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We are confident on sustaining Edo’s IGR growth, tax reforms – IRS chair

We are confident on sustaining Edo’s IGR growth, tax reforms – IRS chair

John Osagie Inegbedion is the chairman of Edo State Internal Revenue Services (EIRS). Inegbedion, in this interview, spoke with Churchill Okoro on the state’s performance in the first quarter of 2023, projected annual revenue, ongoing tax reforms, and impacts of the proposed subsidy removal among other issues. Excerpts:

What has been the performance of Edo state’s revenue since you assumed office in 2021?
Upon my assumption of office in September 2021, the revenue for the previous month, which was August, was N1.9bn. However, the average collection within the period was about N2.5bn. And, so, it was now a task to improve and better revenue collection for the state. My background is accounting, and having worked as a banker and commissioner for finance in the state, it’s a space and an environment that I am a bit familiar with. So, I had to approach the operations here from a different perspective from what it used to be.

One of the major strategies that I had to come up with in dealing with or in trying to improve and reform the operations here was seeing the tax administration more like a banking operation. Wherein, you are a bank and you clearly know that banks do deposit drive and loan administration. We needed to be easily accessible by the taxpayers.
It, therefore, means that we need to be closer to the taxpayers, unlike in the past where we just had few branches and every taxpayer in the 18 local government areas will go looking for a tax man to pay to. Clearly, the convenience of payment was also a challenge. We decided to break the state into zones and branches. We currently have about 12 zones in the state and 56 branches. So, in the 18 local government areas, you have 56 branches, majorly in Edo south, which is the largest economic hub of the state.

Our biggest tax operation is in Oredo council, it is the seat of power, the seat of governance and it’s also the most economically active area. Generally, we have considered Oredo, Ikpoba Okha and Egor as the economic hubs of the states. These three local governments are the urban and most active economically.

Edo is centrally and strategically placed across the nation. Refineries are coming up in the state. This is the beginning of a new economic revolution

There are more than 50 percent of our branches located within these three local government areas. We needed to also get data. So, we had data of the various economic activities in the states, segmented into both formal and informal. We also give them Tax Identification Numbers (TIN), to access their records on the system. We are also able to track and follow up on them, and also keep them abreast of their tax obligations to the state.

What was the state’s revenue for the first quarter of 2023 and what is your target for the rest of this year?
The target for the full year budget is N60 billion. For last year, the budget was N54bn and we achieved a total of N45 billion. While in 2021, the total collection was N38bn. So there was a growth of N7billion between 2022 and 2021. For this year, we’re expected to do N60 billion, which will mean an additional N15 billion to the N45bn of 2022. So, it’s quite a huge leap but we’re doing our best. We will improve on the previous years. If we do not hit it, we will still do something significant.

For the first quarter, in the first month, January, we did N4 billion, in the second month, February, we did N5bn. And for the month of March, we did N3.6 bn. We set our new benchmark at a minimum of N3.5bn. In some months, it will exceed based on the activity level, especially those seasonal taxes that come in yearly. There are some taxes that are seasonal, they come once in a year and some are monthly.

We’ll put our eyes on the ball to ensure that we push the numbers and try to achieve our set targets.
I also need to make this point that the Board of Internal Revenue has its own tax administration proper. So, for Edo Internal Revenue Service (EIRS) in particular, we have those tax collections we administer. Last year, we achieved 97% of our budget. And the previous year, which was 2021, we achieved about 85%. So last year’s performance was far better than the previous year. For this year, we hope to achieve about the same score from last year. We’ve reformed, and we have seen the outcome of our reforms. And it is already showing in the numbers, we’re not going back, we’ll continue to do so every month so that at the end of the year, we hope to be very close to the target of N60bn.

As we begin to deploy more technology and get the people more aware of tax and their tax responsibilities as well, the economy is expected to have something significant. Tax is a function of economic activity; it is based on economic activity, while levies are charged for services rendered by the government. Whereas fines are charges for defaults or failure to have carried out a government process or infringement. So, they’re usually a kind of punishment for not complying with laid down rules. But the major revenue earner for the government is taxes such as personal income tax among others.

In that regard, we are expecting that when the subsidy is removed, there’ll be some economic distortions. And so, not knowing how the economy would fully respond, it will have some impact on tax administration. As long as the economic activity will be affected, the revenue will also be affected. So, it is in our best interest that the economy grows, people get employed and are engaged in economic activities.

We are lucky to have a governor who is pro-business in this space. We are trying to create a port and people do not understand what that means. All over the world, any state having an active port has huge economic activity because commerce around the port is a major economic booster. Edo is centrally and strategically placed across the nation. Refineries are coming up in the state. This is the beginning of a new economic revolution. These are the things the Governor Godwin Obaseki has planted. Obviously, he has planted prosperity for Edo State.

The taxes are not going to come from the unemployed. So, if you do not create the economic activity that will get people engaged, if you do not attract businesses that will employ people, then you cannot grow your tax. We are fortunate to have a governor who has seen the future and invested in them and so I can tell you comfortably that our tax base will continue to grow.

Read also: How incoming government can curb economic, financial crisis — Oxfam

Is Edo following the same path as other states in terms of rising revenues?
In 2021, we moved from 14th position to 8th in the country. We maintained it even for last year, 2022. We are in the top ten, staying in 8th position for two years consecutively. We only have the big boys like Lagos among others ahead of us. Among our peers, in terms of GDP size, we are far ahead. We are actually punching above our weight when compared to states of our size. It is all about the economic activity as well as the efficiency of collections.

What opportunities are you exploring to drive the state’s revenue or shore up shortfalls?
We are exploring the informal sector. Quite a number of people within the tax brackets are those in the formal sector. And, interestingly, they represent less than 10 percent of the entire population. It is estimated that taxable adults in Edo should be about 1million. About 800,000 are in the informal sector and their income taxes are not commensurate. In the formal sector, we do about N17bn while in the informal sector we do about N2.1bn. So, part of our strategy is that people should pay a fair share of what they ought to. There is a lot of tax avoidance and evasion in that segment. We will be more engaging to get them to pay this time around. More so, our property tax is not where it ought to be. Quite a large number of people in Edo state do not pay property tax. We have deployed enough resources to it and we expect we will get the reward that will grow it substantially.

In terms of shortfall, it is more willingness and our people’s attitude to tax matters. Over the years, not just in Edo, but across the country, tax payments or tax administration has been at a very low ebb. But today, across the country, everybody is realizing that the oil that used to sustain us can no longer be relied on. So the populace, the citizenry must participate and have their role and say in governance. Their role is that they make their payments in terms of taxes, which is the obligation to the state and they hold the state accountable for good governance. That’s what has happened in advanced countries because they pay their appropriate taxes and hold the government officials accountable.

How does the Edo Revenue Administration Service (ERAS) implement tax digitalization?
We invested heavily in technology, because this level of tax administration cannot be done without technology. So, we created an internal revenue system, which is called the Edo State Revenue Administration System (ERAS). This system, not only stores, but analyses and processes all our tax administration. Every taxpayer that has been identified has a unique number and record on the system. So, we can call your records in the last four years and show you your tax remittances. All payments and settlements of taxes are linked, whether to the bank; through E-payments or any medium of payment. However, we are improving on it, creating platforms for self-service; such that at the convenience of your office or home or wherever you are, you can make your tax payments with ease without necessarily coming to any physical office.

All these initiatives and processes have eased tax administration as well as tax collection. And it has shown in the numbers. More so, we also came up with the concepts, where every month, we call all the branches and have a review, which is called Monthly Performance Review (MPR) and the quarterly performance review. Like I said earlier, we modelled it, just like the banking sector and system. So, for everyone that is pushing in the tax administration and delivering on their numbers, we also have a system of reward for them. But we’re not seeing it only from the aspect of just revenue connection and administration, it is also a way of communicating with the people for them to understand what their tax obligations to the state are. As we branched out and had more branches, some persons that were into businesses or economic activity did not even know that certain economic activities that were carried out had tax implications and as such, there was ignorance. So, we had to do a lot of education to make them understand. Some of these businesses are small-scale businesses, but with our new initiative and constant engagement with them and the branches closest to them, they’ve been well informed. So, that is also improving the numbers.

We also had to engage with the big corporate entities and review their operations and had a talk with them that they are remitting their taxes but after the reviews, it shows that they are not remitting appropriately. So, we had to work on that and get them to comply fully, and a lot of them now are doing so.

There were some people that were completely out of the tax brackets, they were not just involved, either because of their location, or the fact that somehow no one engaged them. So, they were completely out of the tax bracket and were not making any tax obligations to the state. We have engaged them now, quite a number have also come on to the tax net, and they are paying their appropriate taxes.

We’ve also applied more courteous and professional dealings with taxpayers. Even when you have been assessed, you have a right of complaint. Should you feel unfairly assessed, our officers will come to you. We know a lot of people, I mean, a lot of our small-scale businesses that do not have appropriate records. When the tax officers come in to assess or give you an assessment that you deem is not okay, we encourage our taxpayers to write a letter of complaint, because by law, you are allowed to complain that you have been over assessed. But the caveat is that you must prove that what you have been assessed is not the proper income and show us your true income. As a matter of law, I will not allow anyone to be charged more than the tax they ought to pay. So, we’ve also created that window, and we have what we call a Tax Assessment Review Committee that will now look at such complaints and review it and resolve any complaints regarding assessment so that you don’t give room for abuses that people are being over taxed.

The issue of multiple taxation has been on for some time, how are you proffering solutions to this problem?
Another controversy that has always played out, which I hear often, is the issue of double taxation. The law clearly specifies on the taxes that states can collect and it also specifies the taxes local governments can collect. For us as a state, and because of our professionalism and the level of investment we have put both in Information Technology and training of our staff, we don’t engage in anything called double taxation.

A typical taxpayer gets confused when they are being sent different tax bills from various tax heads. Those taxes are legal, mind you. However, you get from the state government, you get from the local government, so that volume hitting one person, most times, puts them off. So as a government, and as part of the joint tax board reform on tax matters, we are harmonizing taxes. We’ve gone into a lot of harmonization of taxes. One of which is the land use charge.

Taxes are not going to come from the unemployed. So, if you do not create the economic activity that will get people engaged, if you do not attract businesses that will employ people, then you cannot grow your tax

There, you have the property tax and ground rent, which are state taxes. The tenement belongs to the local government. Those three taxes used to be assessed as one. So instead of you seeing three notices, you will just see one and then you make your payments. We also have the one called the presumptive tax. The presumptive tax is also a harmonized tax wherein we’ll send you a one bill to cover for three taxes. Usually, it deals with small-scale businesses as well as sole proprietorship businesses. So rather than you getting three notices, we will serve you one notice. So, when you pay, the breakdown is already known to us. The values are sent to the respective beneficiaries, and, in this case, it is the state and local government. So, we’ve been harmonizing a lot of this tax so that people don’t get overburdened with different assessments.

For the transport sector, we have tried to harmonize their operation because in the past, they used to have several unions. But today, we have only three recognized unions which are the Road Transport Employers Association of Nigeria (RTEAN), National Road Transport Union of Nigeria (NURTW), and the Association of Motorcycle and Keke/Bike Union (ANNEWATT), who have been very cooperative with the government. The deputy governor has also been championing the reforms and creation of a standard of operation in that space.

For the other entities, particularly property owners, we need to collaborate. We’ve invested heavily in our Edo State Geographical Information Service (EdoGIS). You see, when you have your property registered, you’re also protecting it, as a capital asset. It avails you an opportunity to be able to unlock that tied down capital because property has value. You can unlock that capital when you have certified government documents, in this case, a C-of-O, depending on how you have acquired it; for which you can go to the bank or any financial institution and unlock it. For me, property registration, from an economic sense of it, I want to encourage our populace that you gain nothing by just not doing anything or registering your property. In fact, you’re losing more. It’s in your best interest to have documentation for protection of the property. Even if you don’t want to use it as a loan or a collateral but for the fact that you have a genuine title, protect the property as well as ensure that your beneficiaries – when you need to pass on the assets – have a secure title.

In the past, we know how issues on property have always been very ugly and that’s one area where we have made huge investments in technology. So, we have maps of the entire state and identification numbers. The tax value is so minimal compared to the opportunity and the security of those assets. It’s not about the money for us as a state but about security so that owners of properties are not scared.