How electronic platform is boosting tax revenue generation in 2020
The Federal Inland Revenue Service (FIRS) continues to engage stakeholders, especially the legislative arm of government, in order to gain invaluable support in assenting to laws and policies that will drive tax compliance and increase revenue generation for national development. As a result of this support, there has been an increase in the collection of revenue over the years while the cost of collection has gradually been decreasing, especially because of the adoption of electronic services (e-services) like e-registration, e-filing, e-tax payment, e-receipt and electronic Tax Clearance Certificate (e-TCC).
For instance, the number of tax clearance grew by 519.91 per cent from 9,574 to 59,350 within a year of introducing the e-TCC on the FIRS’ platform. With this, taxpayers request for and process their Tax Clearance Certificates (TCC) from the comfort of their homes. Likewise, in 2018, FIRS generated the highest tax revenue ever which amounted to the sum of N5.32 trillion, an increase of 32.09 per cent from N4.03 trillion in 2017, even though it dropped to N5.26 trillion in 2019. Meanwhile, the cost of collection as a percentage of actual taxes collected has been reducing; in 2016 it was 2.6 per cent, in 2 017 it was 2.49 per cent while in 2018 it was 2.14 per cent.
Although, the coronavirus pandemic disrupted commerce to almost a halt across the federation towards the end of the first quarter (Q1) of 2020 to the middle of second quarter (Q2) 2020, the Q1 and Q2 2020 data combined from the planning, research and statistics department of the FIRS showed that Nigeria generated N2.48 trillion from taxes. This represented 1.27 per cent rise on a year-on-year (YoY) basis from 2019 data (combined Q1 and Q2). This growth promises a good deal for the country.
In Q2 2020 alone, the agency responsible for assessing, collecting and accounting for tax and other revenues accruing to the Federal Government of Nigeria surpassed its tax revenue target of N1.270 trillion by 1.51 per cent (N19.15 billion). The Q2 2020 total revenue of N1.29 trillion represents an increase of 8.24 per cent compared with N1.9 trillion generated in the previous quarter; however, it represents a decrease of 8.01 per cent compared to the N1.4 trillion generated in the corresponding quarter of 2019.
Prior to the Q2 2020 data, FIRS had not met or surpassed its revenue target in 19 different quarters since Q2 2015 where it surpassed its set target of N1.02 trillion as it generated N1.09 trillion as tax revenue. The full-year data in the agency’s repository showed that Nigeria has not met or surpassed its revenue target in 5 years since it did in 2014 when it generated the sum of N4.71 trillion as against its target of N4.08 trillion.
A closer look at the Q2 2020 data showed that tax revenue from the oil sector alone represents 34.18 per cent of the total revenue generated while the revenue from the non-oil sector represents 65.82 per cent.
In comparison to the previous quarters, it showed that tax revenue that accrued from petroleum profits decreased by 17.84 per cent and even by 12.46 per cent YoY. This decrease between Q1 and Q2 2020 reflects the significant drop in oil prices as well as revenue by major oil companies between the two quarters as the coronavirus struck. However, this story is expected to change in the remaining half of the year as oil prices are now on the increase.
Within the non-oil sector, the tax revenue from the NITDEF increased by a whooping 1,571 per cent from N691 million to N11.55 billion within the same period, but it decreased by 12.16 per cent YoY from Q2 2019. Another significant increase that was recorded in the tax revenue was from Stamp Duty which increased by 1,217 per cent from N4.75 billion in Q1 2020 to N62.58 billion in Q2 2020 and by 1,582.93 per cent year on year.
Still within the non-oil sector, the agency recorded decreases in tax revenue of 4.12 per cent, 3.06 per cent and 23.03 per cent in Capital Gains Tax, Non-Import VAT, and Consolidated Account respectively.
Also, revenue from VAT (NCS-Import VAT and Non-Import VAT) for half year 2020 amounted to N653.11 billion, a decrease of 11.49 per cent compared to N737.92 billion generated in the corresponding period of 2019.
For the agency to meet its set target, it is necessary to consider broadening its tax base system and to also establish more strategic approach to collecting taxes especially by taking advantage of the digital economy.