Our new face of taxation is to awaken Nigeria’s sleeping economy, says Ogungbesan
Tax administration in Nigeria under the leadership of Samuel Sunday Ogungbesan, who was appointed recently as Acting Chairman of the Federal Inland Revenue Service (FIRS) is wearing a new and friendly face, apparently in line with the ‘change’ mantra of the new administration of President Muhammadu Buhari. Accordingly, the old order of sealing business premises as a strategy to recover taxes may have gone for good, as a bouquet of humane strategies are been introduced to trigger voluntary compliance; enlarge the tax net through collaboration with the states’ boards of Inland Revenue Services, financial services regulatory authorities and the banks. With over 30 years experience, who has also traversed all key departments of the tax agency and member of the think–tank of all the major tax reforms undertaken by his predecessors. Ogungbesan told Assistant Business Editor, MATHIAS OKWE and SEGUN OLANIYI that the implementation of the new strategies will lead to a giant leap in the current low taxpayers’ base of 460,000 to greater heights and would awaken Nigeria’s sleeping economy. Excerpts.
WHAT’S your vision of tax administration in Nigeria? I have been watching quietly all these years and I know that the only way to succeed in tax administration in Nigeria is to engage and collaborate. I will engage with taxpayers whether you are large or small, I will engage with my collection agents.
I will collaborate with all third party sources that will provide information for me to enable me do good tax administration.
I am not going to fight with them and to avoid going to court, I will sit down and negotiate with them and the important thing is to make this country move forward.
Ultimately, I am working towards ensuring that we build an investment-friendly environment- a situation where companies are folding up in Nigeria and relocating to Ghana is not acceptable to me and I promise you that we would not condone it any more. Ghana is benefitting from the things that are ordinarily should be done easily in Nigeria.
Tax administration is not about levying taxes on everybody, but the ultimate thing is to help everybody get the message. As good as United Kingdom is, this January, I still bought things along Oxford Street without paying VAT and the Indians are there working. So, enforcement is not carrying policemen, with camera and seal up premises.
Why must I seal up people’s premises on account of not paying tax when I can sit down and negotiate with them and make sure that government get its money even by installment and that company must continue to exist? Think about what they have invested in the place and the money they have borrowed from the banks.
Those who borrow from the bank to pay back at the rate of 22 per cent and are struggling everyday are the ones we want to encourage because at the end of the day, they are the ones recruiting our children, they are the ones keeping this economy standing on its feet. If they have any problem in the payment of taxes, particularlythe small business, we should help them address those problems. So, its not about fighting them.
I was in UK with my former boss and we are boasting that what we do in Nigeria is once they don’t pay taxes we seal up their premises and they were shocked. When you seal up their premises, what happened to the people who are working there? What happened to the turnover, which is obstructed the minute the business is sealed up?
So, when we learnt of these things as we go for such programmes and we see them work over there, even if we do not have the structure that will support that here, we must enclose in our mind that there is a possibility, particularly that we are members of the international community where they are asking us everyday to provide this information or that. We can’t go to sleep. We are member of the multilateral group on exchange of information.
Talking about collaboration, what’s the relationship between the Federal Inland Revenue Service and the States Boards of Internal Revenue Service? Most of the things I have seen from the perspective of the state revenue board is that emphasis is more on money and less concern on whether taxation principles are operated upside down.
In 2012, the amendment of the income tax was aimed at defining itinerant worker. Itinerant worker definition is different from the one you and I know in those days of the Aba women riot.
Whatever the petty arguments therein, we would correct it now because this is one country. We want to make sure that we build an investment-friendly environment to let people bring out the best for this country and at the end of the day, we would take our tax.
The job of the revenue man is to keep collecting taxes and we would continue to do that. Are you planning to do it differently or the same old ways that you have been used to all these years? We are not going to change the structure of the Nigerian economy and this is not a quick fix kind of approach, but we are building an institution.
So, what we have to do is to make sure we look inward and see what we are doing that could be done better and that is exactly where we have started off- defining a new structure for the organisation.
We know it is going to be tough, but we spoke to all the officers that were concerned, we went round the entire 10 regions of this country to speak to them, to present to them what our plans are and what is indeed needed from each one so that everyone would feel safe. We came back and reviewed our plans based on some of their suggestions and we are ready to go.
Again, we have identified that audit is critical to self assessment tax regime and that we can no longer continue to do it the way we are doing it now.
We need to ensure that all the best hands are engaged. What do I mean by best hands? A chartered accountant who has the skill and there are some officers of the service who are very sound technically in the interpretation of the law and these would work together.
We reorganized the audit function by creating 20 audit offices unlike a situation where every tax office has audit function. So, this 20 would be reporting directly to us through a director to our management, where we can ask question from them.
Also, technical issues, which before now were creating problems in the field offices would be flagged and it would be discussed by the technical committee and will quickly release a ruling and say this is the circumstance under which this would apply.
I think this will provide compliance and improvement at the field office level. Another thing we did was to say why don’t we bring out debt management function from the current tax office structure and let it be driven by another special people with a little bit of skills that we know are common and prevalent in debt management.
Today, what we have is the same man that is in a tax office structure raising assessment as well as pursuing the one that has not been paid. It is the same one who does audit and virtually everything.
This is much load on that tax office. So, we have decided to separate debt function now, bring it out and give it devoted attention. Lastly, is taxpayers service. My experiences have shown that most of the failure to pay is as a result of ignorance. Now we have a taxpayer service department at the headquarters but it can’t cover the whole country and we have broken them down into 10 regions and for each of the region there is senior officer leading taxpayers services.
These are the things we need to do to enhance compliance and if every Nigerian and corporate entity are paying their taxes as and when due, we would continue to support them. This is our plan.
Talking about compliance and debt recovery from recalcitrant taxpayers, do we have a robust taxpayers’ database in Nigeria, if yes, what figure do we have? Every tax authority has its database. As at today, I will tell you that we have about 460,000 taxpayers and I think the problem with Nigeria is that many of these companies are registered with fake addresses and the taxman can’t find them.
Some will operate from their homes, while their homes are in areas that are not accessible, so we must take charge of the ones that are seen, known and with fixed places of businesses. In other countries, they just don’t register companies until they signed that they are ready to do business. Here, everyone is floating companies in anticipation of what will be done in future or on retirement, but in the records, you will say that this is a kind of company we want to run after.
A lot of prospective companies have registered businesses in Abuja here, but for years have not even done any business, not even with PHCN, yet they are in our register because the law states that they must file a return.
It is the structure of our law itself that is making us define some of this people as non-compliance. Now, we have a data and the way we structure the data shows that the large taxpayers like the multinationals are about 2000. Because of the success we made with that, we also created what we called medium taxpayer group.
We also went across the whole country saying that those with turnover between N200 million and N1 billion will form the core medium taxpayers, whereas the large taxpayers would be those above N1 billion, while all the rest are micro and small businesses.
Our focus now should be on this micro, small businesses who are said to have turnover below N200 million and our investigation revealed that when we go out to conduct audit, some of these small ones we say are micro, are actually large taxpayers and they are not doing anything physical that you can see, but on real businesses with huge turnovers, transferring billions from here and there.
They are in the services sector and those are the ones that we have discovered, but in the real sense of it, are these the taxpayers? The taxpayers are people who will drive the economy, those with presence and they are the ones recruiting your children and my children.
They are the ones who would help drive development in this country, but many others who are faceless are just exchanging money and they are here today but tomorrow they are nowhere. Do you have inter-agencies or institutional collaboration on your tax payers’ identification project? Yes.
Today the banks are giving us information on people who are opening accounts, its just because we realize that some of the information are not often complete that is why we beckoned on the Central Bank of Nigeria (CBN), but on our own, we have also engaged the banks and I have spoken with them for example those ones who are paying to them, they shouldn’t take any money from them if the Tax Identification Number (TIN) has not been provided.
That is actually working but we are taking it further to apply to CBN, which is the sector regulator and can enforce its implementation.
The rule has not been given out to them yet, but we are just talking informally with the banks, saying anyone that you open an account for, ensure the person has a TIN. Surely, we would get there. I would also say that if theycontinue to improve on their level of compliance with the rules it would be better.
What has been the performance of tax revenue, particularly in the first and second quarters of the year in the face of serious revenue headwinds experienced globally? Generally, everything is low since the beginning of the year for every agency of government that is collecting money and there is no magic about it.
You know that government is the biggest spender and government businesses drive the economy. From January this year up till now, nothing has seriously happened because this is an election year.
Everyone keeps holding back their money and that has impacted on the economy, even oil business too continues to dwindle because, though we started on a positive note in January, the months of February, March and April have been below average and it is not about anybody being unable to do it. It is the international market price of oil and the volume of production.
If you produce oil and it is stored in the container, there is nothing you can do about it because people need to demand for your oil before you can begin to talk about money.
So, it hasn’t been good, but again, given seasonality factor in revenue collection, we will say that January, February, March and April are usually periods of low collection for the inland revenue.
Our collection would begin to pick up from the end of May and it would continue like that till the end of August, but on the whole, if you look at performance trajectory today, I would say that we have achieved about 65 per cent of the revenue collection. This is still a pass mark, but we keep looking towards 100 per cent of the targets.
We know when revenue would increase and when not. So far, our collection is about 65 per cent of our target and there is room for improvement and a better performance from this month. As at the end of April, I think our non-oil was about N900 billion and we should be collecting about N1.2 trillion.
As at now, we have collected about N990 billion, about 65 per cent of what should be reported. I will not advocate for increase in the rate of tax because it is not the issue now, we can only look at the system that we are running and re-jig some of them to get synergy and improve performance.
We are introducing presumptive tax system this year and that would help the states towards domestic revenue collection and also for us at the centre- the Federal Capital Territory to also help us to mobilize revenue.
What is presumptive tax regime and how is it possibly going to assist in raising tax revenue at all levels? Presumptive tax is another regime of taxation that often times will not make reference to the audited accounts of companies because it is believed that most of them are in the informal sector, where they do not keep books of account. We have gone to the Finance ministry to gazette a regulation and bu the minister advised that we need to do sensitization.
Now we have done sensitization sufficiently well to have even come to this stage and we have discussed with all the professional bodies on what we intend to do and we have given the document to the states revenue chairmen to take back to their people for the purpose of discussion.
It is working and as soon as we have the regulation, we are ready to go and the rest is to clean up the mess in the system, which will afford us transparency to strengthen the resolve of our workers to do more work.
I told you earlier on what we are doing is in the area of audit review, we talked about debt management and we are talking about taxpayers services.
All these would enable us to provide improved services to our taxpayers and it would also help us to deliver higher compliance level.
All I want is more people filing their returns, all I want is more people paying taxes towards economic development and all I want is ensuring that all taxpayers understand their rights under the law.
We are there to provide them support where ignorance would have been the order of the day and now they have the information and they cannot say they don’t know.
I won’t say it is an incentive, it is rather an intervention on our part just to make sure that we are able to get everybody to contribute towards economic development. It’s a strategy to bring us closer to them, a strategy, which addresses the facts of non-compliance.
If I forced them and at the end of the day they go and prepare an account when I know they have never kept any records; what is disclosed here is non-disclosure interest, the auditors will just close their eyes and prepare returns for them and they will bring it to the office and I will deplore my officers to go and examine the returns; why will I be examining the results that I know is not correct, is waste of time and resources just transparently what is it you have made or I made one million, take tax of 50, 000 and lets move on and let everybody be paying like that and it pays off at the end of the day but the objective is to bring them into the tax net and we would promote them to a level where they will voluntarily be filing returns on their own much more better.
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