The Federal Government yesterday banned tax consultants from assessing and collecting tax revenue on its behalf. Acting Chairman of the Federal Inland Revenue Service (FIRS), Mr. Babatunde Fowler, at a meeting with members of the Joint Tax Board (JTB) in Abuja, said the decision was taken to enthrone transparency in tax collection. Fowler said tax consultants would be restricted to gathering of data for the agency. He said it was a breach of law to engage tax consultants in tax revenue collection.
“FIRS has 1,000 staff in audit function so, you can imagine 1,000 staff trying to review or audit the books of 450,000 companies; it just won’t work. To improve the levels of transparency and accountability, these consultants will only gather data, the law does not allow them to do assessment or collect revenue on behalf of government, they’re just to assist our staff to collect data,” he said.
Fowler said the FIRS would execute the assessment with the state boards of internal revenue and issue the demand notices to companies for the tax due. Besides, he said some state members of the JTB had complained on the involvement of consultants in tax matters.
“Many consultants come to make huge claims so that they can get huge commissions, but they don’t have the capacity to actually collect the huge revenue they claim to have collected in some states,” he added.
To break the barriers associated with tax compliance, Fowler said he would consolidate on achievements of his predecessors and promised to reach out to state internal revenue boards for collaboration.
He said: “There are many stones left unturned as far as our current tax administration processes are concerned. For example it is a common knowledge that administration of VAT is greatly hindered by many factors, ranging from inadequate coverage of VAT-able persons to non-remittances of VAT deductions, tax revenue loss in this aspect can only be imagined.”
On how he intends to administer FIRS to meet and surpass its target, Fowler said his “strategy is going to change a bit. Our objective is to have 99.9 per cent level of compliance – meaning that everyone and corporate entities that are taxable are captured in the tax net and pay the appropriate tax.
“We will exchange information with state boards of internal revenue so that we have all the information on their own database. We’ve given them ours already, meaning that if there is any company that they don’t have in their database, they can capture such company. So, immediately we will have a growth in the number of taxpayers at both the federal and state levels within one week.”
Besides, he said the FIRS had to identify and locate taxpayers through sharing and exchange of information as much as possible; conduct joint audit exercises by FIRS and SBIRs; carry out joint tax enlightenment and enforcement exercises; sharing and exchange of information concerning unremitted taxes identified by either side.
Also, FIRS has to embark on joint training programmes and workshop and strengthen collaboration on areas of review and amendments of tax laws and legislations from time to time.
But Fowler was reluctant to put a figure on volume of revenue FIRS could generate under his watch. He said: “In terms of percentages and the information given by FIRS, they did say that they have 450,000 corporate organisations, out of which onethird were paying.
We intend to make sure that 99.9 per cent pay taxes due, in terms of what figure that will be, I don’t know; but if we are to assume that they are small to medium-scale companies, maybe we can begin to say 50 per cent growth within the next 12 months. “Collation and analysis of Internally Generated Revenue (IGR) of states from 2010 to 2014 is being carried out.
The importance of this exercise cannot be over emphasised as it would enable us compute non-oil revenue ratio/ GDP. As at Thursday, 10th September, 2015, we have received IGR figures up to December, 2014 from all the states.”
He also called for the deferment of the proposed increase in the Value Added Tax (VAT) rate from five per cent to 10 per cent, stressing that it would make sense to raise VAT when the country achieves 99 per cent tax payment. Fowler’s statement of the bid to double the VAT rate, contradicted that of his predecessor, Mr. Sunday Ogungbesan, who had told reporters in Lagos a month ago that Nigeria would double the VAT rate to 10 per cent this year to help shore up government revenue eroded by the declining price of oil. Nigeria depends on crude exports for about 70 per cent of government revenue and more than 90 per cent of foreign exchange earnings.
The price of Brent crude has dropped by more than half since peaking in June last year, undermining President Muhammadu Buhari’s ability to deliver on his election promises since he took office in May.
Fowler said: “The current 5 per cent VAT is too low. When you consider other countries that charged VAT both in West Africa and in Europe, these countries have reached what I will call the maximum level when it comes to paying taxes or public tax.
Those countries have 99 per cent tax compliance; so, I think we should first of all get there before we consider increasing VAT. When everyone is paying their taxes, then we can look elsewhere.”
He, however, said it was the responsibility of the Federal Government and the Federal Ministry of Finance to decide whether the VAT rate would change. According to him, the JTB secretariat is also monitoring Pay As You Earn (PAYE) payments at the Nigeria Electricity Liability Management Commission, adding that the process is paying off. “More states are being listed for payment as soon as funds are released for the purpose.
The commission is considering installment payments to the states on the outstanding list. Enugu State just benefited from this arrangement by receiving half payment of its total entitlements from NELMCO. Sometimes we give taxpayers that opportunity to make installment payments, especially when it is a government agency because a government agency is run through budget and, of course, you have to have cash to back up those payments.” he said.
