In any language, growing the internally generated revenue of a state from N6billion to over N20billion monthly over a period of eight years must spell success. This is what the scorecard of Lagos State shows as the fruit of the re-engineering of its Board of Internal Revenue.
Prior to the return of democracy in 1999, the internally generated revenue of the state stood at a measly average of N600million monthly. But the next six years would deliver a steep rise to N3.6billion monthly, the equivalent of 500 per cent jump.
That was under the Bola Tinubu administration, which was convinced that Lagos State still had the potential to deliver a more exponential jump in internally generated revenue through a radical remodeling of its tax administration architecture.
The remodeling process began in 2005 with the appointment of Mr. Babatunde William Fowler as the Chairman, Lagos Board of Internal Revenue and Chief Executive Office of the Lagos State Internal Revenue Service, LIRS.
The appointment of Fowler, a US-trained economist, business administrator and banker of vast experience, was preceded by the government presenting a bill to the state legislature to make the Board of Internal Revenue an autonomous and self-accounting entity. The bill, which was passed into law in 2006, made it the first agency of its kind to be autonomous in the country.
The revolution had begun. LIRS, the chief revenue-generating organ of the state, was on its way to implementing the ideals of the revolution through a variety of radical programmes and forward-looking strategies. The LIRS knew it was not going to be a picnic. Given the endemic nature of tax avoidance in the country, not many organisations would relish the job of collecting taxes. LIRS accepted the challenge.
It started, in 2006, by removing impediments in tax payment, making tax assessment and payment easier for tax payers by establishing mini-tax offices in markets around the state. As at the last count, there are 38 of such across the state. Two years later, LIRS introduced the Self Assessment Filing System for individuals outside the formal sector.
This has since ensured that individuals could conveniently pay their taxes at any of the 1,200 branches of the designated banks as well as the LIRS tax stations and receive their receipts within 72 hours of payment.
Voluntary compliance was vigorously encouraged. Realising that the success of its operations is largely contingent upon public buy-in, LIRS raised awareness among businesses and individuals on how their taxes would benefit citizens, communities and commerce in the state.
It launched a war against tax evasion, part of which was its hugely successful publicity campaign that uses prominent Lagos residents across tribal, religious and professional lines for testimonial adverts on the need to pay tax and highlight the importance of tax obligations.
LIRS simply took a scalpel to the tax payment process and conducted a reconstructive surgery, which has ensured that all payment to the Lagos Internal Revenue Board were to be made directly to designated revenue collecting banks for the state.
These are electronically linked to databases that issue electronic receipts to tax payers. The LIRS also introduced personal electronic tax clearance cards (e-TCC), the first of its type in the country. The opaqueness that characterised tax collection in the past was banished, as the process was made more open to tax payers, who can now access their records via the internet.
The results have been astounding. Between 2008 and 2012, the average monthly IGR of the state leapt from N18.9 billion to N29.9billion, a fact attested to by Governor Babatunde Fashola during the 2012 Annual Public Lecture of the Institute of Chartered Accountants of Nigeria, ICAN. Lagos State IGR has also accounted for over 65 per cent of government revenue, making the state less dependent on proceeds from the Federation Account.
Data from the National Bureau of Statistics, NBS, and Joint Tax Board, JTB, attest to the success of the tax administration revolution spearheaded by the LIRS. Released last December, the figures showed that Lagos State generated more revenue than any other state of the federation between 2010 and 2012. Broken down, the figures show that the state recorded N185.9 billion in 2010, which increased to N202.76 billion in 2011 and rose further to N219.2 billion in 2012.
Of the N219.2 billion in 2012, Lagos realised the highest revenue of N172.44 billion from through PAYE. A total of N4.36 billion came from road taxes, N1.89 billion from direct assessment of companies domiciled in the state, while N40.513 billion came from other revenue sources.
About N120.25 billion was realised from PAYE in 2011; N7.97 billion from direct assessment, and N74.54 billion from other sources, while N104.681 billion came from PAYE in 2010; N7.51 billion from direct sources, and N73.704 billion from other sources.
In second position was oil-rich Rivers State, which earned about N49.59 billion in 2010; N57.19 billion in 2011 and N66.28 billion in 2012. The state earned N55.1 billion through PAYE in 2012; N485.9 million through road taxes; N22.075 million through direct tax assessment and N10.668 million through other revenue sources.
Delta State realised N106.4 billion within the three years under review, earning N26.1 billion in 2010, N34.75 billion in 2011 and N45.57 billion on 2012. PAYE fetched Delta State over N42.565 billion in 2012. Also, N244.195million was realised from road taxes, N123.4million from direct assessment, while N2 .635billion came from other sources.
For LIRS, the scope for improvement and greater success still exists. Early this year, it was disclosed that an additional 1.1million taxable adults have been captured by the tax net, pushing the number of taxable adults in the state to 4.2million. Fowler, LIRS Chief Executive, attributes the spike in the number taxpayers to the benefits the paying public has seen its taxes deliver.
“We now have 4.2million adults in our tax net. And this testifies to the fact that residents can now see the importance of paying their tax through the various projects that have been embarked upon by the government,” he said.
LIRS’ success is a contagion, with many states, including Edo, Osun, Oyo, Ekiti, Kano, Delta and Bayelsa substantially adopting the “LIRS manual” for use.