Nigeria’s tax strategy
There are between 35 and 40 million Nigerians engaged in economic activity but out of the country’s tax net. CNBC Africa’s ChristyCole Popoola caught up with Babatunde Fowler, Chairman of Nigeria’s Federal Inland Revenue Service and started the conversation by asking him about Nigeria’s economic recovery.
In terms of the economy, people are talking about the recession. Clearly Nigeria is coming out of a recession if it has not already. In terms of the economy from the point of view of tax revenue. Our tax revenue has been on the increase which clearly shows that certain sectors of the economy are doing quite well and are paying their taxes. Basically, for any government to fulfil it’s mandate and for the economy to grow, a lot more people have to pay taxes which will first of all give revenue to the government, and the government in turn will be able to execute more contracts, and in executing more contracts be able to provide more opportunities for employment in the private sector and in doing that will stimulate the economy. Once people are employed they will earn a monthly salary and they will have more purchasing power. They will visit the shops, buy more phone recharge cards, buy more food etc.
There are indications that Nigeria is coming out of a recession statistically speaking and there are projections of economic growth by the IMF. WHat would you say are the signs of economic recovery from your perspective as the Executive Chairman of the FIRS?
When you look at the business community, once the business community is doing well, and the tax revenue is on an upward trend. This means that most industries are not only keeping transactions going but they are actually improving and in terms of value and the number of transactions they engage in. For us, we have not had a situation where major companies or industries have laid off people. So as long as companies are still keeping their employees, are still in business, and are still making profit the economy is getting better.
Is it real? Are we seeing the impact of this on the real sector or is it just statistical?
Like I said, if you ask what puts a country or an economy in a recession, there are different theories but in Nigeria we have to look at the make up of our GDP. The informal sector in Nigeria is large. There are a lot of businesses in transactions in that sector of the economy and it is difficult to track them. So we look at what we call the organised sector and business from the point of view of the government and from our own view, as long as companies are still operating well, paying their taxes, and not letting people go, then the economy is doing well.
Since the beginning of the year, we have had a umber of initiatives geared specifically toward generating more revenue for the country through the payment of tax. Can you give us a sense of what achievements you have recorded and how you’re performing in terms of targets set around the 2017 budget?
For one, part of the rules of the FIRS is to make payments more convenient, to improve the level of transparency, and also to let the tax payer know or realise that if they don’t do the right thing there are laws that can be enforced. What we have done is that we have launched 6 E-Solutions to tax administration. Now you can pay all your taxes online from anywhere in the world 24/7. You can download and confirm your receipts which will show that contributions have actually gone straight into the federation’s account.
You can also apply for a tax clearance certificate online. You can register your company online and pay your stamp duty online as well. Basically we have introduced transparency and convenience. From our point of view, we have provided services which make it very very convenient for anyone who really wants to pay their taxes. Also we have improved our monitoring of tax payers to ensure that they obey the law and they remit their VAT and withholding tax on a monthly basis, and that they file their returns in a timely fashion. We have looked at ourselves and we have also expanded the tax net. We believe we have everyone that has registered a company in the tax net, now we’re just trying to make sure that they file their returns in accordance to the law once a year and for the individuals we are working with the state internal revenue services. In 2016, we were able to add about 4 million tax payers to the existing ten million which is a 40 per cent increase. In terms of percentage it may sound quite good but we believe that there is at least another 35-40 million Nigerians who are engaged in one form of business or the other that are still not in the tax net. We are hoping that we will be 40 million individuals added to the tax net in the next one year.
Let’s talk about your projections for the 2017 budget.
Basically what happened in the first 6 month of 2017 was that we generated about 1.7 trillion naira which was about 224 billion naira in 2016. Going into into the full year for 2017 we have a budget of about 10..9 trillion and we are quite hopeful that we’ll achieve that.
That’s a one hundred and twenty five per cent increase. How achievable or realistic is that?
It’s quite realistic we have deployed technology, although it came out a bit late because we had to go through certain processes and procedures. The Federal Government has a procurement process, and we also had the audit of both state governments and corporates organisations and of course we have launched VAIDS which should bring more people and organisations into the tax net. We are all hands on deck. I think its quite achievable.
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