By Omoh Gabriel, Business Editor
The federal government has raised alarm over un paid corporate and personal income tax in the country saying it would collaborate with state and local government councils to ensure that Nigerians pay their taxes.
Speaking at the Chartered Institute of Taxation in Lagos on Friday Minister of State for Finance, Mr. Remi Babalola said ‚ÄúThere is also alarming volume of tax debts owned by companies, institutions and MDAs to government, raising question of whether the current penalty for defaulters is adequate.
‚ÄúThis is unacceptable and must be stopped. Government is currently studying the situation and will soon review the penalty for defaulters. The Federal Government has put in place appropriate measures to eliminate inefficiencies, corruption, leakages and all other imperfections in the system to enhance the revenue of the government. Additionally, steps are being taken to make revenue generating MDAs to accurately disclose earnings, payments and remittances to the Federation Account.
‚ÄúIndeed, it has been revealed that debts on Withholding Tax (WHT), Pay As You Earn Tax (PAYE) and Value Added Tax (VAT) are put at over N260 billion and over US$260 million owned by companies, institutions and MDAs to government. He said that four bills remain outstanding and they are; the Personal Income Tax (Amendment) Bill ‚Äì to reduce personal income tax; the Petroleum Profits Tax (Amendment) Bill ‚Äì to improve overall tax administration; the National Sugar Development Council Act (Amendment) Bill ‚Äì to remove sugar levy; and the Customs and Excise Tariffs Act (Amendment) Bill ‚Äì to remove sugar levy. He urged the National Assembly to speedily consider these Bills with a view to ensuring their passage in the interest of the country.
Continuing the Minister said ‚ÄúIndeed, the process of commissioning a process audit of all revenue-generating agencies has commenced. Besides, as a measure of improving the nation‚Äôs investment climate, the Government has rolled back excise duties on selected products as part of efforts to encourage the manufacturing sector. More importantly, the Government is determined to ensure that taxes are certain, fair, easy to understand, straight forward to pay and economical to collect.
The Minister also said ‚ÄúInvestigations have revealed that many individuals, especially the self-employed, and organisations are either not in the tax net or under taxed. The government is currently collecting far less in income tax, individuals and corporate, including withholding taxes, than it should. The self-employed persons outnumber those in paid employment by ten to one ratio at least.
‚ÄúIn terms of earnings, on average the self-employed earn about four times more than others in paid employment. Yet the tax yield from personal income tax by direct assessment is on the whole less than 10 per cent of the yield from PAYE system. Other taxes like Capital Gain Tax (CGT) and Stamp Duty are only paid by those who have an urgent need to perfect their property transactions. Government, therefore, intends to continuously revamp tax collection machinery through restructuring and strengthening for more effective collection.
According to Babalola ‚ÄúWe expect improved collaboration rather than friction between and amongst Federal, State and Local Government authorities to enhance tax revenues. Hence it is imperative that the Joint Tax Board must operate effectively in its task of harmonizing the regulations and management of taxes among all tiers of government. Government is aware of the need to enhance revenue through broadening and deepening the tax base, effective surveillance efforts and aggressive monitoring by the relevant government agencies.
‚ÄúIn this regard, efforts are on to reform the current tax system in order to enhance revenue. The proposed tax reform is aimed at addressing multiple taxations and the need to strike a balance between governments‚Äô lawful need for revenue and the desire to encourage investors. Over the years, there have been several policies aimed at tax compliance by individuals as well as corporate organizations. The bottom-line of such policies is the desire by all tiers of government to derive high revenue from tax. Our charge is to be proactive and look beyond the challenges of the moment to reposition the economy to effectively meet its present and future growth needs, which all Nigerians will be proud of. No doubt, we all appreciate the challenges before us and would therefore be willing to collaborate and cooperate with the Government to move the Nation to an enviable height.
‚ÄúThe FIRS has generated substantial revenue in the last four years but not sufficient for development. Experience has however shown that the most reliable source of revenue is taxation. It has a correlation with the level of Gross Domestic Production (GDP). Thus, with increase in the GDP, it is almost automatic that the revenue from taxes will increase. Apart from its revenue generating objective, taxes could be used to stimulate economic development as well as for income distribution and redistribution. It could also be used to stabilise the economy in periods of economic challenges, such as the current situation we are in. It is therefore imperative for our country to have in place a robust tax system with little or no opportunities for evasion, avoidance and non-compliance.
‚ÄúAs you are aware, revenues generated by Government to date are insufficient to meet our development needs. While our revenues have in the aggregate declined, reports have indicated that we need about 50,000 MW of electricity from our present 4,000 MW. Roughly estimating the need to immediately overhaul the power situation to achieve about 25,000 ‚Äì 30,000 MW for our present level of development, and based on the estimates of about $1.75m per MW for new infrastructure ‚Äì combined with transmission and generation, the Nation would require about $36.75bn – $45.5bn (N4.4 ‚Äì N5.46 trillion) to fund infrastructure development. This amount averages at about 50% of the amount of monies allocated to the States and Local Government over an 8 year period.
‚ÄúAlso, an estimated 12- 16 million units of housing deficit by the recent reports of the United Nations Centre for Human Settlement (Habitat) will cost the Nation over between N42 ‚Äì N56 trillion Naira to fund, based on an estimated average cost of N3.5 million per housing unit. Besides, provision of educational infrastructure at primary, secondary and tertiary levels will require no less than N20 trillion per annum. In all of these, we have not considered the cost of health care, provision of incentives to encourage individual and communal development, provision of social amenities for the young and old, as well as the sheer running of the public service.
‚ÄúMeanwhile, total monies allocated from Federation and VAT pool accounts, including excess crude allocations, for the period from June 1999 to May 2007 to the three tiers of Government, amounted to N16.5 trillion, with over 85 per cent derived from crude oil and crude oil related revenue. Therefore, we are dependent on a revenue source that is neither sustainable nor enlists the collective will and accountability of the people of Nigeria. Indeed, a close examination of the Nigerian tax system today will reveal that the three tiers of government will find it extremely difficult to survive without oil revenues which accrue to them by way of allocation from the Federation Account.
‚ÄúIn 2008, about 76% of the income budgeted by the Federal Government came from oil and gas. Much of the other 24% came from the revenue sources such as VAT and customs and excise duties. Despite the wide prevalence and massive turnover of incorporated companies in Nigeria, they only contributed a paltry 6.3%. With the dwindling fortunes in the international oil market coupled with the disruptions in the Niger Delta, this signifies that States with low Internally Generated Revenues (IGRs) will find it difficult to survive the current precarious situation. Any State that does not generate 15 per cent of its total revenue internally may need to adjust or realign its policies and strategies in view of current realities.
‚ÄúThe need to reposition non-oil tax revenues as the number one source of sustainable revenue for national development cannot be over emphasised. This underscores the need to continue with the ongoing tax reform initiatives at all tiers of government. For effective tax reform, collaboration within the Federal Government and State Governments, between States, between the Federal and the State Governments is critical. Central to effective tax reform is having effective access to the right information, having the right skills in sufficient numbers, and working within the right systems which should be automated with minimal human interference, especially in determining tax assessments and collecting tax dues‚Äù he said