A Job Well Done by FIRS for the Improvements in Tax

The Federation Account Allocation Committee (FAAC) meeting for June 2016 revenue distribution was delightful on account of the huge surge in resources shared amongst the tiers of government.

A total of N559 billion was shared as against N305 billion in the previous month. It is heart warming, not just because of the increment at a time that all the tiers of government are cash-strapped due to the crash in oil revenue. Rather the good news lies in the reversal of the age-long predominance of oil revenue in the fiscal profile of government without the fanfare. 

In June, non-oil revenue was 70% against 30% for oil. Silent revolution! 
But just before this development, however, the Chairman of the Revenue Mobilization, Allocation and Fiscal Commission (RMAFC), Shettima Gana, had called for a 50% increase in Value Added Tax (VAT) from 5% to 7.5% as a means of achieving this same objective of increasing government revenue.

This position is not attractive. The call came amidst indications from the National Bureau of Statistics (NBS) of a dire situation in the economy regarding growth, inflation and purchasing power.
Growth had reversed since last year and entered the negative side in the first quarter of this year. The Federal Government has already declared that second quarter figures will be negative also, meaning that the economy is in recession. This is hardly the time to increase tax.

The same NBS also reported that inflation has surged to 16.5%, about the highest in 11 years as the rising trend has been consistent since last year. Is it under this circumstance that the tax rate should be raised?

The cumulative effects of these and many more adverse economic statistics (including job losses) have led to worsening of the purchasing power and the standard of living of over 90% of Nigerians. Yet somebody in high public office was calling for an increase in taxes to increase the misery. This is atrocious!

We are pleased that the FIRS has risen to the challenge of putting taxation in its rightful place as the driver of Federal revenue by simply bringing more companies to pay their taxes. We hope the state Inland Revenue Services (IRS) will emulate it responsibly.
We need to point out to the FIRS, however, that the tax net has not been stretched to its limit. So we encourage the Service to leave no stone unturned until it achieves the target of bringing in the additional 700,000 corporate tax accounts into its basket.

We also hope this is not a flash in the pan but a trend that will take Nigeria out of the economic recession to a future where non-oil revenue dominance will be taken for granted.

Source: Vanguard