RISE IN TAX REVENUE MISS-MATCHES EXPENDITURE GROWTH

TAX COMPLIANCE

TAX COMPLIANCE

There is indication that tax revenue may not significantly cushion Federal Government’s impending huge deficit projected for 2016 budget as expected tax revenue in 2016 fiscal year is about N4.5 trillion. According to the projections of the Federal Inland Revenue Services, FIRS, tax revenue growth is around 10 per cent as against expected expenditure growth of over 100 per cent in 2016 fiscal year.

FIRS Executive Chairman, Babatunde William Fowler, during his screening for confirmation as the substantive tax master gave a hint to this. Federal Government has planned to spend about N8.1 trillion in next year’s budget, almost double the N4.3 trillion slated for 2015 which was about 10 per lower than N3.9 trillion in 2014.

When the news of the impending huge expenditure profile of the new government at the centre filtered out through the Vice President, Professor Yemi Osinbajo, many analysts expected an equally huge tax measures and inflow.

But not only did Fowler indicate marginal increase in tax revenue he also indicated that the proposed 100 per cent increase in Value Added Tax, VAT, will not take effect immediately, adding that he would not employ tax driving agents to shore up revenue as he did in Lagos State from where he recently moved to FIRS.

FIRS had missed its revenue target in the third quarter of the year when actual collection was N980 billion against N1.143 trillion target. Tax revenue had taken a bashing recently when the Petroleum Profits Tax, a major component of FIRS inflow, underperformed by massively missing its target of N1.48 trillion to settle at N1.1 trillion.

Fowler had said that over 200 oil and gas companies operating in the country have not filed their tax returns for the year. Also he said that due to the significant drop in oil prices, he said that a huge gap existed between the revenue generated by the FIRS and the total revenue by other government agencies like the Nigerian National Petroleum Corporation, Department of Petroleum Resources and the Nigeria Customs Service between July and September this year.

He pointed out that the decline in oil revenue had made it necessary for the Federal Government to focus on non-oil taxes. As a result, he explained that compliance was expected by all organisations and that the agency was prepared to remove bottlenecks associated with tax collection, adding that one such way was joint tax audits of companies by the FIRS and the states’ Boards of Internal Revenue.

Other interventions, according to him, are “nationwide tax registration drive, with focus on VAT, which commenced on October 12, 2015, to bring in all unregistered taxpayers into the tax net”. The concern of many fiscal policy analysts is that the widened gap between tax revenue and the federal expenditure plan at a time oil revenue was on the downside would me extensive borrowings which will drive up the country’s debt-to-GDP ratio. The ratio of a country’s national debt to its GDP compares what a country owes to what it produces, indicating the country’s ability to pay.

Nigeria’s Debt-to-GDP ratio averaged 34.26 per cent from 2000 until 2014, reaching an all time high of 88 per cent in 2001 and a record low of 10.50 per cent in 2014. Fowler said the proposed N8.1 trillion budget for 2016 is realisable, adding that Osinbajo was not aware of the FIRS projection before disclosing the proposed budget figures.


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