From Isaac Anumihe, Abuja
The small number of Nigerian tax-payers has become a serious source of worry for the Federal Government. This is because, tax as a major source of revenue, has surprisingly, failed to contribute enough to the Federation Account with only 40 million Nigerians paying taxes.
Tax evasion in the country is a serious offence because lack of revenue impacts negatively on the nation’s infrastructural development.
Speaking to Daily Sun on the negative effect of tax evasion and the low revenue yield therefrom, the chairman of Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) Mohammed Bello Shehu, saw the need to enlarge the tax net.
According to him, the informal sector has become a major setback to the economic development of the country because majority of businesses in the sector do not pay appropriate taxes to the Federation Account and this impinges on the economy a great deal.
Shehu regretted that out of over 200 million population, only about 20 per cent of Nigerians contribute to the economy through tax payment.
He spoke on this and other political and economic issues, suggested ways to improve tax collection can help the country come out of the woods.
Excerpts:
How increase in tax ‘ll solve Nigeria’s harsh economic situation
You should enlarge the tax base. It’s only about 40 million Nigerians that are paying taxes.That’s too low for a country that has over 200 million population. That’s always the debate in the informal sector and informal economy. What the tax reform or the revenue committee intends to do is to bring a lot of the agencies to become more productive. We are a member of that committee and we have articulated our position and meetings are going to be conveyed. We will communicate what we believe that can add value to that discussion.so that at the end of it we will have a better society.where more people are paying taxes.and the money is being utilised for better services and to build infrastructure so that everybody can benefit.
You should also understand that there are some taxes that the government is not taxing Nigerians. Somebody has an income of N600,000 a year and that same person will import a vehicle of N40 million into Nigeria. A whole lot of things. I believe that the tax agency will look at all those things and collaborate with Nigerian customs. I have always been an advocate that if you import a brand new car, not only your name or your date of birth should be known, you should disclose your National Identity Number (NIN). They should place a search and see the last time you imported car and how much tax you paid to the government. So, I believe this government can do it and they are on the right direction in that aspect.
What we gained from removal of petroleum subsidy
That’s more like a political question and not a technical one. We are in support of the removal of subsidy not because we want to punish Nigerians. The nation can no longer afford that kind of money to be given in and out. It’s going to run us into bankruptcy. It’s not only in Nigeria that we have been subsidising but the entire West African sub-region. And if you look at the consumption rate it has been brought down by about 10 per cent. Over the years, about 30 per cent to 40 per cent of whatever is produced from Nigerian National Petroleum Corporation (NNPC) is taken outside to Cameroon, Niger and Benin. So people were making money at the expense of Nigerian government. So, the subsidy that is removed will free some money for various projects in Nigeria. One of the greatest problems of Nigeria is infrastructure deficit – good roads, good rail lines, better schools, better hospitals. After the removal of subsidy there will be more money for sharing not only to local governments and states but even to the Federal Government. That will allow the system to do more projects. So, in terms of revenue generation, obviously there will be more revenues to be shared among the three tiers of governments.
I was thinking of a figure on amount generated?
We are coming out with a six months report of what has been generated in the last six months for this year; what has been disbursed, to all the three tiers of governments. We have officially forwarded it to the leadership – the president and the stakeholders. But by next week you are going to have those figures.
How many trillions were collected, how much was shared, how much was deducted, what was the cost of collection by the revenue generating agencies; any outstanding liabilities and some other things. Obviously, there are agencies that did very well especially the Federal Inland Revenue Service (FIRS) They actually exceeded their target for this year. One agency that didn’t do very well is Nigerian Upstream Petroleum Regulatory Commission (NUPRIC). They were hovering around 43 per cent or 53 per cent. And of course, the solid mineral sector that is still at an infancy stage in terms of the amount of money that comes into the account. Obviously it’s not as much as expected. Customs performed well but they did not do as well as FIRS.
How can you justify recent salary raise for political office holders?
I knew this type of question will come. I will like to say that categorical that it’s not true. Let me give you a background. If you look at the constitution, it’s our (RMAFC) constitutional responsibility to determine the salaries of political officeholders, the legislature and judicial officers. The constitution gave us the power. In 2007 through 2008, there was a review. From that 2008, there was no single review. Last year, some individuals took the federal government to court. These are some activists concerned about the salaries of judicial officers. I am sure some of you are aware. The court ruled that a judge should be paid somewhere around N10 million. That was the court ruling. Now, they went to the Attorney General. They articulated the position. They sent it to the president.
Of course, there was a recommendation by the Nigerian Bar Association (NBA) from Nigerian Judicial Council (NJC) and so many other interested people. It was a big document and it was brought to us to see how it can be implemented. So, we started working on that. So, along the way, we were also asked to review the salaries of political officeholders and the legislature. So, we combined the three. We did our job. But the lifespan of that administration – Muhammadu Buhari administration – was so short a time for anything to be done. But we have forwarded that particular report. Before that report becomes law, it has to be transmitted to the National Assembly automatically. But the president has to convey to the National Assembly. Then the National Assembly would work it out, agree with it or not agree with it. If they agree, they make a law, amending the previous act and then it would come back to the president and the president will sign it into law. Now, those processes have not been done. With the new government, we are not going to start talking about reviewing it or sending the report again to the government. Because of the challenges the government is facing regarding the removal of subsidy, the issue of palliatives; dealing with labour issues and others, as a commission, we are going to do our work but we are not going to say that it must be now. At the appropriate time, as a constitutional responsibility, we will do it when the climate is ripe. Then we will take it forward to the stakeholders for them to advise on what to do. I want to disabuse the minds of many Nigerians that it’s not true that people are getting jumbo salaries. The salary of a minister is not even up to a million a month.
I know that an average Central Bank of Nigeria (CBN) worker that is not even a director earns more than a minister. People in Nigerian Extractive Industries Transparency Initiative (NEITI), people in NNPC, people in Nigerian Communications Commission (NCC), people in Nigerian Ports Authority (NPA), people in Nigerian Financial Intelligence Unit (NFIU). If you journalists do your research you will discover that there are lots of Nigerians that earn more than the president of the Federal Republic of Nigeria. What is the salary of a governor? What’s the salary of a legislator? Go and do your research. I know some people will say that members of House of Representatives and Senate, get like N9 million or 10 million in a month or N11 million or so. Those are not salaries. Those are operating costs of running their offices which in other societies, the legislator doesn’t have to see that because there’s a structure that once you get elected, you’ll meet that structure from your constituency office – to computers, to logistics, to the size of your constituency. It’s the National Assembly Commission that is supposed to take care of that but the Nigerian system allows a legislator to be given a quantifiable amount of money. But It’s not true that the political office holders are earning jumbo salaries. The president’s salary is not up to N1.5 million a month, N1.35 million or so. The whole president of Nigeria.
Are you still in the business of making states harness their individual minerals?
Well, it’s a commission. It’s the same agenda. It’s a constitutional mandate for us to assist states to diversity the economy so that there will be more revenues coming to states and we have a committee on mobilisation and diversification. Some members are in it and they have been doing a lot. They go round the states to get their comparative advantage. They guide them on how they can harness their resources and even interface with some relevant agencies like Bank of Industry (BOI), Bank of Agriculture (BOA) and African Development Bank (AfDB) and even World Bank. We are all collaborating with the states and we organise a seminar for them. We just did one on gas last year with Bayelsa State and as a result of what we did, somebody brought money and invested. So, that’s an agenda that’s in the constitution for the commission to help articulate and popularise. You are going to be seeing more. We will be doing more collectively. The more you have your economy diversified, the more you have income, the more you pay taxes, the more money you’ll get and the more progress you’ll make and people will get jobs
These states are asking for more than 13 per cent derivative. Are you looking in this direction?
We don’t have a role to play as far as that’s concerned. The 13 per cent is a constitutional issue. No one can tamper with it. In the new Petroleum Industry Act (PIA), there’s 30 per cent for the community. The commission does not have a role to play in any percentage. Ours is to implement what the law says and all the states are getting their 13 per cent of what’s mined in them – whether it’s gas, crude oil or some other minerals. Every state is getting it – from Rivers to Yobe to Borno to Sokoto. If that’s to be amended, we don’t have problem with that and we cannot say that it should be this or that. We leave it to the stakeholders.
Gas flaring management?
There was a release we did a couple of days ago. We had an interface National Oil Spill Detection and Response Agency (NOSDRA) and then NUPRIC. They came and everybody stated his own side and we agreed that we will interface and agree on how we we’ll tackle gas flaring and we’ll not be losing money. We are working on that. Anywhere we see revenue, we try to come in. We try to find out from them what can be done. We advocate for them on behalf of the nation so that everybody will have an understanding.
What’s the ideal funding formula for the commission to maintain its independence?
Well, we will be working on that I will not like to preempt the leadership and the stakeholders but I can tell you that we submitted our proposal last year with the previous administration and it has got to a certain stage. But it’s important for the commission to be properly funded because when we are properly funded we are able to assert our independence much better because as it’s now, the funding comes from one source which is the envelope system of the Federal Ministry of Finance. That’s the federal government. The commission is a federation commission. We deal with the national and the subnational governments. That’s, government at the state level and government at the local level in addition to the federal government. So, we believe that the administration is looking at it and we have appealed to the governors’ forum and believe they are also looking at it. Two weeks ago I was with the Vice President of Nigeria, Kassim Shettima and he agreed with us. He is also one of our supporters and advocates. And even had a discussion with the president and commander in chief on this. Yes, you should advocate for us in order for us to assert our independence.
The commission should be well funded. The funding will give us a better capacity, a better training, a better environment, a better salary and then a better productivity. And then better monitoring. My vision is to see this commission become a world class commission. Maybe after I have left here somebody will say it was during his time this and that was done. We get operational vehicles; we get better offices. You can see the environment of the commission. So, that’s what we hope to achieve and we believe that the government is interested in making more revenues and doing good things for Nigeria.
Harnessing solid minerals from states?
On Solid minerals, NEITI as an agency established a liability based on what they know. Bad taxes from small scale miners that are operating in various places in Nigeria owe certain amount of money and the commission has sent in people to go and engage various states in this exercise to be able to get them to pay and some of them are complying. There was even a component of foreign currency. We sometimes collaborate with law enforcement agencies like the Economic and Financial Crimes Commission (EFCC).
If there’s a Ministry Department and Agency (MDA) or any organisation that decides not to pay for whatever reason we request the services of EFCC and they have been helping in this regard. There was even a case that some of them were trying to fight in the court of law but at some point some of them backed out.
The commission tried to set up a software data connection. Would this facilitate the course of events?
Oh yes, sure. One of the functions of RMAFC is to review the revenue formula for the federal, state and the local and then the horizontal. What the horizontal means is how do you share the percentage of states among states and local governments? How do you share this percentage among the local governments? That means that you have to consider factors like population, landmass, school enrollment, number of hospital beds. Those are some of the indices. Previously, what we did was to request those information manuals and then the commission would go and do the inspection. Of course, we would also get other data from relevant agencies like the Office of the Statistician General of the Federation (OSGOF) and the National Boundary Commission (NBC) and places where they have some data and particular places where we collected data. But all those things were done manually. Somebody will sit down and calculate and then we agree. So, we moved on from that system. We now have a system which is a software and we taught the states and local governments to put in the data in the system. They have a password and then it will come to us and we’ll look at it and collate those data they sent. Then we analyse it and we also send our own team to go to those states and local governments and do a verification and then we bring down the information and input it and finally we agree to have that horizontal formula. Technology is the way to go now. Things are much easier. You can store that data. You don’t have to go looking back to five years, six years. As we have for this year, after next year you update your record and you have a permanent solution to that. That automatically will save the system from the usual way businesses were done.
Then, in terms of revenue generation, the commission is also to have a centre or a data bank whereby all these revenue generating agencies will be able to see real time what comes into the system. We have moved from multiple accounts to single treasury accounts. So we can do these things online. The RMAFC wants to have a system they can join these systems so as these things are coming we analyse. Of course, it’s going to be a long time project. It’s not something you can do in a twinkle of an eye. We have to have the agreement of all those agencies which the commission has been talking about all those years.We have reached a certain level and we are waiting for the right time. The federal government and the states are concerned on how to make more revenues by also blocking leakages. What that will do to us is to save us time of going through documents which, sometimes somebody may decide to have. But if you have a system whereby you do it electronically you will cut down a lot leakages.