A proposal by the Presidential Committee on Tax Policy and Fiscal Reforms may stop the Nigeria Customs Service, Nigeria Ports Authority, Nigerian Postal Service, and 60 other Ministries, Department and Agencies from collecting revenue on behalf of the Federal Government.
The new plan means trillions of revenue generated or collected by the agencies will now be collected by the Federal Inland Revenue Service.
The Presidential Committee on Tax Policy and Fiscal Reforms says the Nigeria Customs Service and 62 other Ministries, Departments and Agencies are not meant to collect revenue directly.
The Chairman of the committee, Taiwo Oyedele, who spoke on Channels Television’s Sunrise Daily breakfast programme on Wednesday, said FIRS was best suited to collect revenue for the MDAs.
According to Oyedele, who is a former Fiscal Policy Partner and Africa Tax Leader at PriceWaterhouseCoopers, Nigeria’s revenue collection from taxes is one of the lowest in the world but the cost of collection is high.
“Ironically, our cost of collection is one of the highest. And the reason for that is that we’ve got all manners of agencies. The Federal Government alone, we have 63 MDAs that were given revenue targets last year, no; actually in the 2023 budget,” he said.
“And two things that would come up from that: on one hand, these agencies are being distracted from doing their primary function which is to facilitate the economy. Number two, they were not set up to collect revenue, so, they won’t be able to collect revenue efficiently.
“So, move those revenue-collection functions to the FIRS. It has two advantages: the cost of collection and efficiency will improve, these guys will focus on their work, and the economy will benefit as a result.”
Asked for clarity on his comments, Oyedele said, “If you are Customs, focus on trade facilitation, border protection and if you are NCC (Nigerian Communications Commission), just regulate telecommunications. You are not set up to collect revenue.
“It can be your revenue and someone else can collect it for you. There will be more transparency because you can see what is being collected and is accounted for properly. It is also a way of holding ourselves to account as to how we spend the money we collect from the people.”
The committee chair said there would be a pushback from stakeholders and others benefitting from the process but the committee’s sole objective is to not to take what belongs to anyone but what should come to the government.
Oyedele also described the Treasury Single Account initiative as a step in the right direction but it has not been fully developed. He said the TSA would help his committee’s work but there are more to do to maximise the initiative.
Some of the agencies that would be affected include the Federal Airports Authority of Nigeria, Nigerian Ports Authority, Nigeria Deposit Insurance Corporation, Nigerian Meteorological Agency, National Agency for Food and Drug Administration and Control, Federal Road Safety Corps, Nigeria Customs Service, Standards Organisation of Nigeria and the Nigerian Airspace Management Agency
Others are Bank of Agriculture, Nigerian Bulk Electricity Trading, Tertiary Education Trust Fund, Federal Radio Corporation of Nigeria, Nigerian Railway Corporation, Federal Reporting Council of Nigeria, Nigerian Maritime Administration and Safety Agency, Corporate Affairs Commission, Nigeria Civil Aviation Authority, National Broadcasting Commission, Joint Admission Matriculation Board.
The Nigerian Port Authority, National Automotive Design and Development Council, Federal Mortgage Bank of Nigeria, Nigerian Upstream Petroleum Regulatory Commission, and the Nigerian Communications Commission will be affected too.
Findings by the PUNCH showed that about 11 of these agencies generated over N4.13tn last year.
Majority of the revenue was generated by the Nigeria Customs Service. The agency generated about N2.6tn in 2022, which was, however, below its N4.1tn target for the year.
The PUNCH also observes that the affected agencies may lose their cost of collection.
In 2022, the Nigerian Customs Service withdrew N128.64bn (five per cent of its generated revenue) as cost of collection.
Another affected agency is the Nigerian Upstream Petroleum Regulatory Commission, formerly Department of Petroleum Resources, which received 2.6 per cent of the total revenue collected (N462.81bn), as the cost of collection during the period.
Checks by the PUNCH revealed that Nigerian Ports Authority revenue was N361bn in 2022.
Private sector reacts
Speaking with The PUNCH, The Director-General of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Olusola Obadimu said the idea of taking away revenue collection from Customs or the other MDAs would contradict the existing targets already set for them to accomplish.
According to him, the suggestion could become feasible in the long run when a more detailed presentation of its workability has been made.
He said, “If you want to take revenue-collecting responsibility from Customs, why did you budget target for them for the year? I think it is just a suggestion. Some things cannot take place immediately. It’s not something that can take effect immediately.”
Obadimu, however, expressed doubt over the government’s willpower to implement the recommendations of the panel.
He recalled that despite several calls for the implementation of the Oronsanye report which was meant to cut down the cost of governance, the government is yet to implement the recommendations of the report.
On his part, the Deputy-President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa described the idea as dangerous because it could prompt the affected agencies of government to work against the initiative.
He said, “If you stop Customs from collecting taxes, Customs may deliberately sabotage imports and exports, all the other agencies may deliberately sabotage the system if you take away their ability to collect revenue.”
He added that the idea would have to be thoroughly analysed to determine its feasibility.
According to him, having the FIRS hold exclusive right to revenue collection is lmost impossible since the relevant agencies will still be involved in the process, because they understand the industry better.
He added, “The agencies are not going to accept the suggestion. Customs, NIMASA, they’re all on that panel and they are bound to hold meetings before deciding anything. Those agencies will not agree to this.”
Reacting to this, the Director General of the Nigeria Employers’ Consultative Association, Mr. Wale Oyerinde, said, “There can’t be inter-agency rivalry. Once the tax reform committee does due diligence, apportions roles, and makes all the agency heads understand their roles and the extent of their power and then the government creates the necessary framework and regulation to guide their operations. I don’t see any inter-agency rivalry there once the direction that the government wants to go is clear. You only need inform all the agencies and FIRS becomes the central point. That is what is done in most developed climes. When you have a proliferation of agencies everybody collects money it is not good. What the OPS has supported is for the government to unite collection agencies. And if you also check the terms of reference for the presidential tax reform committee one of their assignments is to ensure accountability within the context of revenue generation and also review the cost of collection which remains a major issue in the tax administration system.”
Also speaking, the Chairman of the Nigerian Economic Summit Group, Mr Niyi Yusuf, said, “I agree with Taiwo, multiple MDAs collecting revenue is one of the reasons for undue multiplicity of taxes and it also distracts the agencies from their core economic development responsibilities and at times, it creates conflict of interests. Revenue collection can be made to be a specialised service by one agency and so should be easier to track performance, transparency, and accountability for results.”
However, a facilitator with the NESG, Dr. Ikenna Nwaosu, said, “It won’t be effective; it will be a complete disaster; because revenue collection from different agencies requires different training. The officer of the Nigeria Customs Service that collects the import duty revenue is different completely from the collection of revenue from company import tax and the other associated taxes. What the committee person is suggesting is the old school, the world has moved beyond that. In the new models in the world, there are specialised agencies for specialised revenue generation. So the person is talking about the old school model the world has moved beyond that, it is the old school model. The world has moved beyond allowing only the Federal Inland Revenue Services to collect all the taxes, the world had moved beyond that.”
Meanwhile, the National Public Relations Officer of the Nigeria Customs Service, Abdullahi Maiwada, said he doesn’t have anything to say about that. “I don’t have a take sir,” he replied
The Director/Chief Executive Officer of the Center for the Promotion of Private Enterprise, Dr. Muda Yusuf, said, “I don’t think there would be any issue as long as the system does not interfere in their operations. That is what I think should be done. But the challenges cannot be underestimated because you are talking of collapsing many parastatals into one. They should not underestimate the challenges of collapsing all these revenue-collecting institutions into one single channel. Perhaps there can be a pilot of one or two institutions and see how it works so that you don’t just jump into it and create all manner of confusion. What is important is that the budget of these institutions should not be disrupted in terms of funding.” he concluded.
Also speaking, an economist and a former member of the Monetary Policy Committee of the Central Bank of Nigeria, Prof Akpan Ekpo, said, “In most countries, they have one agency that collects taxes and then gives others their share, so it depends on how they want to do it. If you say Customs, the department collects its taxes what you do is fill out a form and money enters into FIRS. So it is good to have one body collecting the tax but you must have a good automation system, you have to use technology. The idea is to avoid more agencies collecting different taxes. So it is not a bad idea but whatever is good for any agency should be given to them. So it is not a bad idea in the area of ensuring that you block leakages and also stop tax evasion. Whether the current FIRS can do that is one thing. Where I don’t agree is, you cannot collect on behalf of the state because we have a federal system. So you can do that for federal agencies but when it comes to the state, you can’t impose it on them.”
Credit to PUNCH