Good governance is critical to sustaining IGR growth in Nigeria –CEO, Discovery Cycle Professionals
As a whole IGR, as we all understand, it is just like other classifications of taxation and revenue in the country is an option that has not been properly explored in this country, because we live in an economy that is oil dependent and a rent seeking economy. So, when you have an economy that is tied to rent collection definitely, taxation and revenue will not be as developed as it ought to be.
What are these unexplored IGR potentials and how best can the government explore them?
The potentials are so many; in the first instance, at the level of state governments, that is the sub-nationals, they have incredible potentials of IGR. Although some are doubling or tripling their current collection without taking some practical steps needed to make it work even more efficiently.
There are basically three areas in taxation that governments globally must have to adopt, in order to get it right. It is a global benchmark that everywhere you go, it is like that, and once you get it right, you are done. And where are these important areas? They are assessment, collection and accountability. These are the three frameworks that enable a people to build any efficient tax system or administration upon. Once you perfect the areas of assessment and collection, and accounting for the process, then you would have an efficient tax system. However, to achieve this, one would have to look at four other areas; that means; for the three areas to be perfected, there must consideration for four critical intervention areas.
In Nigeria, I think we have gotten it right, because at the federal level; we have the Federal Inland Revenue Service (FIRS), and at the state level, which is the sub-national governments, there are states boards of internal revenue. And these states boards of internal revenues are established by personal income tax Act (PITA); they are the ones that designate the various states internal revenue boards as tax authorities across all the thirty-six states. However, the only abnormality we have is the Federal Capital Territory (FCT). In the FCT, there is no designated tax authority; why, because the Personal Income Tax Act, which designated various tax authorities in the country did not make provision for the Territory. By the virtue of the law establishing the Abuja as the nation’s capital, FCT is not considered as a state; so it does not have same status with that of a state in the country to qualify it to have a designated tax authority.
As it is today, Personal Income tax of residents of the Territory are been collected by FIRS But there other taxes that ordinarily if FCT her own designated Revenue authority would have boosted her IGR base. Of course Abuja has huge potentials when it comes to IGR but because there is no designated revenue authority that would have complimented or even completely substitute what FIRS is doing, these potentials are not adequately explored. Also, you would find that at the FCT the collection system is not as organized as what you would find across the states, no thanks to her inability to have an independent tax authority like the states do.
Lastly, there is the need for technological infrastructure sufficient enough to drive the tax system in place. Apart from this, with the technology in place, it makes tax compliance very easy as it is friendly. As a taxpayer, of what sense does it make for me to spend say N500.00 transport fare to enable me go and pay one thousand Naira tax to government? It doesn’t make sense. So there should be a way or window that makes it easy for people to pay their taxes as friendly as possible. Notwithstanding, with the right mechanism in place, I have confidence that IGR potentials at the sub-national governments would be adequately explored. So, there is the possibility of state governments doubling or even tripling their current IGR growth.
As a consultant and adviser on IGR to the NGF, what have you done and intend doing to water down the need to harness the huge IGR potentials in the 36 states by their governments?
In 2009, we had the first ever IGR conference, where we brought all the governors to participate. The idea at that time is that there was a global recession; there was dwindling fortunes of the total revenue collection, as a result revenue base reduced drastically. But as a consultant to the governors’ forum, I was asked to organize the conference, and we were able to successfully hold that conference and came up with a clear path of what the states should go and initiate and implement. It was designed for state by state on how their IGR base can be enhanced.
And the good news about it is that a lot of governors adopted the plan and went ahead to start implementing them in the various domains.
Also, we have a peer review system, where we had opportunity to go round the whole 36 states of the federation. And going round all the 36 states gave us the opportunity to talk one on one with the their various revenue departments, during which we were able to advise them on best practice and then, what they can learn from their neighbours; because they don’t need to go to America and or the United Kingdom (UK) or any developed country so as to learn from them.
As a state, you don’t struggle with IGR issues, what you should is just go to Lagos, and they would show you how were able to develop theirs, so that you can easily replicate same in your state. Because the governor is the number citizen in a state and the chief executive officer of the state; but we now added another title to them, as the number one tax person in the state.