Anxiety over FG’s agressive revenue
LATELY, NIGERIANS HAVE WITNESSED a more aggressive revenue effort b y the government via announcement of new taxes and levies on the citizenry.
This development has been generating worries in some quarters where...
LATELY, NI GERIANS HAVE WITNESSED a more aggressive revenue effort b y the government via announcement of new taxes and levies on the citizenry.
This development has been generating worries in some quarters where experts hold that the rather strange aggressive drive of the federal government towards revenue generation could be a harbinger of precarious economic realities lying ahead or that the country is broke.
Some of the means recently devised by the FG to further enrich its coffer include the rather controversial increase in Value Added Tax (VAT) from 5 per cent t o 7.5 per cent, indication from the minister of works that toll gates on federal roads would return and the more recent introduction of a card renewal and maintenance fee on National ID cards by the National Identity management commission (NIMC).
The government at the centre has also recently imposed charges on online transactions and payments made via point of sales (POS) channels.
Similarly, the government recently reintroduced the proposal for a nine per cent charges on telecommunication and pay-tv services enjoyed by subscribers in the country, which it tagged Communication Services Tax (CST).
The CST bill, which was initially battled tooth and nail by operators and subscribers in the sectors when first introduced in 2015, was greeted again with even more hostility and battleready opposition leading to its second death on arrival as it resurfaced two months last month.
The government’s voracious revenue drive, in addition, is coupled with increased borrowings which has generated attention even from the international community.
According to experts, this begs the question as to the financial status of the federation.
Finance analysts at the United Capital Plc observed that regarding the actual revenue performance o f the FGN as of H1- 2019 versus the budgeted revenue for 2019, only 29.1 per cent of the projected revenue has been achieved.
Shockingly, the minister of finance noted that it is impossible t o meet 80 per cent revenue performance b y year-end.
“Additionally, Nigeria’s debt profile as o f June 2019 was reported at N20.4 trillion, up 6.2 per cent from December 2018.
“Assessing the severity of debt burden using the ratio of the FGN’s actual revenue t o debt servicing cost as at June 2019, debt service to actual revenue stood a t 54 per cent, implying that the FG spent N54 out of every N100 revenue on debt servicing.”
They noted that this fiscal arrangement questions the sustainability of the FG’s fiscal operation and provides an insight into recent aggressive revenue drive, while they maintained that whether Nigeria is broke or not depends on the actions or inactions of the government going forward.
Defending the position of the government however on its obsession with revenue generation in the current dispensation, Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed ascribed the observed aggressive drive on the part of government to the need for the FG to optimize revenue mobilization potential.
Ahmed, said this in an interview with journalists at the ongoing IMF/World Bank Annual Meetings in Washington DC.
According to her, budgeting is supposed to be based on taxes that a country is able to generate.
She said unless more money is raised by the government to foot its recurrent expenditures and debt servicing, the government would fails in certain regards.
“It is an anomaly for us in Nigeria that our budgets have not been focusing on revenue. What we are trying to do in 2020 is to harness the full potential of revenue mobilisation. The only increase in taxes in 2020 budget is just VAT,” she explained.
She added: “Everything else is just maximising the potential of existing tax streams that we have and we hope that we will be able to do this to be able to move our tax to GDP ratio from the current seven to eight per cent of GDP to 15 per cent.
According to her, the country can only develop in a manner that is sustainable when it is using tax revenues to fund its national and subnational budgets.
“It is an anomaly that we are depending largely on oil and gas revenue, which is a resource that is finite. It is going to go out of existence before you know it.
“So, we have to develop the domestic tax base. The main focus will be on expanding the tax base ensuring enforcement of the existing laws and then blocking leakages.”