At a time the country is still in the throes of the ravaging COVID-19 pandemic, the Federal Inland Revenue Service (FIRS) has set what analysts consider a most ambitious target of generating N5.9trillion as revenue for 2021, writes Ibrahim Apekhad" />
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Can FIRS achieve N5.9trillion revenue target in 2021?

At a time the country is still in the throes of the ravaging COVID-19 pandemic, the Federal Inland Revenue Service (FIRS) has set what analysts consider a most ambitious target of generating N5.9trillion as revenue for 2021, writes Ibrahim Apekhade Yusuf

As things gradually get back on an even keel, one area a lot of people are still watching with trepidation however is how businesses can indeed remain profitable in the midst of a ravaging COVID-19 pandemic which has continued to lead to disruption of businesses world over, including Nigeria.

But one organisation that is rather upbeat about the business landscape in Nigeria today is the Federal Inland Revenue Service (FIRS).

Despite the real and present dangers posed by COVID-19, the Service is optimistic that its revenue projection for the year, however ambitious, can be achieved.

While speaking with a cross-section of journalists in Abuja recently shortly after meeting with the House of Representatives Committee on Finance, led by James Falake, on the Service’s 2021 budget defence and consideration of its proposed Revenue and Expenditure Estimates, Nami placed the FIRS revenue projection for 2021 at N5.9 trillion.

According to the FIRS boss, of the proposed figure, non-oil and oil components are expected to generate N4.26 trillion and N1.64 trillion respectively.

He, however, put the cost of collecting the projected revenue at N289.25 billion against the budgeted N180.76 billion in 2020 to fund the three operational expenditure heads for the year.

He said: “Out of the proposed expenditure of N289.25 billion across the three expenditure heads, the sum of N147.08 billion and N94.97 billion are to be expended on Personnel and Overhead Costs against 2020 budgeted sum of N97.36 billion and N43.64 billion respectively.

“Also, the sum of N47.19 billion is estimated to be expended on capital items against budgeted sum of N27.80 billion in 2020. The sum is to cater for ongoing and new projects for effective revenue drive.”

According to him, “the FIRS is optimistic this current fiscal year 2021 will be better than 2020. We shall perform exceedingly well given that our service reforms are expected to yield greater dividends, especially as different parts of tax administration are being automated.

“We are also optimistic that exploration activities will improve in the oil sector and increase the prospect of higher tax revenue from the sector. Similarly, the ongoing reforms by the service together with increased stakeholder collaborations will brighten the prospect of improved voluntary compliance and consequently higher tax revenue generation for the country this year and beyond.”

Responding to a query by the committee on why there was an increase in the recurrent expenditures of the Service for 2021, Nami attributed it to the new salary structure occasioned by recruitment of more staff.

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He said there were about 1,800 staff recruited by the erstwhile management between 2019 and 2020, adding that the Service also carried of about 500 members of staff. “There’s lockdown effect on businesses, implementation directive also for us to study, research best practices on tax administration which involves traveling to overseas and we also have to expand offices and create offices more at rural areas to get closer to the tax payers, we pay rent for those offices and this could be the reason why all these things went up.

“If you have more staff surely, their salary will go up, taxes that you’re going to pay on their behalf will go up, the National Housing Fund contribution, PENCOM contribution will go up. Those promoted you have to implement a new salary regime for them. There’s also the issue of inflation and exchange rate differential,” he said.

A review of 2020 revenue target

From available information, the FIRS total tax revenue in the year 2020 amounted to N4,952,243,711,728.37, a development considered a landmark achievement which represents approximately 98% of the national tax target of N5.076 trillion set for the FIRS by the federal government.

While speaking on last year’s tax receipts, the FIRS boss said the near 100% collection feat was remarkable in view of the debilitating effects of COVID-19 on the Nigerian economy; the all-time low price of crude oil in the international market; business disruptions and lootings during the #EndSars protests.

The FIRS boss also stressed that the feat was possible despite the generous tax waivers granted by the service to ease the impact of the COVID-19 shutdown; additional tax exemptions granted to small companies in the 2019 Finance Act and insecurity in some parts of the country.

Nami noted that the service recorded the feat at a time when the price of oil hit an all-time low.

“In other words, oil which used to contribute over 50% in tax returns through the Petroleum Profits Tax in previous years, accounted for only 30.6% contribution to the tax revenue generated in 2020. The non-oil tax collection was 109% in 2020, 9% higher than the previous year,” Nami asserted.

The executive chairman attributed the FIRS revenue generation success in 2020 to a number of reforms initiated by the board and management of the service under his leadership.

Nami further commended the conscientious taxpayers in the country and dedicated members of staff of the FIRS nationwide for their support and devotion to work, which he said made it possible despite the numerous obstacles encountered by the service in 2020.

How ambitious is N5.9trillion target?

Although the received wisdom out there is that the revenue projection of the FIRS may be overly ambitious, but its Director of Communication and Liaison, Dr. Abdullahi Ismaila Ahmad has a different view.

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According to him, despite COVID-19 and other disruptions, the Service made good its target for 2020, and is even poised to achieve this year’s target if the prevailing favourable environment is anything to go by.

Speaking in an exclusive interview with The Nation he said the N5.9 trillion is not really ambitious after all.

On what are the possible sources the FIRS hopes to generate the bulk of this revenue, he said, “The revenue target for 2021 is achievable and can even be surpassed too and it is going to be anchored on indirect taxes such as VAT, stamp duty, electronic or e-commerce transactions, to mention just a few.”

On what measures have been put in place to reduce the incidence of revenue leakages, and compromises by FIRS officials, he said with automation that has been curtailed a very reasonable extent.

“These days, with the deployment of technology and automation platform, most of the collection hardly requires physical activities. It is going to be collected through third parties. The whole idea is to reduce the contact of taxpayers with tax collectors even those remitting the revenue are curtailed. The mechanism is such that even those remitting this revenue can be curtailed.”

On whether, the Service would be willing to engage consultants like some states are doing to drive up revenues, the FIRS’ media minder said the Nami-led FIRS has never been disposed to using consultants as he believes the personnel within have the right expertise and competences to achieve their set target.

How Financial Act 2020 can aid FIRS’ revenue generation

According to Taiwo Oyedele, thanks to the Financial Act, “The FIRS is now empowered to deploy proprietary or third party payment processing platforms or applications to collect or remit taxes on digital transactions carried out with non-residents. The FIRS may also deploy technology to automate tax assessment and information gathering process, provided it gives 30 days’ notice to the taxpayer.”

Expatiating, Oyedele said, “With these changes, the government seeks to tackle the difficulty in assessing and collecting tax on digital transactions with non-residents, especially on “business-to customer (B2C) transactions, where the Nigerian customers are individuals that cannot self-account for and remit VAT. There may still be some practical challenges with implementing this approach considering the very fluid and complex nature of digital/online transactions.”

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