Economy

Nigeria’s Dwindling Revenue: The Mountain Facing FIRS

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The National Bureau of Statistics recently revealed that a total revenue amounting to 2.9 trillion naira was generated from both Value Added Tax (VAT) and Company Income Tax (CIT) in 2020.

The report revealed that there is a decline in Company Income Tax (CIT) to 1.2 trillion naira from 1.6 trillion naira recorded in 2019. Value Added Tax (VAT) on the other hand increased to 1.5 trillion naira compare to 1.1 trillion naira in 2019.

The increase in Value Added Tax (VAT) did not come as a surprise because Value Added Tax which used to be 5% was later increased to 7.5%. The continued implementation of the new rate has also helped to raise up Value Added Tax (VAT).

Obviously, another factor that must have influenced the rise in Value Added Tax (VAT) is inflation rate. Food inflation is almost at 20%, and if one should use last year as a base, that means food inflation has gone up by 20%

The decline in Company Income Tax (CIT) on the other hand is largely a result of the COVID-19 pandemic which negatively affected businesses globally. Many Nigerians have been out of jobs and many businesses have closed down due to the impact of the pandemic.

Despite the increase in Value Added Tax (VAT), there are concerns in some quarters that, the country is in serious need to rev up its revenue to meet up with her rising expenditures. Thus, the need for Federal Inland Revenue Service (FIRS) to redouble efforts in this area.

One of the big challenges facing governments at all levels has been that of dwindling revenue and the recession experienced by the economy occasioned by the outbreak of COVID-19 pandemic.
Government expenditure has doubled and debt servicing costs have grown.

As a matter of fact, the federal government is looking for innovative to fund the 2021 budget. But, that seems to be an uphill task with Nigeria’s total debt profile rising to N31.09 trillion ($85,897 billion) as at June 30, 2020, according to Debt Management Office (DMO).

Meanwhile, one of the global rating agencies recently berated Nigerian government on its over dependency on the Central Bank of Nigeria for ways and means, highlighting weaknesses in public finance management. It says the over dependency could lead to financial instability.

Also, in an attempt to look for means to fund 2021 budget, the Minister of Finance, Budget and National Planning, Zanaib Ahmed, recently explained that the federal government wants to sell some of its assets to fund the 2021 Budget because they are currently moribund and provide little or no value in their current state.

Her reaction led to series of public outcry. Former chairman, Estate Surveyors and Valuers Registration Board of Nigeria, (ESVARBON) William Oruka said selling of national properties will be unwise because it would be difficult to replace them in the future.

From this scenerio, it is obvious that the Federal Inland Revenue Service (FIRS) which is saddled with the responsibility to generate revenue for the nation, has a mountain to climb.

Analysts are of the view that, the nation’s tax net need to be expanded. Revenue collectors should spread their net into the informal sector, which is almost about 40% of the economy. The introduction of BVN, TIN, and NIN will help bring more people into the tax net.

In 2018, 19 million Nigerians contributed into federal or state coffers, according to government data.

A World Bank report in that year put the country’s economically active population at 65 million – so even with rising numbers of taxpayers in recent years, that is still less than 30% of the tax belt of the country.

To this end, the Federal Inland Revenue Service (FIRS) must target individuals that it believes are liable for tax but have not been paying. Tax officers can ensure compliance with legal obligations because of its efficiency and fairness of any tax system. Noncompliance undermines revenue.

To make the job of Federal Inland Revenue Service (FIRS) easy, experts say that the federal government on its part must strengthen her trust base with the citizens. Simply because many Nigerians will be reluctant to pay taxes because of concerns that money raised may be siphoned off instead of spending it on health, education and other public services.

Government can also redouble efforts in the area of ease of doing business. For example, the supply chain of many companies using the port in Lagos have actually been distorted.

Read Also: LIRS Demands Tax Revenue From BBNAIJA Winner

It takes longer time than necessary to get goods cleared from the port, and the prices have quadruple in most cases. Such high cost means reduction in profit for corporate organisations and in effect, reduction of taxes for government. If government can facilitate the ease of doing business, it can help increase the taxes paid by such organizations as it will impact positively on the company’s bottom line.

Godwin Anyebe

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