My FIRS change efforts that grew Nigeria’s tax revenue to $30bn
Revenue grew from N1.2trn in 2004 to N4.6trn in 2011 Nigeria registered on global tax map – ATAF, GFTEITP Staff capacity taken from primordial to professionalism
UNTIL 2004 when IFUEKO OMOIGUI-OKAURU, the chartered accountant, chartered tax administrator and management consultant was appointed the executive chairman of Nigeria’s hitherto shambolic Federal Island Revenue Service (FIRS), not many knew the agency could play a major role in Nigeria’s quest to generate revenues through taxes from corporate and individual citizens. One thing was obviously lost on managers of the Nigerian economy before then. It was the fact that the agency was supposed to be run as a professional institution with a private sector eye. Once Omoigui-Okauru was appointed the Nigerian tax czar, the ex-Arthur Andersen, she set to work to put professionalism into national tax administration in Nigeria. It is largely the work that she did that has become the golden standard for measuring the work of anybody that has come and would come after her as the executive chairman of that institution. Just over a year ago, Omoigui-Okauru was appointed the 2019/2020 Africa Initiative for Governance (AIG) Visiting Fellow of Practice at the Blavaknik School of Government (BSG), Oxford University, a fellowship that allowed her to reflect and discuss her time as Executive Chairman of Nigeria’s Federal Inland Revenue Service (FIRS) between May 3, 2004 and April 9, 2012, with lessons for Public Service Reform. Penultimate week, following the end of her fellowship, Omoigui-Okauru, at a public lecture hosted by AIG and BSG, shared the outcome of her one year reflections, on the topic: “Transforming the Public Sector in Nigeria: Reflections from my Leadership of Federal Inland Revenue Service”, attended by Business A.M.’s BEN EGUZOZIE, who captured the essence of her presentation.
BEGINNING WITH A BELIEF in the value of the tax administrator and proactive stakeholder management, strategic management as a critical first step to change, Nigeria’s tax agency, the Federal Inland Revenue Service (FIRS, under the watch of Ifueko Omoigui Okauru as executive chairman, 2004–2012, witnessed an astronomic fourfold increase – while the agency also underwent the first strategic restructuring and professional transformation in its history.
Omoigui had clear reform objectives upon assuming office: to increase voluntary compliance through a more equitable system, more efficient system; strengthening FIRS by adequately empowering its human resources to act as required; eliminate obsolete and obscure provisions, plus loopholes in laws; strengthen penalties & sanctions in line with current realities; increase revenues collected/revenue yield to government; increase funding available for development; increase the stake of Nigerians in the development of Nigeria.
She then set out: to triple non-oil revenues by 2007, and grow overall revenues by 25 percent year-on-year. When non-oil growth was largely achieved in 2007 (N265.1 billion – 2003; N714.9 billion (vs N795.3bn) – 2007), her goal focused on increasing collections by 25 percent yearon-year. She focused on the achievement of set goals at every meeting with staff and stakeholders. As the reforms weighed in, tax collection figure jumped from slightly below N1.2 trillion (about $7.9 billion) in 2004, to over N4.6 trillion (over $30 billion) in 2011, while FIRS moved to become a modernized tax agency, with a modernized team that had a clear roadmap.
By the time Omoigui-Okauru was leaving office in April 2012, the FIRS – formerly the Federal Inland Revenue Board (FIRB) with 7,200 staff, 80 percent of which was seconded from the federal civil service with no skill in tax administration – had about 7,000 staff with 80 percent professionals, located in every state of the federation and the Federal Capital Territory. The service had also secured an undisputed place on the international tax map – with the agency contributing to the development of a new United Nations Model Convention for Avoidance of Double Taxation between developed and developing countries. Also, Nigeria was invited and joined the Organisation for Economic Cooperation and Development’s (OECD) Global Forum on Transparency and Exchange of Information for Tax Purposes in 2010. On the African continent, Nigeria was on the front row with other African countries
in the establishment of the African Tax Administration Forum, (ATAF) and the West African Tax Administration Forum (WATAF). Nigeria also represented the West African region in the ATAF Council and chaired its finance and audit committee. Nigeria today chairs WATAF whilst also acting as its secretariat.
Omoigui, who joined FIRS in April 2004, speaking on the topic: “Transforming the Public Sector in Nigeria: Reflections from my Leadership of Federal Inland Revenue Service” at the 2019/2020 Africa Initiative for Governance (AIG) Visiting Fellow of Practice at the Blavatnik School of Government, Oxford University, London, said, from the onset, her mindset that drove the change efforts was to use her position (as FIRS executive chairman) as an opportunity to bring development to Nigeria her country.
“It was about restructuring the organisation and bringing a sense of purpose to every single staff. I was driven by years of experience in leading strategic planning and change management engagements, that placed in me an unchanging belief of the importance of inclusion and buy-in and alignment across the organisation as critical to organisational success. I was also driven by my inbuilt sense of personal sacrifice, built over time from my very early years, to disregard self and focus on the results expected by those around me,” she said.
How did Omoigui Okauru embark on the reforms? She said, in commencing the reform journey, she and her team, which she described as “modernisation team”, had a home-grown reform roadmap completely developed by the people of the service (FIRS). “Guided by my skills as a strategy consultant, we put up an internal team driven by an internal recruitment process that sought to identify the best persons in the service to work with as part of what we then called the modernization team. I had decided in joining the service, to join alone, so as to assess first-hand the persons I would be working with. I was advised and I agreed, that starting with an external team would not enable me give those within a clear opportunity, and that it could colour my assessment of the team. I was glad that I took that counsel. It was one of the best decisions that I took. Some members of that internally recruited team were with me through the first and second terms of my tenure. And are still with me, till date and where necessary, as I work on different consulting assignments,” she said.
All these were helped by the federal executive council of former president Olusegun Obasanjo administration, which pioneered perhaps Nigeria’s first ever tax reform meeting in 2004.
Omoigui Okauru said she took advantage of the support of donor agencies such as the World Bank, GIZ, DFID, and the International Monetary Fund (IMF). In the absence of financial resources, WB, GIZ and DFID came in very useful in supporting the reform efforts. The IMF was particularly useful in technical consulting and resource support around tax administration and designing and aligning our organisation to the way the FIRS should operate, bearing in mind our own society and context, she explained.
The former FIRS boss used a seven-pronged reform strategy to turnaround a tax agency whose earlier history was replete with elemental operations as an appendage of the Nigerian federal civil service. These are: funding and autonomy; capacity building, improved structure and staffing; reengineering and automation, human resources processes, finance and procurement processes; audit of oil and gas/large sector taxpayers; taxpayer education and services (TPES); strengthening investment and enforcement, and automation collection and tax administration system.
The essence of her reform strategy flanks hinged strongly on securing funding and getting autonomy of the FIRS, which had initially depended only on staff productivity bonus fund, to fund its operations. “There was need to fund the agency. The FIRS reckoned that it was necessary to have sufficient funds in a sustainable manner to enable the service carry out the numerous activities it deemed essential for the turnaround of the tax system. Some of these activities included its ability to recruit competitively, pay reasonable wages and train and retrain staff,” Omoigui lectured from her 38-page written exposé.
She believed strongly that to achieve this required capacity building, improved structure and staffing: getting the FIRS improve its capacity to do its work well – not just sending a few staff on training. Capacity building, according to her, involved instituting a legal framework on level of FIRS autonomy, organisation structure and design – top, middle and other levels (design, assess, redesign until it fits); people: leadership paradigms (see - do - get model of change), recognition of the person as a human being, belief in learning and re-learning, belief in inclusion, transparency and accountability, leadership capacity, alignment of staffing to the structure, attitudes and behaviours, organisational culture, decision-making, compensation and benefits, reward and recognition, career development, performance management, other intrinsic motivators, technical competencies, managerial and personal competencies. There were also systems/ institutionalization, which is development of the human capital management function, functional policies and process design and redesign, documentation and learning, use of technology; improving the work environment – the ambience and supportive environment.
“We also used the design of structure to determine the additional staffing needs of the service leading to clarity around what positions were needed and what kind of staff was needed for recruitment to fill gaps identified. This influenced the massive recruitment that the service embarked upon and advertised, starting first with internal recruitment to seek those within that meet those needs before opening it to the general public to plug skill gaps that were not available. While the recruitment effort was largely successful, the principles behind (it) may also not have stuck as the employment crisis in Nigeria has made the FIRS a mecca for persons seeking employment, even if there is no identified need being met or clarity around the exact positions being filled,” Omoigui said.
On the people end, the FIRS enabling law (FIRSEA) 2007 enabled a number of activities to take place. Compensation and benefits packages were enhanced. This led to other valid legislations such as: Value Added Tax (Amendment) Act 2007; Companies Income Tax (Amendment) Act 2007; National Automotive Council (Amendment) Act 2007, and Personal Income Tax (Amendment) Act, 2011.
Training was aggressively done domestically and internationally, with everyone based on their functional need, given the opportunity to learn. Training and retraining of FIRS staff, attraction of crucial skills into the system, and the retention of its good hands were seen as core to the FIRS bid to attain its set goals. FIRS management made it mandatory that all persons due for promotion and conversion/ upgrading must have gone through either a special technical refresher programme for staff that had benefited from the last training conducted over five years earlier, or preliminary inspectors course, or final inspectors course, or other programmes as may be relevant for the cadre/function. As a result, by the end of 2006, more than 3,836 of the service’s 7,200 staff had been exposed to one training or the other, 142 of such trainings were international. The work environment was also improved – rebranding of FIRS buildings/offices nationwide.
Of particular mention in Omoigui’s FIRS change efforts is the automated collection and tax administration system. In the absence of a unique identification code in the country, FIRS introduced the Taxpayer Identification Numbering (TIN) system, with a format that aligned with the standards of the Nigerian Identification Management Commission (NIMC) such that it would be ready for harmonisation whenever required. It started plan to align TIN with the Corporate Affairs Commission (CAC) and the Nigeria Customs Service (NCS). Recently, the alignment with CAC was achieved, while that of NCS is closer to being done.
Omoigui’s achievements over an eight-year reform-propelled headship of FIRS are summarized in seven areas of: belief in the value of the tax administrator and proactive stakeholder management; strategic management as a critical first step to change; rebranding and communication about a new order, and the need for citizenship participation in governance; a national tax policy, a FIRS Establishment Act 2007 and other legislations; securing a place on the international tax map.
Meanwhile, the FIRS reform strategy earned Nigeria international acclaim, improving the profile and reach of the FIRS and Nigeria on tax matters. It created strategic relationships that the country must continue to leverage on for the benefit of the Nigerian tax system. Under Omoigui, FIRS contributed to the development of a new United Nations Model Convention for Avoidance of Double Taxation between developed and developing countries; contributed to discussions aimed at improving the methods for transfer pricing and exchange of information between countries; negotiated and signed a number of agreements for the avoidance of double taxation and prevention of fiscal evasion with other countries. For instance, Nigeria was on the front row with other African countries in the establishment of the African Tax Administration Forum, (ATAF) and the West African Tax Administration Forum (WATAF). Nigeria represents the West African Region in the ATAF Council and Chairs its Finance and Audit Committee. Nigeria Chairs WATAF whilst also acting as its Secretariat. Nigeria was invited and joined the Organisation for Economic Cooperation and Development (OECD), Global Forum on Transparency and Exchange of Information for Tax Purposes in 2010.
Omoigui said her lecture was set out to demystify public service – “In my view, the difference between public and private service is that one is in the public eye with accountability to and expectations from a wider audience and multiple stakeholders; the other is private, but may, depending on the sector, have multiple stakeholders as well - in both instances, service is the critical word; communicate that achievement of goals is possible no matter the terrain, but it does take a lot of strategic thinking (timing, the team, trust consistency in processes that are fair and objective to all), capacity to execute, personal sacrifice and doggedness, to make it happen; demonstrate that for the person expected to lead the achievement of goals, your readiness for the job at the particular time, how you frame your thinking and goals, determining what you can or cannot do, and how you embrace the people around you, matters in keeping you focused on achieving the goals set.”