FIRS’s New Technological Drive for Tax Collection, Leakage Block
Musa Abdulmumuni writes about the current moves of the Federal Inland Revenue Service towards blocking revenue leakages as well as deploying new technology for its operations.
An efficient tax drive system inarguably, would always serve as the most run-of-the-mill and important government intervention to redistribute income among the population of any society such as Nigeria, with over 200 million people.
Aside from oil, which remains the major revenue source for Nigeria, tax revenue continues to impact the nation’s economy, building government’s fiscal capacity at both national and the sub-national levels to provide the public goods and services that citizens need for growth.
Despite being a veritable alternative system for raising government revenue for development purposes however, not many people are disposed to willful payment of taxes due to a lack of public confidence, official corruption, embezzlement, infrastructure deficit, high levels of evasion, and rising public debt among other issues. Several citizens are still oblivious to the fact that taxation is the key contribution they make towards national development. According to the chairman of the Revenue Mobilization Allocation And Fiscal Commission (RMAFC), Mohammed Shehu, less than 40 million Nigerians are presently captured in the tax net and paying taxes.
Like in many African countries therefore, available reports indicate that Nigeria has one of the lowest tax collection rates in the world at approximately 10.8 percent of gross domestic product (GDP), well below the African average.
President Bola Tinubu appears to be worried about this trend. His decision in July 2023, to set up a presidential committee on fiscal policy and tax reform, is indicative of the government’s readiness to enhance revenue collection efficiency, ensure transparent reporting, and promote the effective utilization of tax and other revenues to boost citizens’ tax morale, foster a healthy tax culture, and drive voluntary compliance.
The current executive chairman of the Federal Inland Revenue Service (FIRS), Dr. Zacch Adedeji who served on this presidential committee, then, as a Special Adviser on Revenue to the President, believes strongly that the administration of President Tinubu is on a mission to reform Nigeria’s tax system and tackle some of the challenges hampering tax collection in the country.
These challenges include multiple taxes and revenue collection agencies, a high prevalence of tax evasion, a complex tax system, and poor accountability in the use of tax revenue. There is the aspect of revenue leakages. Obviously, lack of data in the oil sector for instance has made it difficult in the past to determine the exact number of vessels of crude that is brought into the country and the amount of tax that should be adequately paid.
“Our aim is to transform the tax system to support sustainable development and achieve a minimum of 18% tax-to-GDP ratio within the next three years without stifling investment or economic growth,” Adedeji told reporters at the presidential villa in July, 2023.
The choice of Dr. Adedeji, a consummate tax expert, by President Tinubu to pilot the affairs of the nation’s top revenue agency, may be one of putting a round peg in a round hole.
While serving as Presidential aide, Adedeji undoubtedly also played critical roles in the formulation of the economic direction of the new administration.
One of the earliest promises of the FIRS chairman, was therefore, to build a tax administration that enjoys the trust and confidence of all stakeholders. Along this line, the FIRS boss acknowledges that having a data-driven system that makes revenue targets predictable is a precondition for the realization of the fiscal projections of the government for economic development.
This is imperative for the revenue agency, if it must achieve the mandate of collecting a record N19 trillion in the 2024 fiscal year as set by President Tinubu and legislated for in the budget.
To achieve this huge task, the FIRS boss in February this year, during a management strategic retreat in Abuja, declared that working with his team, the agency would be embarking on a structural transformation, to make the country’s tax collection system more tax-payercentric, seamless, and to encourage voluntary tax payment by both members of the public, as well as, corporate organizations.
A systematic implementation of this reform, would obviously place the agency in a vantage position to raise the unprecedented N19 trillion revenue target, within 12 calendar months.
“The cornerstone of this paradigm shift is the establishment of a customer-centric organizational structure designed to streamline processes and enhance efficiency in our tax operations. We are not merely adapting to change; we are leading it. The forthcoming structure, set to kick off from February 2024, embodies our dedication to modernize and digitize the tax administration landscape in Nigeria.