FIRS initiates 7-point agenda to enhance non-oil revenue

Determined to exploit opportunities discovered in the rebased Gross Domestic Product (GDP) which has made Nigeria the leading economy in Africa, the Federal Inland Revenue Service (FIRS) has commenced initiatives aimed at enhancing revenues from taxation as a percentage of GDP and giving impetus to the diversification drive of the government.

The service, through an in-house capacity enhancement programme (CEP), is set to restructure the economy by increasing its non-oil revenue collection.

“With the intervention of the CEP, we have embarked on some key initiatives as a platform for achieving our goal. These initiatives are in the areas of audits, arrears and debt enforcement, tax exemptions, evasion (high net worth transactions and rentals), registration, filing, and improved communication as a means of enhancing compliance. We have started to implement these initiatives and are already seeing results,” said Kabir Mashi, acting executive chairman, FIRS, at the stakeholders’ forum in Lagos yesterday.

The initiative by FIRS has brought to the fore the need for government to show justification for tax collected through improvement in quality of lives of citizens.

“The revenues that are collected by government from you are a means of citizen participation in governance and your compliance with tax laws is a clear demonstration of good corporate citizenship,” Mashi said.

According to FIRS, the programme has put the organisation in a position to improve on its service delivery and also to block the leakages in tax administration, reduce audit periods and also filing and registration to the extent that citizens will be encouraged to fulfil their obligation to their country.

However, stakeholders at the engagement forum challenged government to demonstrate its responsibility to citizens through replacement of promises with real provision of amenities when demanding for tax, stressing that people go to the markets to pay in exchange for services or products.

To the stakeholders, effective collection of revenue through leveraging on viable sectors discovered in the rebased GDP by FIRS and judicious utilisation of the resources for the common good of the citizens, among others, were capable of giving credibility to diversification of the economy.

Razia Khan, analyst at Standard Chartered Bank, London, said recently that while the rebasing showed positively that the economy was vast, it also highlighted the persistence of problems relating to economic informality. 

“Existing revenue collection is simply inadequate – far lower than any frontier economy in Africa – and FIRS will need to drive much more efficient revenue collection. Its success in doing so will be key to people accepting that the Nigerian economy is indeed as large as the rebased statistics suggest. In a sense, it is key to the credibility of the rebasing,” Khan said.

Mashi, however, said that a major outcome of the 2007 reforms of the FIRS Act was the mandate for the service to collaborate with and facilitate exchange of information with relevant national and international organisations and to carry out and sustain rigorous public awareness and enlightenment campaigns on the benefits of tax compliance.

“In fulfillment of this mandate, and as part of the overall strategy of government to enhance operational efficiency, FIRS engaged the services of McKinsey & Company to provide technical assistance in implementing a capacity enhancement programme,” Mashi said.

“This capacity enhancement programme is a specific intervention to give further uplift to FIRS in its quest to become an organisation that can efficiently and proactively support the aspirations of government to make the Nigerian economy one of the largest in the world. One major area of focus in this regard is the improvement of our non-oil tax collection and other indices of measurement, where improvement is necessary, such as tax-GDP ratio and the ratio of oil to non-oil tax collection,” he said.

He added that with the intervention of the CEP, difficult areas such as enormous time wasted on audits would be reduced, while companies and individuals would be encouraged to pay tax through less cumbersome registration, as well as improved and regular communication with stakeholders.

Ngozi Okonjo-Iweala, finance minister, while acknowledging the critical role of FIRS in improving the revenue base of the government, said the rebasing exercise showed the dismal contribution of tax (12 percent) to GDP, compared to 27 in South Africa and 20 percent in Kenya, adding, “At 12 percent, we need to step up, as opportunity is the possibility due to existence of potentials.”

The minister said, however, that FIRS’ CEP was yielding good results which would take time to manifest, adding that the outcome of the rebasing exercise demonstrated that the economy was not monolithic but evolving.

“The diversification efforts of government are on course,” she said, adding that there was need to know the structure of the economy for effective tax administration so as to increase the percentage of non-oil to the GDP.

Some of the stakeholders also challenged FIRS to up the game of tax revenue as a percentage of GDP, currently at 12 percent, by increasing its tax net to the social services sector and other sectors discovered to be viable. They also charged the service to be proactive under the new dispensation by collaborating with other government agencies to tackle the issue of evasion and avoidance by eligible taxpayers.

John Omachonu