Fowler: FG is Targeting 20% Tax to GDP Ratio
The Executive Chairman, Federal Inland Revenue Service, Mr. Babatunde Fowler, spoke to select journalists recently on the Voluntary Assets and Income Declaration Scheme, the federal government’s tax amnesty initiative, as well as its drive to broaden its
You set a deadline of March ending for a window of pardon for all tax defaulters; the deadline is almost around the corner. What follows the deadline?
What follows the deadline is that we shall follow the laws that deal with tax administration and for those that are not complaint, we shall investigate them and if need be we prosecute them. We shall take all actions in line with the law, which includes the stoppage of their business activities and if need be, the sale of assets.
Talking about prosecution, are you looking at prosecuting the high net worth individuals and big corporate or all tax defaulters? Also, is there a possibility of extending the deadline?
Let me first answer the issue of extension. The issue of extension does not depend on me. It was a decision and approval by all the tiers of government, meaning that the presidency was aware of it and approved it, the governors approved it, it was taken to the Federal Executive Council (FEC), the Senate approved it, the House of Representatives approved it. So, I don’t have the capacity to change that approval. I think the only person that can, for whatever reason decide to give an extension would be the President or the Vice President who oversees the economy, through the Minister of Finance. Now to the second part of the question, every tax defaulters would be prosecuted. People say we should use the 80-20 principle, meaning that we focus that give you 80 per cent of your tax revenue. But when it comes to tax, just like the lady that gave the widow’s might and Jesus said she gave more than the rich men because she gave all that she had. It was not subject to the amount. That is how tax is. You can say you are a big tax payer and that you have paid N1 billion and because you have paid N1 billion, we should leave the N500 million you are owing. Meanwhile, somebody who paid N100,000, paid 100 per cent of his tax liabilities, meaning he was 100 per cent compliant. The organisation that paid N1billion and still had N500 million left, was only 50 per cent compliant. So, you can’t compare them. Tax is based on profit and income. So, what we look at as tax administrators is the level of complaint. That is, we should use same law for those who are paying N100,000 and those who are paying N1 billion.
What was the target amount for VAIDS and how much have you gotten so far?
The target amount we are looking at is $ 1 billion, which is equivalent to N305 billion and this include both corporates and individuals. Now, what has come in so far from the corporate angle is about N20 billion. Now, what people would say is that it seems small. But from our own experience and the experience of those who have had similar programmes, whether it be Turkey, India or South Africa, is that everybody waits till the last moment. So, we have received a lot of enquiries. We have received a lot of proposals, but in terms of payment, they have not paid yet. So, we believe by mid-March, there would be a better appreciation of the value we are looking at. But for us, N305 billion is doable.
There is this believe some people who have political connections cannot be punished by the FIRS. How is the agency prepared to go after them?
Let me put it this way and in few words: I am a nominee of the president and I was approved by the Senate, under the supervision of the Vice President and the Minister of Finance. All of them have assured the FIRS 100 per cent support and none of them have said we should take political considerations into account. None of them have said we should take the status of persons or corporate organisations into account. So, that tells me that we would do our job the way it was supposed to be done. So, there are no sacred cows.
Can you shed more light on the information that the FIRS has compiled a list of Nigerians with property abroad?
We did that even before VAIDS started. We looked at the number of tax payers that were paying under direct assessment, those who pay N10 million as tax per year and those figures were made public. We found out that in the whole of Nigeria, only 943 individuals paid over N10 million tax. And out of those 943, 941, was from Lagos and two were from Ogun State. That tells me that in all the other states of the federation, including the Federal Capital Territory, that there is no billionaire, there is no multi-millionaire. But, when you look at the assets and the vehicles that are on our roads, that tells me that there is something wrong. If you look at the average house at Ikoyi or the average house in the high net worth neighbourhood in Kaduna, Rivers, Onitsha, and other cities, you find houses that are worth over N500 million. So, if an individual has a house worth over N500 million and he did not pay N10 million in tax, where did he get his money from? Now, we are carrying out an exercise on corporate Nigeria and we are doing it nationwide, we started in Abuja. We looked at all corporate organisations that own property. We got a valuation of those assets. We found out that over 2,000 property are owned by corporate organisations that do not pay tax. Now, what the law says is that if you don’t file your returns, we can use an estimated turnover and based on that turnover, we assume you make a profit of 30 per cent and we charge you at 30 per cent. For example, if your turnover is N100 million, we assume that you make N20 million profit and we charge that N20 million at 30 per cent, then you pay about N6.6 million in tax. We found out that we had properties more than N2 trillion in Abuja alone, under corporate names that did not pay tax. We have sent out assessment and we are in court to get a judgement that would let us cease those houses and sell them. We have concluded Lagos and we are nearly completing Kaduna. I believe without doubt that by the time we complete other states, you will find out that corporate Nigerians with property of such would be in multiple of trillion. The same goes for individuals. The whole idea is that all of us must come together and put our little contribution to make Nigeria work. I was in the United Nations recently and the experts came up with a formula and said if any country’s tax to Gross Domestic Product (GDP) ratio is below 15 per cent, it is highly unlikely that they can expect economic or social development in that country. In 2016, we were about six per cent. In 2017, through the support of the media, the FIRS was able to cross N4 trillion, Nigeria Customs for the first time in history crossed N1 trillion. We are looking at the collection of all the states revenue agencies. From the information we have gotten so far, they equally have crossed N1 trillion. That tells us that in 2017, the IGR from tax would be in excess of N6 trillion. Hopefully, by the end of March when we get the actual figure of per cent of Tax to GDP.
But we believe that for government at all tiers to be able to provide services, we must hit at least 20 per cent, so that we can start feeling the impact of government. See, any time we have a good road, it opens up more avenues for residents, for business, we have good healthcare and it improves the level of life expectancy. I don’t see why life expectancy in Nigeria should still be under 50, when other countries have a problem of