President Muhammadu Buhari had in December, last year, nominated Mr. Muhammad Nami as the new Executive Chairman of the Federal Inland Revenue Service (FIRS). He replaced Babatunde Fowler whose application for a second term was rejected by the presidency. Nami’s appointment was swiftly confirmed by the Senate. Therefore, the new FIRS boss should be aware of the need to improve revenue generation targets, which were reportedly not met under the tenure of the immediate past FIRS boss.
The shortfalls in projected revenues were so dire that the President, through his Chief of Staff, Abba Kyari, on August 8, 2019, issued a query to the then FIRS boss to explain the variances between budgeted revenue collections and actual collections for each year from 2015 to 2018. According to reports, FIRS set a target of N4.7trillion in 2015, but was only able to make N3.7trillion in the actual collection. In 2016, 2017 and 2018, the target collections were N4.2trillion, N4.8trillion and N6.7trillion. But the actual collections were N3.3trillion, N4trillion and N5.3trillion, respectively. The highest annual collection the agency generated was N5.7trillion in 2012, under the leadership of Mrs. Ifueko Omoigui Okauro.
From the foregoing, it is clear that the task ahead of Nami is daunting. However, his resume shows that he is in a familiar terrain and may not be intimidated by the enormity of the challenges. He has about three decades of practical working experience in auditing, tax management, advisory and management to clients in the banking, manufacturing services, public sectors and non-profit organisations. He is also an expert in rendering advisory support services to investors in respect of new business start-ups and management of existing businesses. In addition, he has rendered outsourced services in trading, service and manufacturing sectors of the economy.
His first test in office will certainly be how the agency would meet the N8.5trillion target set for it in the 2020 fiscal year. His meeting this revenue target will demonstrate his leadership ability, especially for an administration that has made collection of tax the cornerstone of its economic recovery plans. Though Nigeria has significantly improved its ranking in the World Bank’s Ease of Doing Business index, it has also slipped two points to 159 from 157 in the Ease of Paying Taxes.
The Nami-led FIRS must put necessary structures in place to ensure effective and easier modes of tax payment. He needs the support of the staff of the agency towards making the task less challenging. The agency under his leadership should also review some of the policies of his predecessor, especially the policy that threatened to freeze the bank accounts of tax defaulters. He should commence the implementation of the Finance Bill 2019 which was presented together with the 2020 Appropriation Bill to the National Assembly by President Buhari in October, last year.
The Bill seeks to promote fiscal equity, align local laws with global best practices, introduce tax incentives for investments in infrastructure and the capital markets as well as support small businesses in line with the ongoing Ease of Doing Business reforms. A key part of the reforms is to ensure that small businesses with a turnover of less than N25 million will be exempted from Company Income Tax (CIT). It is expected that this will aid penetration and easy collection of taxes by the agency.
No doubt, that the agency under Nami will have little problem meeting the N8.5trillion target. It may surpass it, with the increase of Value Added Tax (VAT) to 7.5 per cent from the previous five per cent. Other categories of taxes have also been raised as part of government’s efforts to broaden the revenue base through tax.
Already, the agency has issued a 30-day window to enable taxpayers obtain Tax Clearance Certificate (TCC). The agency says it will put a lien on the bank accounts of defaulters. A lien is a legal right to take possession of a debtor’s property as security until the debt is discharged. The invoking of lien is in line with the provisions of Section 101(1) of Company Income Tax Laws of the Federation 2004, and in conformity with Self-Assessment Relations, 2011. The measure will also enable government to achieve sustainability in revenue generation, identification of taxpayers and enforcement of the relevant provisions of the laws in the 2020 budget.
However, government should avoid imposing multiple taxes. We urge the new FIRS boss to address the issue of offshore tax evasion through which Nigeria is reported to be losing about $15billion annually.
We believe that with the implementation of the first Automatic Exchange of Information standard this year, government will achieve transparency in tax administration, enhanced revenue collection and effective service delivery. While we congratulate Nami on his appointment, we want to remind him that success is a function of teamwork. We wish him a successful tenure.