Enhancing government revenue in time of economic recession

Economists observe that the current economic recession may drag Nigeria’s economic growth if there are not adequate plans to address it. They note that the militancy, resulting in the destruction of fuel pipelines in the Niger Delta region and foreign exchange restrictions, among others, have in recent time adversely affected Nigerian economy. According to them, read more......
the development has also resulted in dwindling revenue generation and inflation. With the reduced volume of income of the nation, they recall that many states in the country are finding it difficult to pay salaries and meet other obligations while the Federal Government has had to intervene in state finances. Worried by the development, the Federal Ministry of Finance recently organised a retreat with the theme “Enhancing Revenue Generation for Sustainable National Development’’ in Abuja. Participants from all revenue generating agencies of the country, economic analysts and relevant stakeholders, among others, attended the retreat. The participants noted that the retreat presented an opportunity for key players in government revenue generation to make plans on how to meet government’s needs for funds to keep its promise to the people and curb inflation. Explaining why other agencies should expand sources of revenue, Nigeria Customs Service Comptroller Tukur Haruna said that in the first quarter of 2016, the service collected N160 billion of the N229.3 billion targeted for the period. He said this translated to a shortfall of N69.3 billion or 30 per cent of the target for the first quarter, citing some government fiscal and monetary policies as reasons for the shortfall. He said the Central Bank of Nigeria’s decision to ban the importers of 41 items from getting foreign exchange had also impacted negatively on the service revenue projections. “Government needs to improve road networks leading to the ports and some border stations such as Tincan Island, Apapa ports and the Lagos-Badagry corridor,’’ he said. In his speech, the Executive Chairman, Federal Inland Revenue Service, Mr Tunde Fowler said the service had achieved 73 per cent of the N4.2 trillion projected revenue in 2016. “We still have a number of companies that have yet to pay their taxes and so we will start the process of enforcement. “There are currently five major sectors that are not as tax compliance as they ought to be. “We are going to focus more on sectors such as telecommunications, aviation, multinational corporations, financial institutions and power,’’ he said. Fowler said the service had also captured 700,000 existing companies that had never paid tax into its database. He said that the service’s strategy was to improve revenue generation by improving the number of entities that paid tax and ensuring that those entities paid the right tax. He noted that the service had deployed technology to improve the performance of the service in tax collection to ensure accountability and transparency. In the oil and gas sector, the Petroleum Products Pricing Regulatory Agency said that taxation of petroleum products such as fuel, diesel, kerosene and gas holds huge revenue potential for Nigeria. In its report to the Ministry of Finance, the agency the introduction of taxes on petroleum products would supplement the revenue lost due to the fall of oil prices at the international market. It noted that there were three different taxes that could be charged which the agency’s pricing template did not accommodate currently such as highway maintenance, government tax, import tax and fuel tax. According to the report, if environmental tax, consumption tax, fuel tax, VAT, import and excise tax are included in the final pricing of petroleum products, they will provide opportunities for petroleum products to provide direct funds for other sectors. For a robust revenue base, the Revenue Mobilisation and Allocation Commission insisted that Value Added Tax (VAT) should be reviewed upward from 5 per cent to about 7.5 per cent. The chairman of the commission, Mr Shettima Gana said that Nigeria’s current VAT rate charged on cost of goods and services purchased or sold was one of the lowest in the world. “South Africa’s VAT is 14 per cent, in Togo, Senegal, Guinea and Chad, it is 18 per cent while in Niger Republic, it is 19 per cent,’’ he observed. He urged the Federal Government to start the process of increasing VAT to between 7.5 per cent and 10 per cent. But Mr James Naiyeju, a former Accountant-General of the Federation, cautioned against increasing VAT. “Government should not increase tax rate especially VAT, thereby causing more hardship; some people are advocating increased VAT rate about three years ago, then I would have agreed, but now, I can’t agree with that. “Leave the economy to reflate again and maybe in a year or two when the economy is back then you talk about increasing the VAT rate. “You cannot increase the VAT rate now because it is going to bring more additional burden. But you can expand the tax base,’’ he said. Naiyeju advised that deregulating key sectors of the economy and improving tax collection could improve government’s revenue base. He also advised the Federal Government to hand off the exploration of mineral resources in the country to encourage more private sectors’ participation. Irrespective of these views, Minister of Finance Kemi Adeosun assured Nigerians that the Federal Government’s drive for enhanced revenue generation would not be a burden to Nigerians. She said the administration of President Mohammadu Buhari was firmly committed to turning this economy around by mobilising capital for investment in the essential infrastructure which would drive economic growth. The minister said the revenue focus would not burden Nigerians but would ensure that all revenue due to Nigeria’s government, irrespective of the source, was collected with a high degree of efficiency. She, nonetheless, expressed the determination of the Federal Government to work with the private sector when necessary to maximise the nation’s revenue potential. “The ease of doing business has been cited as one of the key drivers of economic growth and Nigeria has already set targets for improvement in this regard. “Accordingly, in our drive for revenue, we must look for opportunities for cooperation and synergy through the three tiers of government. “Single collection of multiple levies must be pursued where possible to maximise the convenience and efficiency of our collections,’’ she said. In whatever methods chosen to improve the nation’s revenue base, observers plead with the Federal Government to tread carefully in its quest to boost non-oil revenue generation through tax. According to them, in as much as government needs money to take care of the people, the underlining word is people who should not be burdened with unfriendly tax regime.(NANFeatures)

Category: NATIONAL NEWS, NEWS