When the Federal Capital Territory Internal Revenue Service (FCT-IRS) took over tax administration in the nation’s capital in 2017, the highest amount collected was about N48billion, but available records show that the city has the capacity to generate a steady annual tax income of N400billion.
A significant chunk of individuals and corporate entities operating in the nation’s capital evade tax; this consequently denies government the much needed revenue to provide basic infrastructure that will improve the quality of lives of citizens.
Over 90 percent of FCT residents registered for tax do not file their tax returns; meaning only 10 percent of the registered Taxpayers file their tax returns, according to data from the FCT-IRS.
But paying tax is a civic responsibility of individuals and organisations. Leading world economic organisations, economy experts and stakeholders have stressed that taxes are the sustainable source of financing. It is also noteworthy that most developed countries have effective tax administration and compliance.
The FCT IRS was established to streamline and better manage the activities of revenue-generating bodies within the nation’s capital. The federal government enacted the FCT-IRS Service Act, 2015 which establishes the Service. Prior to its establishment, the responsibility of assessing and collecting taxes in the FCT was vested with the Federal Inland Revenue Service (FIRS).
The First Schedule to the new Act listed the legislation to be administered by the FCT IRS to include the Personal Income Tax Act, Capital Gains Tax Act, Stamp Duties Act, Federal Capital Property Tax Regulations and all enactments or laws imposing taxes and levies within the FCT.
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Upon establishment, the service began developing and deploying strategies to ensure tax compliance by residents, and boost the revenue of government especially amid the dwindling revenue. The federal government has repeatedly highlighted its revenue problems which have compelled it to keep borrowing.
Nigeria’s debt stock rose to N41.6 trillion in the first quarter of 2022 and there are projections that it could peak at N45trillion by the end of the year. The minister of Finance, Budget and National Planning, Zainab Ahmed recently disclosed that about 119 percent of the country’s revenue was spent on debt servicing.
Also, oil is the largest revenue for government, but Nigeria has not been benefitting from the rising oil prices due to low production. Furthermore, data from the FIRS show that the Nigeria tax to GDP averaged at 6 percent in recent years, but the world bank recommends 15 percent tax to GDP ratio as a key ingredient for economic growth and ultimately poverty reduction.
The Economist Intelligence Unit recently warned that if the country fails to optimise its tax system, and focus on other areas to boost its revenue, the already low revenue would continue to drop.
The FCT-IRS has however made some strides which has attracted commendation from stakeholders. In 2021, the Service exceeded the highest collected tax of N48 billion to over N100 billion with an additional N26 billion in recoveries of unremitted With-holding Taxes (WHT). The Service is also positioning itself to raise the revenue to 200 billion in 2022.
Moreover, the FCT-IRS has raised the figure of Tax Identification Number (TIN) issued from about 10,000 which it inherited TINs to over 1,200,000 million and routinely reminds registered Taxpayers to fulfil their civic responsibility of filing their tax returns as required by the law.
The Service leveraged existing biometric identity organizations to identify and issue TIN without putting residents through the rigors of coming to the tax offices for biometric data capture to issue TINs. Furthermore, the Service introduced the Key Account Managers (KAM) who follow up with taxpayers on one-on-one basis.
The Service is also deploying Information Technology (IT) solutions for the automation of taxpayer services, tax management, and administration processes to achieve a full-blown digital system.
It developed a self-service portal for taxpayers to generate, validate and verify TIN via USSD, mobile applications, and the web in addition to filing tax returns. This has lessened the burden of going to tax offices and reduced human error and processing timelines.
The Service integrated and adopted the Joint Tax Board (JTB) TIN for all her taxpayers to ensure uniformity of standards. Furthermore, to simplify the revenue remittance process, the payment gateway enjoyed by taxpayers is the REMITA platform which allows seamless inflow.
Despite some success achieved, the service is not relaxing; it strives to map out more strategies for tax evaders. To this effect, the Service hosted a one-day seminar designed to identify new ways to boost tax collection. The seminar which was themed “Reviving the Culture of Filing Tax Returns”, was held in Abuja in July. It has in attendance all critical stakeholders.
At the seminar, Haruna Abdullahi, acting executive chairman, FCT-IRS reiterated that the Services’ ability to collect taxes is central to improving the quality of life of the citizens in terms of social services such as health and education, critical infrastructures like electricity, good roads, and other public goods to facilitate the growth and development of the FCT, making it the most enviable city in Africa
“This year we intend to increase our collection to N150 billion and are in good stead to recover some unremitted taxes and levies taking us to a targeted collection figure of N200 billion,” he said.
He added that the Service can easily provide a steady annual tax income of N300 billion to N400 billion. “We are hopeful that this seminar would address the issue of low tax compliance among the residents since the most sustainable source of public finance remains taxes and levies,” the executive chairman said.
“We are not relenting in our efforts in creating an institutional framework for stability to improve collections at this stage of our journey and beyond.
We will capitalise on ‘quick-wins’ that will make tax administrations more effective in addressing our current pressing needs while seeking lasting solutions that will result in the desired outcome of achieving voluntary compliance and increased revenue collection,” he further said.
The executive chairman decried that residents of the city file and pay taxes largely when they want to transact business with the authorities. Available records from the Service show that most active taxpayers in the country were people under the Pay As You Earn (PAYE) scheme. About 120,000 are under the scheme with half the figure comprising staff of Federal Government Ministries, Departments and Agencies (MDAs) on the IPPIS platform and those working for the FCTA and the Area Councils, according to a data from the FCT-IRS.
But the average number of Taxpayers outside those remitting through the PAYE scheme has remained in the region of 4,000 with a significant percentage of stop filers.
The Service also observed with concern the unethical conduct of some Tax Advisors who routinely encourage Tax Agents to doctor records or flatly refuse to make available documents that are needed to arrive at a fair assessment of taxes due.
The Service decried the worrying trend of engagement of unprofessional consultants by Taxpayers to prepare and file returns with seemingly very wealthy individuals being encouraged to file ridiculously low annual income of N1m to N2m.
Muhammed Bello, minister of FCT, described the move by the FCT-IRS as apt, especially in the face of the dwindling allocations from the federation account. The minister who was represented by Agboola Dabiri, secretary, Economic Planning, Revenue Generation and Public Private Partnership (PPP)expressed concern over the number of residents who pay tax in the nation’s capital.
“It is worrisome that only 10 percent of registered residents of the FCT are contributing to the maintenance and development of the Territory by paying their taxes. This needs to change, both for fairness and entrenchment of the rule of law. We must begin to treat tax evasion as the crime that it is,” the minister said.
“We must understand that taxation is not just a means of providing funds for services and infrastructure, it is also a means for the high earners to contribute for the upliftment of the quality of life of the low earners,” he stressed.
Mark Abani, lead faculty, Superskills Nigeria Ltd, in his paper presentation titled ‘Beyond Enforcement: Strategies for Encouraging Compliance,’ shared strategies which the FCT-IRS can use to encourage voluntary compliance.
According to him, some of the reasons people evade tax is lack of trust in tax authorities or the lack of trust in government not to misuse the revenue from the tax.
Ngozika Jipreze, director, legal services FCT-IRS, noted that non-compliance to tax obligation was inevitable due to ignorance, carelessness, recklessness or deliberate evasion. She said the Service has therefore, embarked on enlightenment campaign to educate the public on their civic responsibility of paying tax.
Jipreze added that the Service, in line with section 38 of the Act, plans to corporate with security agencies such as the Nigeria police force, the department of state security services, the Nigeria security and civil defence corporation ensure compliance of tax payers.
Just recently, the FCT-IRS partnered the Nigerian Financial Intelligence Unit to ensure tax compliance by residents.
