FIRS/VAT

By Suleiman Uba

TODAY, very few will dispute the fact that one of President Muhammadu Buhari’s most important, flagship appointments in his five years in office is the Chairman of the Federal Inland Revenues Service, FIRS, Mr. Muhammad Mamman Nami. Several unfolding reasons back up this contention. Amid uncertainties thrown up by the coronavirus pandemic, prices of Nigeria’s benchmark crude oil grade, Bonny Light, slumped significantly.

A Bloomberg report said that it traded at $12 and $13 per barrel between Monday and Friday last week. The report relied on data gathered from traders monitoring the West African market.

The current selling price is below the cost of production for Nigerian crude producers. It also falls short of the revised budgetary benchmark of $30 per barrel. Nigeria relies essentially on crude oil to fund its budget and address numerous other fiscal concerns. It also represents about 90 per cent of Nigeria’s source of foreign earnings.

Despite the supply cut by the Organisation of Petroleum Exporting Countries, OPEC and its allies (OPEC+), lock downs in most cities of the world have led to a drop in demand for crude oil. At press time, as factories, industries and machines grind to a halt in several countries, airlines have also had to shut down operations.

Meanwhile, in the US, buyers bidding for crude in Texas, the birthplace of the shale revolution, are offering as little as $2 a barrel for some oil streams, a precipitous markdown from a month ago. The slumping value of physical barrels is raising the possibility that Texas producers may soon have to pay customers to take crude off their hands.

Against this background, a critical fallback option to fund the revised national budget is proficient domestic tax revenue generation through efficient and accountable processes and templates. And that is where Muhammad Nami, the new unassuming tax chief boldly strides in.

Nami is an astute certified tax, accounting and management professional with privileged credentials. He navigates with top-tier professional practicing licenses and about 30 years of practical working experience in auditing, management and tax advisory and management services to clients in the banking, manufacturing, services and public sector as well as non-profit organisations.

Nami, the new tax boss who assumed duty on December 19, 2019, simply hit the ground sprinting. Having apparently taken in the big, unfolding global picture with its market volatilities and product vulnerabilities, he immediately introduced measures to produce impactful results. He halted the use of tax consultants for jobs regular staff members were employed to do. The funds saved from this practice which had bled the commission is now being saved for FIRS.

What’s more, it has also restored the morale of demotivated workers. In his acknowledgement of this change in staff morale, Nami correctly observed: “They are quite excited now and willing to work harder than before because I have taken steps to return the functions previously given to the consultants back to them so that they can perform optimally.”

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The tax boss’ introduction of Authority to Incur Expenditure, AIE, and the commencement of implementation of a new organisational structure, which opened up the opportunity for eligible staff to be promoted, leading to round pegs being put in round holes for efficient service delivery were important tweaks that boosted productivity.

Since assuming leadership at the FIRS, Nami has emplaced a regime of policy reforms anchored on deployment of Information Communication Technology, ICT, to staunch leakages.

Other measures were also taken to motivate members of staff to positively change their attitude to work. Mindful that modernisation would vastly aid more effective governance of the commission, Nami opted for across the board update of the Nigerian Tax System to eliminate artificial hurdles and align it with global best practices as envisaged by the 2019 Finance Law.

Nami’s focused efforts at FIRS have transformed into an unprecedented result in tax revenues harvested in the first quarter (Q-1) of 2020. From the final performance result in revenue collection in Q-1 by FIRS, it was revealed that the Service posted a new collection record of 15 per cent increase compared to the Q-1, 2019. This clearly had linkages with the widespread policy reforms and institutional re-organisation initiated by Nami, since assuming office in December, 2019.

It’s a “new record in revenue collection”, an elated Abdullahi Ismaila Ahmad, Director, Communications and Liaison Department, FIRS, said in a recent press statement. Traditionally, Q-1 collection results are low as a result of limited economic activities within the period. Business analysts trace this customary sluggishness to the festive hangover of the New Year celebrations, delay in budget presentation which was a New Year ritual in the country for decades under the military, limited clarity about government policy directions after the budget had been presented and consumer spending caution and limited liquidity following lavish festivities of preceding December month and January 1 New Year celebrations.

The unprecedented Q-1 2020 revenue receipts was remarkable as the period coincided with two adverse global developments on individuals, businesses and nations – a global fall in the price of crude oil price, which is Nigeria’s foremost cash cow and a shutdown of the global economic system by the COVID-19 pandemic. In the final computation of the Q1, 2020 results, a comparative analysis of the two periods shows that the Q1, 2020 collection of N1,203,310,372,900.34 is over N156 billion higher than its corresponding Q1, 2019 collection of N1,046,889,787,060.27. This translates to 15 per cent increase over the previous year’s first quarter collection.

The Q1,2020 performance result shows an astronomical increase in collection trends. Capital Gains Tax, CGT, recorded 568 per cent increase to N643,935,849.06, from N96,408,740.90.  Gas Income Tax rose by 420 per cent from N2,977,345,332.31 in Q1,2019 to N15,489,264,736.92 in Q1,2020. Even Petroleum Income Tax, PPT, increased by nine per cent.

Other taxes such as Companies Income Tax, CIT, increased by 152 per cent – N102,610,369,777.73 in Q1, 2020 compared to N40,696,980,658.52 for the Q1, 2019; NITDEF rose by 522 per cent – Q1, 2020 N691,206,855.85 to N111,037,797.16 for the Q1, 2019; and Stamp Duty increased by 40 per cent from N3,386,648,663.85 in Q1, 2019 to N4,750,893,578.48 in Q1, 2020. Value Added Tax, VAT, increased by 27 per cent at the Customs Level and 13 per cent at the Non-Import Level.

It is worth noting that the passage of Finance Act 2019 led to a drop in Withholding Tax rate from five per cent to 2.5 per cent in some sectors. The Act also tinkered with Pre-operational levy (levy paid by tax payers to obtain TCC) thereby resulting in a five per cent collection in Q1, 2020, a drop from seven per cent in Q1, 2019. With the full take-over of PAYE and PIT in the FCT by FCT-IRS, the FIRS lost all FCT collection, which led to the fall in both Pay As You Earned, PAYE and Personal Income Tax, PIT, for Q1, 2020.

As Nami’s new, uplifting tax songs at FIRS deepen; they provide crucial hope that even in the midst of COVID-19 darkness, real leadership and professionalism can light up the national journey.

Uba, a public affairs analyst, wrote from Kano 

VANGUARD

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