By Omodele Adigun
AS the new acting Chairman of the Federal Inland Revenue Service (FIRS), Mr. Babatunde Fowler, fired tax consultants in his first assignment after settling down to work last week, the question on every lip now is, can the former Lagos Inland Revenue Service (LIRS) boss repeat his Lagos magic at FIRS?
Recall that under him, Lagos State’s monthly Internally Generated Revenue (IGR) shot up from N3.6 billion monthly in 2006 to N23 billion in 2014.
Fowler himself admitted the increase was due to the number of people that were brought into the tax net, even as he prosecuted 376 organisations for tax default.
Hear him: “Those who are tax compliant in Lagos State (as of 2015) were 4.5 million, up from 3.8 million in the previous year, 2014. In terms of our actual collection, in 2013, we had approximately N236 billion while in 2014 it was N276 billion. So we went from an average of N20 billion in 2013 to an average of N23 billion in 2014. And that was one of the things that kept the state working.”
But Fowler, appointed on August 19, 2015, as the acting FIRS boss, take this model to his new station? Can he also prosecute tax defaulters in Nigeria as a whole when the former Finance Minister and the Coordinating Minister for the Economy, Dr. Ngozi Okonjo- Iweala, once lamented that over 65 per cent of companies in the country have not filed their tax returns for the past two years?
According to her, a recent study conducted by the government revealed that about 75 per cent of registered companies in the country are not registered with the tax authorities.
Stakeholders are wondering how Fowler will tackle this worrisome trend largely constituted by powerful politicians and influential cabals close to the corridors of power at a time many believe the low rate of tax compliance is deeply rooted in the nation’s malfunctioning tax administration system.
Deeply worried tax experts have for some time now almost shouted themselves hoarse over the issue. For instance, the immediate past President of the Chartered Institute of Taxation of Nigeria (CITN), Chief Mark Dike, recently noted that tax compliance problems in Nigeria are the offshoot of tax evasion and avoidance.
To him, tax compliance problems in the country are entrenched in the fabric of tax evasion and avoidance. “The consequence is that the main purposes for raising revenue, regulating consumer demand, boosting investment and savings, checking or halting economic depression, inflation and deflation, ensuring equitable distribution of income and wealth, ensuring appropriate allocation of national resources are almost always invariably weakened. No tax model can be better than its administration. An essential objective of tax administration is to ensure that there is maximum possible compliance by all categories of taxpayers with their tax obligations. Unfortunately in Nigeria, tax administration is usually weak and characterised by large-scale evasion, corruption and coercion. In many cases, overall tax levels are low and large sectors of the informal economy escape the tax net entirely,” he said.
Dissecting compliance problems, Dike stated that issues concerning compliance are specifically noticeable under the Personal Income Tax and Value Added Tax laws. “Under the Personal Income Tax Act, individuals lay claim to reliefs they should not. This principally arises from the relatively high rate of personal income tax and the paltry rates of relief. Apart from this, there are today many eligible taxpayers who have not bothered themselves to register with the FIRS or the various states Internal Revenue Services (IRS). We have found out that many taxpayers who register do so as a hedge against withholding tax deduction,” he explained.
This is a take-away for the new helmsman at the nation’s tax house, who should, by now, arm and equip himself with his Lagos model – his brain child – to stand him in good stead.
By and large, Nigeria’s new tax man will have more grey hair convincing some citizens to voluntarily pay their taxes when there is virtually no reason to do so. For instance, in most parts of the country, every family is a mini-government. They generate their power, drill their boreholes, maintain their roads and provide other basic infrastructure that ought to be provided with tax revenue. People that fall into this category may dare Fowler and his employers in the months and years ahead. of the country, every family is a
Recall that Lagos State became the first state in the federation to be independent of the monthly federal allocation by shooting up its IGR. Giving insight into his magic wand, the former Chairman of LIRS, Fowler, attributed the success to his ability to marry private sector systems with the public sector.
He said: “When I was in banking, I was in charge of what we call public sector. I was involved in the collection of revenue for both states and federal agencies. So I could see certain loopholes and I was also able to bring private sector systems into public sector.
“And with that combination and with the support of the state government, I was able to use that to the full potentials.”
Specifically, he explained that the reforms embarked upon by the state also helped achieve the milestone.
He listed the autonomy of Lagos State IRS as having given LIRS the powers to hire only professionals, with the technical know-how to handle tax issues and administration.
LIRS under Fowler was adequately funded and this ensured its smooth and efficient administration including providing the revenue authority with modern day technologies.
He also stated that new units like religious, judiciary, professional, informal sector, LASTMA, self-assessment review units, public sector, strategic audit, relationship management units, distrain unit were created.
To achieve success in his assignment, Fowler never toyed with capacity building at LIRS while its operation was well equipped and had a functional training school backed by regular in-house training organised to enhance staff skill.
Staff were also exposed to the best practice in tax administration through participation in conferences, seminars, offshore training. LIRS currently sponsors staff who are members of the Chartered Institute of Taxation of Nigeria (CITN) with both tuition and examination fees.
It also adopted the full implementation and use of e-TCC to further assist the blockage of general revenue leakages.
He accelerated tax audits of back years with over 1,500 tax audits in 2006; 3,500 in 2007 and 4,000 in 2008 and over 6,000 in 2011, leading to payment of outstanding tax audit liabilities under him. 1,000 professional accountants and tax practitioners were engaged to collate tax audit data and assist in taxpayers’ enumeration. Already, Fowler has told the FIRS consultants that their function will now be limited to data gathering only because FIRS is short-staffed to handle all the work of the service. According to him, FIRS has less than 1,000 staff in audit and cannot review or audit the books of 450,000 companies.
He has, however, adopted the direct bank lodgment-linkage of over 1,200 branches of banks online; automated revenue receipts, close monitoring of revenue through the generation of timely management reports – creation of accounts relationship management unit that monitors remittances based on industry.
Under FIRS accounting and reconciliation, fast reporting and month-end closing analysis will be imperative.
This will also enhance internal control and continued enumeration of taxpayers.
Source : SunOnline