By Omoh Gabriel
Chairman, Federal Inland Revenue Service (FIRS) Mr. Sunday Ogungbesan weekend said the Federal Government is considering a review of Value Added Tax, VAT with a possible increase from 5 to 10 per cent. He said that FIRS is at the moment engaging stakeholders to sensitise the nation on the possibility of increase in VAT as the quick win for revenue generation for the country, saying that with dwindling crude oil revenue the government expects to fill the gap with non-oil revenue.
He said that the service is collaborating with the Central Bank of Nigeria, CBN to capture the revenue flow of companies and individuals and that very soon it will be difficult for anybody resident in Nigeria to operate an account without a Tax Identification Number.
Meanwhile, President Muhammadu Buhari has urged Nigerians to stop paying mere lip service to agriculture, as crude oil and gas exports will no longer be sufficient as the country’s major revenue earner.
The President gave the charge at an audience he granted Dr Kanayo Nwanze, the Nigerian born President of the International Fund for Agricultural Development (IFAD), at the Presidential Villa, Abuja.
“It’s time to go back to the land. We must face the reality that the petroleum we had depended on for so long will no longer suffice. We campaigned heavily on agriculture, and we are ready to assist those who want to go into agricultural ventures” he said.
Buhari pledged that his administration would also cut short the long bureaucratic processes that Nigerian farmers had to go through to get any form of assistance from government. He told the IFAD President that improvement of the productivity of farmers, dry season farming and creative ways to combat the shrinking of the Lake Chad will also receive the attention of his administration.
“There is so much to be done. We will try and articulate a programme and consult organisations like IFAD for advice” he added. According to the President, foreign exchange will be conserved for machinery and other items needed for production “instead of using it to import things like toothpicks”.
Nwanze had earlier congratulated Buhari on his victory at the general elections and assured him that IFAD was ready to give all possible assistance to the Federal Government and Nigerian farmers to boost agricultural production in the country. Nwanze, who later spoke to State House correspondents, said IFAD had since 1985 been providing loans and grants in the nation’s agricultural sector to boost agricultural production.
“Nigeria has the largest portfolio of IFAD’s investment in Western and Central Africa and the second largest in Africa. But the case point here is that this country has all the endowments that it takes not only for it to produce enough food for its population but also to be the bread basket of region.
And this is where my institution on my behalf, I offered our services and our support in the agenda of rural transformation as a key ingrate in this country’s economic and social development,” he said
The FIRS chairman, speaking on how to boost non-oil revenue said that it would crack down on tax evaders by denying them access to banking facilities for individuals and companies that failed to join its register. FIRS boss told journalists in a news briefing in Lagos that there were more than 450,000 companies in the country, but only about 125,000 pay any form of tax.
Ogungbesan said it was difficult to track the financial activities of those who did not pay taxes, adding that most their firms were not active. “We are collaborating with the CBN to enforce compulsory registration with the tax authorities by companies and individuals before they can access their bank accounts,” said Ogungbesan.
Tax identification numbers were introduced for corporate bank accounts in 2012 but some firms whose accounts pre-date the system are currently not obliged to have one. “There is a need to review our tax laws,” said Ogungbesan, adding they were not stringent enough to deter evaders. Tax evasion can be punished with up to five years in prison.
According to him, the service was given a revenue generation target of N4.5 trillion in 2015 and has so far generated N2.667 trillion. He said that the estimated collection for July 2015 is N404billion. This, he said, is 106 per cent of the monthly target of N381.02 and brings total collection to date up to N2.374.18 trillion against the target of N2.667.13trillion, and improves collection percentage to 89 per cent.
He said that the target for VAT was N1.283 trillion and the service has so far been able to generate N390.36 billion as VAT into the federation account. He said the target was set with the hope that as from July the VAT rate will rise to 10 per cent. Ogungbesan said “oil has not been doing well, government expects the non-oil sector to provide the relief being sought. Governance must continue; this is paramount in the minds of every one.
If we can not pay salaries, it is a big problem for the country; my record shows that we have 450,000 corporate entities in this country, how many of them are contributing taxes, into the coffers of government, only about 125, 000. So the rest 300, 000 plus, where are they? You can not find them; they are portmanteau companies. The law says if you are registered within six months you must commence business.
“The same law which said you must commence business has not provided the infrastructure upon which you can rest. If a company is registered and stays for years without doing business and becomes operational ten to fifteen years later, it will be required to pay return charge fee of N25, 000 for each of the year it did not operate as penalty. This kind of law does not promote investment.
“There is the need to intervene, and amend the complex laws that inhibit interest in promoting investment in the country. The thinking is that all those in the informal sector are not paying taxes, it is only those in formal employment that are paying. Can this be true?
When the local government comes to the market to allocate stores, the woman in the store pays N2, 000 per month. Is that not tax she is paying? All those sundry levies being collected by states, they have more than sixty levies on these businesses what do you call that? They are taxation in one form or another.
“It is true they are not paying adequate taxes, some body that should be paying N60,000 is giving you N2, 500. The limitation and the challenges we have is that we do not know who these tax payers are and where they are operating from. The fact is that the Federal Inland Revenue Service which every one is quick to refer to is only administering the Federal Capital Territory, not the entire country and so that makes it difficult for us.
“When we compute tax-to-GDP ratio, every now and then you hear Nigeria is doing only about 7.5 per cent, whereas other countries in Africa are reporting about 19 per cent. “Yes they are partially correct but they forget that the various levies at the local and state levels, including the personal income taxation administered by state governments are not captured.
If you include them in the tax figure, Nigeria will be doing close to 17.5 per cent. It is still not enough because the bench mark is 20-22 per cent. We are not assessing ourselves correctly. “The quick win is, why not increase the rate of VAT from 5-10 per cent? Can we do it now? If you see how far we have gone this year in revenue generation you will see that VAT would have increased by July, that is the target they gave us but we have not been able to do it.
We are consulting as we speak to you, we will also speak to the academic community, the students, we will speak to labour. “I will tell you first and foremost that we in Nigeria do not pay the classical VAT, which anyone may settle for. The first is the income VAT, is just a matter of taking all the incomes of production and solve them into mathematics and then the value such as income, labour, entrepreneurial, the increase in these element from the previous year record is value added.
This can be conveniently calculated with proper records and book keeping” he said. He added that Nigeria needs to adopt a central tax payment. He said that there are a lot of benefits in this type of tax collection system that will enhance the revenue generation of the different levels of government in Nigeria. He also said that collaboration will go a long way in non-oil revenue drive of the country.
“We are collaborating with all the banks to ensure that even individuals without TIN cannot do businesses with the banks. So what is the idea of this centralisation of tax system, is about helping states to collect their tax revenue, not keeping the revenue, because the constitution says every state shall keep its revenue, but the constitution did not say each state shall collect its own revenue.
*It is easier if I can have an MOU so that FIRS can help them do the collection. We have the staff; FIRS has six thousand staff, check it out with any of the states,” he said.