if we are able to achieve that we would have hit around 27-28 per cent funding mix by the end of the Governorâ€™s first term in office. So if we are able to work very hard, we will say regardless of Federal allocation we should be able to cover our personnel cost in total from internal sources.
So the dream of the Comrade Governor is that whether Abuja works or not we can pay salaries. And long term, we should be able to do 60 per cent of IGR to fund the project. So by 2016 which should be when the governor will be doing his second term we also have a mile stone that by 2016, we should be able to do 50-50. And by 2020 we will now have a situation where IGR would be bigger in terms of contribution to our expenditure.