Experts in the financial sector say state governments can significantly boost internally generated revenue if they leverage technology, especially in the tax collection process.
Thomas Ezeh, regional head for the North and Abuja business at Interswitch, an African integrated payments and digital commerce platform company, said states are still performing below capacity in terms of revenue, as there are still a lot of opportunities waiting to be harnessed. He stressed that technology is key, if states must make any meaningful progress.
Ezeh said this at an Engagement Forum with State Revenue Boards -Northern Region with the theme “Staying Ahead of the Revenue Growth Curve Using Technology ” organised by Interswitch in Abuja.
The regional head explained that the engagement is to discuss the challenges and opportunities within states and help them develop. He also shared data of how technology was deployed in a space and revenue generated grew from N3 million to about N100 million monthly.
“We consider the states as our partners. One of our major activities in the state is to help them collect their revenue, so we work with the Internal Revenue Service of various states. We felt it is a good time to call them together, discuss, share thoughts and other information we have with them. If you look at the Nigeria Bureau of Statistics data, you’ll realise that there are a lot of opportunities in the North. We are certain that the opportunities will be harnessed as we move in on our engagement,” he said.
“Technology is key; if we recall what happened during COVID-19, If not for technology, some of us will not even survive. Some states, companies prepared themselves for that; through technology, they were able to outperform others that were not prepared,” he added.
Kenneth Erikume, partner/director, Tax Reporting & Strategy, PwC expressed concerns that Nigeria’s tax to GDP is still very low, averaging at 6 percent. He however disclosed that Nigeria has the capacity to generate 20 percent of GDP.
Erikume said tax revenue is low because Nigeria has some structural problems, one of which is fiscal structure. According to him, “In other nations, the easy tax is collected by sub-nationals and the difficult tax is collected by the central government. It is the reverse in Nigeria; the difficult taxes are actually collected by the sub-national, while the Federal Inland Revenue Service (FIRS) collect taxes from corporates. It is easier to collect taxes from corporates than go after individuals to collect taxes. State tax authorities do not have the same capacity to administer taxes as well as the FIRS.”
He also disclosed that revenue from Personal Income Tax (PIT), Pay As You Earn (PAYE), and consumption tax remain largely untapped in states, while state revenue growth curve continues to lag behind Nigeria’s growth curve.
To this end, he urged states to: automate collection and assessment of PAYE, and introduce presumptive tax for informal sector; Implement online platform for self assessment/direct assessment process and automate internal process to increase efficiency; centralise all revenue collection process, among others.
On how tax authorities can leverage technology internally, the expert advice authorities to: integrate tax data base with existing database management system; enhance tax audit and verification system; use data analytics and information management system, among others.
He disclosed improved tax payers education is also key. According to him, technology can be deployed through platforms such as mobile and web apps to educate tax payers and help them self-report.
Osasere Atohengbe, group head, government at Interswitch further stressed that deploying technology will block leakages brings visibility to government business, brings analytics and intelligent decision making to the things that government needs to do. “So we cannot rule out the role of technology,” he stressed.
Atohengbe disclosed that some of the challenges faced in leveraging technology borders around funding, political will and data collection. “It is cost intensive, there is a lot that needs to be done to get data, because technology also leverages data to work,” he said.
“Will power is needed from the top to enable the state fully understand the benefits. It is a key factor, if the buy in of the state is not there, no matter how much you put technology, you won’t get the needed benefits. Also, those who are benefiting from the lack of technology today are also people who will typically challenge the system and also fight against it. But again, once the will power is there, and the funding is available, the state begins to reap what comes with technology,” he further said.
Speaking on Interswitch’s intervention, the group head said the company, has in the last 10 years helped the FIRS automate and over 30 states automate their services they provide, bringing visibility and transparency, and helping them to block leakages.
“So we are here again to take it a notch higher, where beyond blocking those leakages, we can help the state fully optimise the potentials that exist within them. We are trying to show the states areas where they can easily leverage upon to increase their revenue base,” he added.