FUNDING THE GOVERNMENT: Budget Office, Tax Agency Expert On Survival Strategies

Godwin Emefiele, CBN governor... the apex bank has a role in the re-engineering of Nigeria’s economy

Godwin Emefiele, CBN governor… the apex bank has a role in the re-engineering of Nigeria’s economy

IT is no longer news that since the middle of last year, Nigeria’s revenue has dipped by over 50 per cent following fall in price of crude oil in the international market.

The consequence of this is that, while majority of the states in the country owe their workers several months salaries, because of shortfall in their monthly revenue allocation from the Federation Accounts Allocation Committee (FAAC), the Federal Government has equally resulted to bond instrument to pay its workers.

The immediate past Coordinating Minister and Minister of Finance, Dr. (Mrs.) Ngozi Okonjo Iweala had put the Nigerian liquidity condition in proper perspective, when she painted the scenario thus: “As a result of the 50 per cent decline in oil revenue, the country has faced a difficult cash crunch and the Federal Government has focused on keeping the economy stable and the government running through a series of measures, which include:
• We have front-loaded the borrowing programme to manage the cash crunch in the economy;
• out of the N882 billon budgetary provision for borrowing, the government has borrowed N473 billion to meet up with recurrent expenditure, including salaries and overheads;
• traditionally, the first part of the year witnesses low revenue because tax receipts come in from the middle of the year. This has compounded the challenges caused by the steep drop in revenues due to the oil price fall, and;
• as a consequence of the revenue challenges, there has been no capital budget release so far this year.”

Consequently, the Budget Office of the Federation evolved a new strategy in the preparation of 2015 Budget. Instead of relying on oil, the office fashioned out what it’s director-general, Dr. Bright Okogu, described as ‘first Nigeria’s non oil budget’ plan.

Okogu told The Guardian, “the impact of drop in oil price was quite significant. We had submitted a benchmark price of $65 per barrel to NASS, in December, after that, we saw that the price of oil continued to decline eventually, bottomed at between $45 and $46, and now, gradually returning to nearly $60 per barrel. We now did a new budget submission to NASS MTEF based on $52 per barrel, which one house passed at $52 and the other at $54. I understand now that both of them have reached a compromise of $53 per barrel, so, we are concerned that the price is half of what it was last June, which is very painful to everybody. If you have a price that is now declining to just 50 per cent of what it was, it means that you are losing a similar revenue value.”

He then spoke of the implication and measures initiated to stem the challenges of Federal Government not meeting its financial obligations: “The point being made here is that, the impact is severe, it is affecting the revenue of government, but as a nation, you have to move on. Nobody is going to applaud you for doing nothing. If you check all these countries suffering from it, they are all doing one thing or the other, which is the reason we took steps immediately to introduce a number of reforms.

“One of them, which we actually started before oil price collapsed, is the diversification of our revenue base, by getting FIRS to engage some consultants to improve their tax administration. We gave them a target of an extra N75 billion for 2014, what did we find? We found out that these people did a N110 billion extra, as at December, using some measures that they have identified, so now we have ramped it up and told them, look, now implement the other measures as identified in the diagnosis. In the current budget to NASS, non-oil revenue is slightly more than oil minerals for the first time, showing that we are getting away from oil based economy to one, which is non-oil.

“This is a transition that we are just beginning now and if we sustain this, having identified the various areas of the economy that needed to be looked at in the area of revenue; if the economy is diversified, and it shows you are the biggest, and a lot of sectors were never captured before, all of a sudden now, they are in the mainstream of the budget what do you do? You get a little bit of revenue from them, you don’t want to discourage them, and so you do it carefully and gradually. That is what is being done now. To the extent that we now have a N110 billion over and above what FIRS use to give us through these efforts. We regard it as extremely good and this is what we are going to keep pursuing. Other sectors that have already been identified will equally contribute their quota. We are worried that oil has given us this particular shock; but it has opened our eyes to so many things that should be done and we are determined, and if these are corrected, they will improve the situation of this country,” Okogu said.

A development economist and social commentator, Mr. Odilim Enweagbara, said the administration of President Muhammadu Buhari must initiate radical moves to bail Nigeria from the current situation before it goes out of hand.

According to Enweagbara: “To start with, the Buhari administration should quickly remove fuel subsidy, which has cost the country over $30 billion during the last five years. The government has no option, but to remove the subsidy, a scam used by politicians and members of the oil cabal to divert trillions of naira to finance their insatiable lifestyle and ever-expensive political campaigns. A credible anti-corruption czar needs to be found along with a new set of laws to fast-track cases of corruption in the country which our legal system has frustrated. Government should find democratic and persuasive ways to ensure that those who stole public money bring back the money.”

He continued: “To ensure that our domestic debt burden does not derail his government, Buhari should pay off the N12.6 trillion debts by printing its equivalent in the form of quantitative easing. Howelse should government settle its debts than print local currency to pay off? If many governments in our present situation resolved the problem by printing money and using it to settle their debts, why shouldn’t the Buhari administration do the same given that if it has to repay the debt, it needs to print N12.6 trillion? There is no problem with printing more naira to repay our domestic debts, so, long as less foreign exchange pressure is put on it, by reducing imports and encouraging domestic production of most of the imported goods.

“Alternative sources of revenues should be sought. Besides high import tariffs and increasing value added tax (VAT), government should also seek other novel sources of meeting its budgetary needs.

“These unconventional sources should include, the formalisation of millions of informal sector operators, who, lacking tax codes, hardly file tax returns, not to mention paying the right taxes at the right time. Because ours is still informal sector economy, there is no other better way to increasing government tax revenues without increasing taxes paid by millions of informal sector businesses, which without their legal formalisation, will never pay the right taxes and as at when due. Another is the need for a carbon tax policy regime in Nigeria. Carbon tax is the special tax imposed on automobile through yearly number plate renewal fees,” the development economist advised.

The acting Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Samuel Sunday Ogungbesan, told The Guardian that the tax agency has commenced initiative that will result in an increase in non-oil revenue generation, as captured in the 2015 Federal Budget.

According to him, the initiatives include, inter-agencies collaboration with a view to identifying tax papers and bring them into the tax net to ensure a raise in tax revenue, which can be an alternative to oil mineral resources.

He added: “Now, banks are giving us information on people, who are opening accounts. We realised that some of the information we have are often not complete, so, we called on the Central Bank of Nigeria (CBN) to help out in this regard. But on our own, we have also engaged 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 working and they are complying with that, but we are taking it further to apply to CBN who is the sector regulator and can force its implementation, that is why we are beckoning to CBN to assist. The rule has not been given out to them yet but we are just talking informally with the bankers to say anyone you open an account for make sure he has a TIN and by the way why would a bank even deal with a company that has no TIN and we keep reminding them that they must watch out demanding for TIN before they open an account for any customer.”

Again, Ogungbesan unveiled another new strategy introduced by him to elicit voluntary compliance by taxpayers, as against the hurdles in the past put on the path of even willing taxpayers that ordinarily want to pay their taxes.

He called the new strategy presumptive tax regime, which allows taxpayers in the informal sector or small businesses to declare what they felt their income has been without an audited statement of account.

The FIRS chairman said: “Presumptive tax is another regime of taxation that, often times, will not make reference to the audited accounts of companies, because most of these people are in the informal sector, where they do not keep books of account and why are you waiting to say they must be compelled to go and prepare an account, so, don’t go the route of submission of accounts or hiring an auditor, just record all that you are doing and tell me this is your turnover and I know what tax to impose on you; you arrange it in such a way that if you are large, this is the rate you would pay, if you are medium, this is what you will pay, if you are small or micro, this is what you will pay and the range in what we have done now is between N2,500 and about N75,000, depending on your size and you certainly would belong to one of the category/column, whether micro or small, medium business or large enterprise you belong there.”

Receive News Alerts on Whatsapp: +2348136370421

No comments yet