N33trn revenue generated in seven years falls below target – FIRS

THE total revenue of N33.02 trillion generated by the Federal Inland Revenue Service (FIRS) between 2015 and 2021 fell below the period’s target of N40.69 trillion, figures obtained from the agency’s website have shown.

The data showed that during the seven-year period, oil tax revenue accounted for 36.58 per cent or N12.08 trillion, and non-oil taxes, 63.42 per cent or N20.94 trillion.

The FIRS targeted a total of N11.77 trillion for oil tax, and N28.92 trillion for non-oil taxes.

Tax statistics for 2015-2021 by FIRS
FIRS tax statistics, 2015-2021. Chart by The ICIR

Tax revenue is a primary source of funding government’s budget; when there is a shortfall, the budget runs into a deficit.


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A cursory look at budgets’ appropriation in the seven-year period showed that the Federal government recorded a N27.92 trillion budget deficit.

The then minister of Finance, Budget and National Planning, Zainab Ahmed, had said revenue generation remained the major fiscal constraint of the government to fund its expenditures.

Government has over the years depended on crude oil earnings to fund its budget, but revenue from the earnings have been falling drastically a result of crude oil theft and infrastructure decay, among other challenges.

The ICIR analysis of the data showed that non-oil taxes component majorly included the company income tax (CIT), gas income, NCS-import VAT (value added tax), and non-import VAT.

The components accounted for 55.93 per cent of total generated revenue and 62.86 per cent of targeted revenue.

In the seven-year period, the tax agency generated N9.39 trillion revenue from CIT against the N11.52 trillion target; N608.37 billion from gas income against the N2.22 trillion target; N1.86 trillion from NCS-import VAT against N3.698 trillion; and N6.61 trillion from non-import VAT against N8.14 trillion.

Meanwhile, the FIRS generated N3.741 trillion in 2015; N3.307 trillion in 2016; N4.027 trillion in 2017; N5.320 trillion in 2018; N5.261 trillion in 2019; N4.952 trillion in 2020; and N6.403 trillion in 2021.

FIRS Tax, comparing annual target to actual collection
FIRS Tax, comparing annual target to actual collection. Chart by The ICIR

Commenting on the FIRS performance in the review period, the head of financial institutions ratings at Agusto and Co, Ayokunle Olubunmi, said revenue figures might seem huge, but when measured as a percentage of the gross domestic product (GDP), the revenue figure was relatively small.

Nigeria has one of the lowest tax-to-GDP ratio in the world, currently at 10.86 per cent.

Olubunmi added that the government might have to rely more on non-oil taxes to generate revenue to run its excessive cost of governance.

“Strengthening revenue mobilisation through tax administration reforms was essential for the country to create fiscal space and put public debt on a sound footing,” the director of communications department, International Monetary Fund, Julie Kozack, said at a press briefing on July 13, monitored by The ICIR.

FIRS’ push to boost tax revenue

The FIRS had on July 3 revealed a plan to introduce VAT in the informal sector, through a scheme dubbed, ‘VAT Direct Initiative’ to boost its collection.

The scheme aims at generating more money for the government to fund infrastructure and social amenities.

The FIRS said it would be partnering with the Market Traders Association of Nigeria (MATAN) to effect collection.

However, the director/chief executive officer, Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, argued it would be impractical to develop a partnership framework with market associations for the VAT direct collection as being contemplated by the FIRS.

Yusuf, an economist, explained that the economics of collection does not support the move, and the cost of collection would be much more than the amount that could be collected.

He said, “Over 98 per cent of the informal sector traders are microenterprises who do not fall within the threshold of entities that are liable for VAT payment.






     

     

    “Most informal sector operators have no records which could be used for purposes of assessment, which poses a high risk of arbitrary assessment.”

    He also expressed the concern that the literacy level of many operators in the sector is low, which would create communication issues, adding that the political cost to the government would be very high.

    “The FIRS should think of more creative ways of taxing the informal sector players, in ways that will be more cost-effective, less disruptive and with minimal political cost.

    “More importantly, the FIRS should adopt the principle of focusing on the few players and individuals that could give the highest revenue yield. This is a model appropriate for an economy with a high level of inequality like ours,” the CPPE boss suggested.

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