Experts divided over FG’s move to centralize revenue collection through FIRS

IBRAHIM QUADRI  and Chinwe Ifezulike-Odita.

Experts and Captains of Industry have started reacting to the Federal Government fiscal Reforms calling for caution and proper study for clarity purpose, even as the FG make moves to centralize revenue collection through the Federal Inland Revenue Service (FIRS), taking the responsibilities off the shoulder of all the 62 MDAs, including Nigerian Electricity Regulatory Commission (NERC) and the Nigeria National Petroleum Company (NNPC) Limited, based on recommendation of the new Presidential Committee on Tax Policy and Fiscal Reforms led by Taiwo Oyedele.

The Experts made this known in reaction to the decision of the FG to centralise revenue collection through the Federal Inland Revenue Service (FIRS) to double its total annual revenue without imposing extra taxes.

It would be recalled that Oyedele, Tax Reform Committee Chairman, disclosed during an interview on Channels Television’s Sunrise Daily breakfast program last week, said the 62 other Ministries, Departments, and Agencies (MDAs) should stop direct revenue collection activities.

Oyedele believes that the Federal Inland Revenue Service (FIRS) should be responsible for revenue collection in Nigeria, as concerns have been raised about the country’s relatively low tax revenue collection rates on a global scale.

“Ironically, our cost of collection is one of the highest. And the reason for that is that we’ve got all manner of agencies. In the Federal Government alone, we have 63 MDAs that were given revenue targets last year, no; actually, in the 2023 budget.

“And two things that would come up from that: on one hand, these agencies are being distracted from doing their primary function, which is to facilitate the economy. Number two, they were not set up to collect revenue, so, they won’t be able to collect revenue efficiently,” Oyedele stated.

“So, move those revenue collection functions to the FIRS. It has two advantages: the cost of collection and efficiency will improve, these guys will focus on their work, and the economy will benefit as a result,” he said.

“If you are Customs, focus on trade facilitation, and border protection, and if you are NCC (Nigerian Communications Commission (NCC), just regulate telecommunications. You are not set up to collect revenue.

“It can be your revenue and someone else can collect it for you. There will be more transparency because you see what is being collected and is accounted for properly. It is also a way of holding ourselves to account as to how we spend the money we collect from the people.”

He argues that the cost of collection is high due to the large number of agencies involved, which are being distracted from their primary functions and are not set up to collect revenue efficiently.

According to him, by moving revenue collection functions to the FIRS, the cost of collection and efficiency will improve, and agencies can focus on their work, which will benefit the economy.

Oyedele also suggested that agencies should focus on trade facilitation and regulation rather than collect revenue. He believes that this approach will increase transparency and accountability in how the money collected from the players in the sectors is spent.

Reactions:

Some analysts have lauded the idea, while others have picked holes in it. One of the experts who spoke to Daily Champion on the matter, a renowned chartered accountant and economic analyst said it was a commendable policy, as “it would block a lot of leakages arising from the current myriad of collectors, some who are just conduit pipes for corrupt politicians.”

He also explained that it would be in the interest of taxpayers, especially manufacturers who sometimes suffer double and multiple taxation. He advised that the policy should be enforced at state and local government levels because that was where taxpayers experience a lot of confusion and hardship.

Asked to clarify, he said that there were instances where some levels of government send out agents to harass, intimidate and cause economic loss to citizens all in the name of” revenue collection”. He hoped that centralizing revenue collection would put a stop to such.

Another economic expert, Mr. Ajaegbu, a former banker and practicing lawyer, commended the policy but opined that it had more demerits than merits. He explained that for a developing nation, that requires all the revenue, it can get, it is a good thing to centralize collection as it would reduce the cost of governance, by getting rid of the multiple agencies currently doing the job.

He also observed that it would lead to standardization of processes and bring in as many people as possible into the tax bracket. He said that he believes the latest technology and best practices in the Western world would be adopted and the FG could rein in huge amounts of money if done properly.

He however expressed fears that like everything in Nigeria, this too may be affected by the Nigerian factor. Ajaegbu said that issue of how the collected revenue will be shared may pose a problem. Since it will now be collected centrally, it may also be shared centrally thus the needs of some local places may be neglected. This may breed discontent and distrust of the government.

He also observed that the policy may throw more people into the over-saturated job market in Nigeria. This is because the agencies currently handling the revenue collection will be left with nothing to do.

Another demerit of the policy, according to him, is that FIRS may focus mainly on “visible taxpayers” thus milking them to death. He gave the example of some manufacturing companies who have relocated to neighbouring countries as a result of the same kind of policy in Lagos State.

Another economic expert who works in the insurance industry but preferred anonymity expressed fears that the policy will bring about “greater tax apathy than there is currently “.

“People have not forgotten the Alpha-Beta example in Lagos. Already this government has brought nothing but suffering and hardship for citizens. People are going to ask for the connection between the taxes they are paying and the amenities, they are supposed to be enjoying? Paying taxes here is just putting more money into our coffers for corrupt politicians to continue feeding fat on”.

He said that people are fast losing faith in the current government based on its recycling of corrupt political appointees.”

On Channels Television, a few days ago, a PDP Politician, Mr. Segun Sowunmi accused the current government of giving all the juicy political posts to Yoruba people but it is all Nigerians that are expected to pay tax.

Perhaps Mr. Oyedele and his team would need to take time to implement the fiscal policies in order not to worsen the already bad situation in the country.

Also, a financial expert, Mr Joshua Oderinde has given his nod to the tax reform initiative being proposed by the Federal Government, saying such an innovation should be given a trial.

Speaking with Daily Champion in a telephone interview on Thursday Oderinde argued that the innovation would lead to consolidation of revenue.

While backing the reform, Oderinde said, “My first reaction to it is that such innovation should be given a trial and time.

“There is no perfect system, we should start and we begin to improve on it. We should not throw away such a new idea,” the financial expert stated.

He believes the reform would lead to consolidation of revenue collection, saying however that proper monitoring would have to be carried out for effective implementation.

He added, “We should do proper monitoring. Positive side of the reform will be to monitor and consolidate our revenue collection.”

Dr, Joe Abah, former Director-General of the Bureau of Public Service Reforms in Nigeria, in a statement , said that the cost of the collection will go down if FIRS is made the only agency that collects revenue on behalf of the government.

Dr. Abah said that the Federal Government would need to amend the FIRS Act, before going on to ask the FIRS to collect everything.

He said, “However, FIRS has not shown that they are any more efficient or less corrupt than any other revenue-collecting agency, like JAMB. So, there is work to do on that score.

“There is also the possibility that illegal, under-the-table, collections will increase to bypass FIRS. So, there’s more work to do there because even what we are getting from them now may dry up, at least in the short term,” Dr Abah said.

Dr. Boniface Chizea, Chief Executive Officer of BIC Consultancy Services said that the proposal to centralise revenue collection by the Tax Reform Committee is hanging and lacking clarity. According to him, we need more details or better clarity!

He said, “If the revenue collecting bodies should stop doing so, which is their core function, we have not been told how such revenues will be collected going forward.

“If this means we want to explore the tech option, what progress has been made in that respect?

“We caution that we have had enough of taking a leap in the dark as we just experienced with subsidy removal. There must be thorough study and arrangements put in place before any potentially disruptive measures are further experimented with again,” Dr, Chizea said.

Adetayo Adegbenle, the Executive Director of PowerUp Initiatives for Electricity Rights (PowerUp Nigeria), expressed hopes that the Tax Committee’s position might help fast-track the demise of NBET and the transition to bilateral contracts between the Discos and Gencos.

He however called for clarity in what the FIRS and the Presidential Tax Reform Committee intend to do through the recommendations.

A source at NERC informed  Daily Champion that anyone is free to talk or make recommendations. He added that any serious recommendation, such as centralization of revenue collections in Nigeria, will be subjected to further scrutiny at the appropriate time.