FIRS attributes tax revenue losses to fragmented tax agencies

Federal Inland Revenue Service (FIRS) Executive Chairman Muhammad Nami blamed fragmented tax systems and agencies as the number one cause of lost tax revenue for the country.

Nami revealed this during the Senate Public and Stakeholder Hearing on the 2023 Medium Term Expenditure Framework (MTEF) and Budget Document, in Abuja.

According to him, Nigeria has revenue authorities in its 774 local governments, with each of the 36 states having revenue authorities with their respective mandates in addition to FIRS and customs departments.

“What I would advise for efficiency and to do things according to global best practice is that we should change our tax laws to harmonize the tax agencies and the tax system.

“With this, when the FIRS, for example, visits ‘Company A’, it can provide a valuation to the company, as well as the person who owns the company; he can also ask the company to account for the VAT it has collected, and request the PAYE it has deducted from its employees as well as the Personal Income Tax of the Promoters of the Company.

“That is currently not the case, and as such it has created a huge void in our tax system,” he said.

Speaking further, Nami hailed the passing of the highway infrastructure tax credit program, which he described as one of the biggest innovations of the federal government in its resolve to tackle the infrastructure deficit of the Nigeria.

The program provides public-private partnership intervention in the construction, rehabilitation and maintenance of critical road infrastructure in the country, with participants entitled to tax credits against their future corporate income tax.

“I think one of the biggest innovations of the current government is Executive Order 007, which was enacted in 2019. I mean the one we are dealing with jointly with the NNPC. The NNPC, through its subsidiary, for example, is investing in approximately 1,824 kilometers of roads across the 6 geopolitical zones of Nigeria.

“Some of these roads had been built as early as 1976. I remember when I was still finishing my primary education, the road that leads from Suleja to Lapai-Agaie-Bida was built by a company called DTV. no significant work done on this road 40 years later, only until now when NNPC uses Executive Order 007 to rebuild the road.

“I can authoritatively report to the chairman and members of this committee that from December 2021 to July this year, the contractor has completed the reconstruction of well over 50% of this road.

According to Nami, financing has remained the challenge of road construction in Nigeria, stating that with Executive Order 007, NNPC is now providing funds for some major road projects across the country.

Supporting the position of the Executive Chairman of the FIRS, the Minister of Finance, Budget and National Planning, Hajia Zainab Shamsuna Ahmed further explained that the tax credit was granted to the beneficiaries only after the completion of the construction work, and not before.

She noted that several companies have shown interest in building and rehabilitating roads under the program across the country, adding that while some of these companies have started the works, others have yet to do so. as they were still finalizing some of the documentation requirements such as bills of quantities.

The Senate Finance Committee, led by Senator Solomon Adeola, has tasked the federal government, through the Department of Finance and members of the government’s economic team, to explore new strategies that would bolster government revenue including the restructuring of the remittance formula for government-owned businesses (Surrend).

The Committee urged the federal government to consider a situation where government-owned enterprises (GOEs) pay 100% of their revenues to the government, while being funded by a specified percentage of the cost of collection, as is the case with the FIRS and customs.

Arguing from this, the Committee objected to the current situation where some government agencies were withholding one hundred percent of their revenues, spending them and paying the government’s operating surplus.

The Committee recommended that these GOEs retain only 5-15% of their cost of collection from the revenue generated to cover their salaries, operating expenses and capital expenditures, as Nigeria Customs and FIRS currently do, while remitting the difference of 85%. at 95% of their gross income, unlike the current practice of operating surplus where they spend between 70 and 90% of their gross income.

The Committee noted that it also has the ability to motivate them to make more efforts to improve their income from FIRS and Customs.

The Committee further urged the federal government to apply the same logic to the operation of public universities by funding only research and infrastructure needs through the school tax already administered by FIRS, while allowing vice- chancellors to use the school’s income. fees and other innovative sources of revenue to run universities.

Sallie R. Loera