• Wednesday, May 22, 2024
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BusinessDay

RIVERS IGR: How too many hands are spoiling the broth

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BEN EGUZOZIE & IFEOMA IKEJI

Majority of the over 3000 companies registered with the Port Harcourt Chamber of Commerce, Industry, Mines and Agriculture (PHCCIMA) were strong on ground and pooling good business in a state that produces more than half of Nigeria’s then 2.1 million barrels of oil per day. By 2005, began a gradual but steady decline of the state’s internally generated revenue (IGR). Recall that, 2003 was the re-election saga in the state (same with other states of the country). The desperation probably to consolidate power, saw the state embroiled in armed gang wars. The year 2004 heightened the crises many youth groups emerged on the scene, destroying the state’s enormous business life via inter-community campaigns hundreds of people were said to have been either killed or maimed. Then, came with it the militancy the struggle for oil profit by different armed youths kidnappings, abductions of mainly expatriate oil workers later narrowed down to fellow compatriots. All this led to the beginning of outward movement and divestment of businesses from the state; particularly Port Harcourt , the capital.
The result of the divestment was a dwindling internal revenue profile. Sampler: in 2005, the state received IGR of N20.73 billion; in 2006, it slightly went up by 19.39% to N24.75 billion, and N27.48 billion or 11.03% in 2007. By 2008, the state earned N2.5 billon monthly which translates to N30 billion for the year. But as Tim Norteh said last year, during a summit on IGR; Rivers was actually experiencing a declining growth in IGR. There has been a steady decline in the percentage of the money generated, which was 32% for 2005, 9% for 2006 and 11% for 2007.

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Shoring up IGR
Aware of the state’s dwindling revenue profile, the Chibuike Amaechi administration in August last year held a summit, to specifically strategise on how to increase the state’s internally generated revenue. The outcome of the August meeting, was that the state actually had IGR the capacity of N6 billion; although it had been generating only N2.5 billion. That government would achieve it through the use of professional revenue collectors. The government bought the idea as an interesting revenue strategy. It contracted the state’s revenue generation to consultants; key among them is Skye Bank Plc. Governor Chibuike Amaechi had insisted at the contract signing that he was targeting a record IGR of N90 billion in 2009. This is a 200 per cent increase or N7.5 billion each month. He also said the bank would be made to make-up the balance each month it failed to reach the target of N7.5 billion.
The target had generated strong criticisms. Majority saw it as unrealisable, especially given the onset of the dwindling oil revenue by Nigeria. More so, the world had started experiencing an economic financial crisis. While passing the 2009 budget into law, the state House of Assembly had expressed doubts over the realization of state’s revenue target of N328 billion in the year’s budget, of which N90 billion would come from the internal sources. The Assembly speaker, Tonye Harry noted that monthly receipts from the Federation Accounts Allocation Committee (FAAC) were on the downward slide since mid-last year, no thanks to the dwindled revenue from crude oil exports from falling international market prices. Also, the activities of militants in the Niger Delta, of which Rivers State is a subset, was exacting much from the state many businesses were shrinking and divesting from the state. Oil production shut in was escalating. By last June, total shut in reached 1.3 million barrels per day.
By far, Governor Amaechi appears desperate to shore up the state’s IGR to meet with his grandiose developmental projects. Chief among the projects is his realisation of the Greater Port Harcourt (GPH) city, an ambitious expansion of the state capital, long suffering from congestion and near population explosion. The GPH initiative covers about eight local councils, and would cost the state N100 billion each year from 2009, for the next 50 years. Added to this, is an infrastructure development drive, estimated to cost over N400 billion this year.

Poor results
Half year into the new IGR strategy, the result is not record-breaking. The state has only managed to raise a little over half of N7.5 billion monthly revenue target. The check list: in January, it got N4.8 billion. February saw a drop to N3.5 billion; March went up 8.57% to N3.8 billion. Other months’ figures are not available. With a budget of N432.2 billion in 2009, the Amaechi administration had planned to utilise the record budget figure to signpost his infrastructure-driven governance. The budget is 15 percent higher than the 2008 appropriation, which was N280.08 billion.
The failure of Skye Bank Plc to deliver on the N7.5 billion monthly IGR is said to be raising fears at official quarters. Unconfirmed statements say the state government may be considering withdrawing the contract from the bank. The bank in six months has managed to recoup the highest amount of about N4.8 billion in January. After January, the packet has staggered between N3 billion and N3.5 billion. Analysts view this development as awesomely critical, as the state may register its worst budget receipts.
Some tax analysts who spoke to BusinessDay in Port Harcourt said the state has only achieved an increase of about 40% from its 2008 IGR average of N2.5 billion. To these analysts, the 2009 monthly target of N7.5 billion or 200% looks mission impossible; and should be discountenanced. But some tax experts and financial analysts spoke in support of Skye Bank. To them, the bank’s inability to rake in the huge IGR was due to the calibre of government tax operators it had to work with a bunch of inexperienced tax operators who are hardly aware of professional tax collection techniques. They were not bound by the codes of conduct of any professional body, therefore they could not be held accountable for any unprofessional conduct, said one tax expert. For Adoge Nortee, principal partner of Integrated Revenue Services Limited, the consultant who has been working for Skye Bank, better results could still be achieved if given more time. He believes that the ongoing tax reforms would sanitize the tax system in the state, as well as, sensitize the public on tax compliance. Knowledgeable financial analysts reason that, this is the wrong time to expect huge internal revenue by Rivers State. Reason: the state is passing through its worst economic performance high business divestment due to militancy, kidnappings, violence; as well as falling federal receipts due to dwindled oil revenues, and a damning global economic crisis. Would Amaechi be able to the recoup the N328 billion revenue earmarked in his 2009 budget of over N432 billion, given the national and global parlous economic situation? Is the state truly thinking other alternatives?
From the assessment of revenue experts, the Rivers State Board of Internal Revenue (SBIR) has been performing below expectation in the business of collecting internal revenues for the state. It was said that the SBIR suffers from qualified manpower deficit. With only about 10% of its staff being utilised, little result can be achieved. Many other staff are said to hardly know anything about professional tax collection. Aside this, hordes of touts and miscreants, using bogus authorisation papers parade as tax agents of the state. In their daily harassment of business people, they brandish all manner of identification cards. While their sordid business go on, the state government engages a retinue of tax professionals: lead revenue collector (Skye Bank Plc), tax consultants, special adviser to the governor on revenue generation as well as, the near autonomous job of the Board of Internal Revenue. Revenue experts pointed at these as having too many hands in preparing the broth internal revenue drive. Despite this, little comes into government coffers. Leakage is not ruled out. A reliable source knowledgeable in government affairs said the government appears desperate to make good its N328 billion revenue target for the year. The person told BusinessDay that government may be up to a desperate decision to get things move on. Their thinking is that there may be a better revenue recouping strategy; while there may be other more well-equipped firms than Skye Bank.

Poor correction measure
In its bid to enhance relevance, the SBIR under A.C. Dokubo instituted what it called Business Identification Number (BIN). The revenue believes through the BIN, a platform for effective collection of all revenue accrued to the state, would be recouped. By the BIN, the board’s staff demand for five years tax clearance on a company, before issuing it a number. It would be difficult to do business in the state without the BIN after this exercise which will end by June 30, said a statement credited to Dokubo, the SBIR’s acting chairperson.
But local tax experts have described the move as a poor correction measure. To the chapter CITN, the idea is novel in business tax system. Akanibo, Rivers CITN boss, faulted the BIN. It would not encourage voluntary compliance; rather businesses should be encouraged to obtain the BIN free; after which they could be traced through it to get their tax payment profiles, he told BusinessDay. The chapter CITN posits that, to achieve a fail-safe tax system in the state, would be for the SBIR to develop a database of companies operating in the state. This should be followed by ascertaining the tax liability of the companies. Thereafter, the firms would be audited to know their staff tax paying strength; and determine the monthly deductible taxes from the company. Only these primordial details can help SBIR to be able to get five years calculable tax from companies, said CITN. The chapter CITN also demanded the state government to be more accountable to the people by ploughing back its revenues into visible developmental projects; stressing that this would encourage voluntary tax compliance by the people. The state government was also advised by the tax professionals’ union to look critically in the area of allowing only professionals to take charge of the revenue board for desired results.
Clearly, the assessment of tax experts at the chattered institute of taxation (CITN) shows the Rivers internal revenue board BIR has so far been performing below expectation. It is astonishing that, chairmanship of the SBIR has operated in the past eight years on stand-in capacity. Clement Akanibo, chairman of the Rivers chapter of CITN told BusinessDay that, there is a visibly use of unqualified persons to achieve revenue generation. Novices were in control while professionals were made irrelevant, he said. He informed that the state’s present revenue generation system does not conform to the CITN recommendations. What we see is that, professionals are not being utilized as expected. For example, the State Board of Internal Revenue is 10 percent capacity utilized. The workers are not well trained, and that would not move the tax system forward, Akanibo stated.
The state CITN boss also said there are a variety of organs involved in the same revenue drive. The staffs of the board are clearly redundant because their functions were being usurped by other bodies, said Akanibo. The appointed revenue consultant working with Skye Bank to achieve the revenue target for the year, does both tax assessment and tax collection, among other things; and has completely usurped the duties of the board, thereby making the staff redundant. To him, this has been the root cause of under-performance in the state’s IGR. The staffs have had little or no training during the period. The CITN boss said the state government has shown poor attitude towards improving the efficiency of the SBIR. The revenue board hardly operates with modern tax collection equipment and adequate logistics.
Again, Akanibo pointed at the domesticated tax laws that were long overdue for review; and the issue of multiple taxations, of which Rivers State is particularly a case study. The CITN chapter agrees the issue has greatly discouraged businesses on tax compliance in the state. To clean-up things, the local CITN wants the full autonomy to the revenue board, citing other states like Lagos whose IGR has been very impressive due to the independence enjoyed by the its revenue board, as well as its possession of improved revenue collection facilities that have combined to help upgrade the state’s internal receipts. To fight multiple taxations in the state, and encourage tax compliance by companies operating in the state, the CITN boss informed that his organisation and the state Assembly were jointly preparing a harmonized tax system for the state, and to review the tax laws. We in CITN will also encourage the state to patronize only our members. We insist that non-members of CITN have no business in revenue generation. Such persons would only mess up things, stated Akanibo. He put it to the government that only members with CITN practicing licenses should be engaged to do tax jobs. And that only this can ensure significant improvement in the revenue generation system. He cited Lagos State, which he said does not heavily depend on external receipts to finance its.