Despite a muted approach ahead of Nigeria’s general elections, the nation’s revenue authorities will no doubt continue with their plans to earn more revenue.
Last year witnessed a form of increased tax activism by the revenue authorities as so many events clearly demonstrated the government’s intention to widen the tax net and raise additional revenue.
In the year 2018, the Federal Inland Revenue Service (FIRS) recorded a total tax revenue collection of about N5.32 trillion. The oil component of the N5.32 trillion is N2.467trillion (46.38 percent), while the non-oil component is N2.852 trillion (53.62percent). The FIRS has a revenue target of N8 trillion for 2019.
The proposed total expenditure for the year 2019 is estimated at N8.83 trillion which is 3.22percent less than the 2018 appropriated expenditure. The Federal Government’s estimated revenue is N6.97 trillion and the estimated expenditure is N8.83trillion. This creates a budget deficit of N1.86 trillion which is a 4.9percent decrease from the 2018 budget deficit.
“Given the level of information that will become available to the FIRS, taxpayers, especially the multinational enterprises (MNEs), are likely to experience increased information/document requests from the FIRS as well as transfer pricing (TP) audits and disputes in a bid to shore up government revenue”, according to Anderson Tax analysts.
Anderson Tax had stated in their January 2019 note tilted “Nigerian tax and fiscal outlook” that although the proposed budget for the year 2019 indicates a reduction in the projected revenue and expenditure for the year, “the revenue from Companies Income Tax (CIT) and Value Added Tax (VAT) is expected to increase from the 2018 budgetary figures.”
“Thus, it would appear that the Federal Government would continue to drive increased tax compliance. It is also anticipated that the Federal Government’s strategy of increasing revenue by focusing on non-oil revenue sources will continue in 2019”.
“It is also possible that the government will introduce new items to the list of items banned from importation within the course of the year. Although this move may result in a reduction in revenue from Customs Duties as projected by the 2019 budget, it would be in line with the government’s overall objective to clamp down on importations and encourage local manufacturing”, Anderson Tax stated further.
The Federal Inland Revenue Service (FIRS) recently issued Letters of Substitution, pursuant to Section 49 of the Companies Income Tax Act (CITA) 2004 and Section 31 of the Federal Inland Revenue Service Establishment Act (FIRSEA) 2007, to banks in Nigeria, appointing them as tax collecting agents for certain listed customers (affected companies) maintaining bank accounts with such banks.
FIRS wanted Nigerian banks to seek its approval to execute transaction in the accounts of no fewer than 2,933 companies it said to have been identified for not paying taxes. Ahead of the elections, Federal Inland Revenue Service (FIRS) wrote to banks, directing them to lift the lien on tax defaulters’ bank accounts for 30 days. The directive, which takes immediate effect, was contained in a letter from the Chairman, FIRS, to bank Managing Directors.
The FIRS had explained that it issued the directive because of the large number of taxpayers, who have besieged itself offices in their bid to regularize their tax positions and the inconveniences they are going through.
“The drive to diversify government revenue via improving the efficiency of tax authorities such as the FIRS, Customs and Ports Authorities will continue”, according to Lagos-based United Capital analysts in their March 1 note titled “Outlook for the Nigerian Economy in Buhari’s 2nd Term.”
Iheanyi Nwachukwu
