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Fowler blames low tax collection on falling crude oil prices, recession

RESPONDING to query from President Muhammadu Buhari over a shortfall in tax collection from 2015 to 2018, Babatunde Fowler, Chairman of the Federal Inland Revenue Service has blamed the decline on the 2016 recession and lower crude oil prices.

“The Nigerian economy also went into recession in the second quarter of 2016 which slowed down general economic activities…The low inflow of oil revenues for the period especially Petroleum Profit Tax, PPT, was due to fall in the price of crude oil and reduction of crude oil production,” a part of the letter reads.

Fowler was upbeat about revenue from the non-oil sector such as Value Added Tax, VAT, and Company Income Tax, CIT, which he said have been on the rise since 2015.

“Tax revenue collection being a function of economic activities was negatively affected but the actual collection of CIT and VAT was still higher in 2016 to 2018 than in 2012 to 2014.”

The FIRS Chairman noted that within the period, the prices of crude oil fell from an average of $113.72, $110.98 and $100.40 per barrel in 2012, 2013 and 2014 to $52.65, $43.80 and $54.08 per barrel in 2015, 2016 and 2017.

He also pointed to a reduction in crude oil production from 2.31 million barrels per day, mbpd, 2.18mbpd and 2.20mbpd in 2012, 2013 and 2014 to 2.12mbpd, 1.81mbpd and 1.88mbpd in 2015, 2016 and 2017.

“The tax revenue also grew as the economy recovered in the second quarter of 2017,” he stated.

Abba Kyari, Chief of Staff to the President  had, in a letter dated August 8, which he personally signed, asked Fowler to explain reasons for ‘significant’ variances in budgeted collections and actual collections of tax in 2015, 2016, 2017 and 2018 when the actual amount collected as tax fell below the budgeted target.

The FIRS chairman was directed to submit a comprehensive variance analysis, which should also state the reasons for poor tax collections between 2015 and 2017, a period when the actual collections turned out to be ‘significantly worse’ than what was recorded from 2012 and 2014.

Fowler was given August 19 deadline to respond to the query.

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