Experts List Ways To Rev Up National Revenue
Aside observed economic challenges, the failing strategies deployed by the Federal Inland Revenue Service (FIRS) in the collection of tax revenue is leaving billions of naira out of government coffers, thereby shorting the country’s revenue budgets.
Furthermore, other revenue generating agencies like ministries of Finance; Industry, Trade and Investments, as well as that of Budget and National Planning are increasingly tardy with reports of financial dealings, remittances of revenue, and avoidance of accountability.
The nation’s tax authorities should, however, learn not to overstate facts, as it appears that tax expectations are not actually based on agreed liabilities, but estimated liabilities, which create false hopes and mostly result in disputes with associated costs to government.
Meanwhile, tax and financial experts have proffered ways of ending the ongoing financial malfeasance, loss of revenue through leakages, lack of proper financial reporting and how to increase collections and remittances.
The latest report of the Auditor-General of the Federation (AuGF), Anthony Ayine, which pointed out several infractions amounting to hundreds of billions, also spotted eight major ones in the Ministry of Budget and National Planning; 11 in the Ministry of Finance; four in the Ministry of Trade and Investment, and huge uncollected tax revenues by FIRS, all of which amounted to hundreds of billions of naira and creating dire fiscal crisis.
The report also deplored the level of financial recklessness perpetrated by several government agencies, citing many violations of fiscal laws that have imprisonment and refunds as penalty.
“As at April 2018, 109 agencies have not submitted financial reports beyond 2013, 76 agencies last submitted for the 2010 financial year, while 65 agencies have never submitted any account since inception,” the report said.
In the Ministry of Budget and National Planning, N36.75m advances granted to some officers of the ministry were still not retired as at March 2017, with most of them granted amounts up to N4m and multiple advances without retiring the previous outstanding.
“The above development is a contravention of extant regulations, which stipulates that advances in excess of N200, 000 should not be granted to any officer and that all procurement of stores and services costing above N200, 000 shall only be made through the award of contract by Local Purchase Orders (LPO), or Job Orders.
“Non-compliance with this extant rule deprived government of revenue that would have been generated from VAT and WHT if contracts were awarded,” he said.
About 42 payment vouchers with amounts totalling N30.93 million were raised and payments effected to members of staff and contractors for various services without relevant supporting documents, contrary to Financial Regulation 603(i).
At the Budget Office of the Federation, about N4.96 billion was made available to the Budget Office of the Federation for Special Purpose Vehicle (SPV) Fund, however there were no records maintained for the receipt and disbursement of this huge amount.
“Accounting books such as Vote books and Cashbooks were not maintained. Payment vouchers were not even raised while making payments. The only information available was the memo to the Director of Expenditure requesting for the release of the amount from the schedule officer stating that a committee had been set up for the management of the fund.
“This act contravenes Financial Regulations 405 and 406 which require the sub- accounting officer of the benefiting MDA to maintain an appropriate record and ensure that the amount on the AIE is not exceeded,” he said.
Also, four MDAs were paid the sum of N19.09 billion from the Service Wide Vote without the approval of the Minister of Finance, some of which were made on a purported verbal directive from the Director- General, contravening the Financial Regulations 301 and 302 which state that “recurrent expenditure is paid from the Consolidated Revenue Fund and no expenditure may be incurred except on the authority of a warrant issued by the Minister of Finance”.
Among the 11 major infractions of the Ministry of Finance include the N48 million paid through a payment voucher dated October 12, 2016, to Federation Accounts Allocations Committee (FAAC) Post Mortem Treasury Single Account(TSA) account being payment for re-appointment of Consultants to the Post Mortem Sub-committee of FAAC.
The payment for the consultants was made to a Sub-committee of FAAC and not directly to the Consultants, while the identity of the Consultants was not disclosed and there was no evidence that due process was followed in the engagement of the Consultants.
Furthermore, the mandatory 10 per cent Withholding Tax and five per cent Value Added Tax (VAT) worth N7.2 million was not deducted from the payment made to the four Consultants, contrary to VAT Act No. 102 of 1993 and Financial Regulation 234, which says failure to comply would result in sanctions, including fines and/or imprisonment.
At the Ministry of Trade and Investment, 13 payment vouchers with amounts totalling N60.39 million were raised for payment of estacode and air tickets to members of staff of the Ministry.
However, all the payment vouchers, which were raised after the journeys had been embarked upon were without relevant supporting documents, as required by Financial Regulation 603, while all the efforts to get the supporting documents did not yield result.
The Partner/Head of Tax and Corporate Advisory Services at PwC Nigeria, Taiwo Oyedele, called for fiscal transparency, as there is no way development can be achieved the globally acknowledged high level distrust for government with tax revenue, which now is inducing tax evasion and avoidance.
“With such a high level of apathy towards tax, it is impossible to move the needle on revenue generation. Government at all levels must urgently start taking steps to address fiscal transparency issues to build the much-needed trust in the system.
“This trend, unfortunately sends the wrong signal about tone from the top, which further dampens citizens’ tax morale. The vast majority of citizens and Nigerian businesses are unwilling to voluntarily comply with their tax obligations majorly due to lack of transparency and non-commensurate social services.
“This is a key factor responsible for Nigeria’s low tax to Gross Domestic Product (GDP) ratio. Addressing the problem could easily raise the country’s tax revenue by over 100 per cent from the current six per cent to at least 12 per cent of GDP,” he said.
Unfortunately, FIRS appears to be failing in many fronts in terms of depth and financial value, as the auditor’s report chronicled huge numbers of uncollected tax obligations worth several billions of Naira and distorting the country’s revenue projections.
The agency’s sectoral segments, according to the report, have hundreds of companies owing taxes across Pay As You Earn, Withholding Tax, Company Income Tax and VAT remittances, ranging from a low of N5million to as high as N10 billion by group of companies.
At the Medium and Small Tax Office (MSTO), Area 11, Garki, Abuja, 37 companies owed different taxes totaling N139.19 million, including CIT as at 31st December 2016, VAT and Education Tax.
At the Individual and Enterprises Income Tax Office, Asokoro, arrears of taxes amounting to N103.7 million were owed by eight companies as at 31st December 2016, while the same office in Wuse recorded tax debt worth N402.97 million by seven companies, as arrears of PAYE in the same period.
At FIRS Large Tax Office, Wuse Zone 5, Abuja, about N9.7billion was owed by 42 companies for arrears of CIT, Education Tax and Withholding Tax, while the Government Business Tax Office at Wuse Zone 5, had N2.7 billion was also outstanding as arrears of VAT and WHT.
A Fellow of the Chartered Institute of Taxation of Nigeria, Dr. Titilayo Eni-tan Fowokan, lamented that other tax avenue for government like the much-touted luxury tax was suspended, while no one is sure are not sure if the new Minister of Finance will resuscitate the tax considering that there were plans to amend the tax laws and revisit the issue of luxury tax before the end of last administration.
She advised that government should intensify efforts in monitoring the TSA framework, which seems to have helped in blocking some revenue leakages, while FIRS should ensure that taxes expected are actually based on agreed liabilities and not estimated liabilities.
“The question we should first ask ourselves is that are those tax debts actually debts owed the FIRS or arbitrary amounts assessed on tax payers which are either in dispute or estimated. With the recent collection and recovery method adopted, the FIRS may even be making tax payers to pay taxes not actually due most especially for tax payers whose accounts are under lien and have little or know knowledge about how tax is determined.
“If the FIRS encourages voluntary tax compliance and improve on its taxpayers services approach, there is tendency to collect more and minimise the level of Tax debts. Creation of a Tax Payer friendly environment and adopting a business partner approach to tax collection will also help in managing the tax debt level,” she said.
Speaking on the non-transparency of public sector accounting, she added: “This attitude amounts to lack of integrity and accountability on the part of the officials. The Ministry of Finance should ensure there is compliance with the financial regulations on expenditure and advances through enforcing accountability via the Accountant General and Auditor Generals Offices. Sanctions should be in place for any personnel that breach the controls.