The Executive Chairman of the Federal Inland Revenue Service (FIRS), Zach Adedeji, said on Wednesday, February 28, that the collection of revenue by over 60 government agencies is a major cause of the leakage of funds.
Adedeji said the duty should be the sole responsibility of the service to ensure greater accountability in the system.
He spoke when he appeared before the House of Representatives Committee on Finance, chaired by Hon. James Faleke, for a budget hearing.
He believed that other government revenue collection agencies should focus on their various core mandates.
He advocated for a single-window method of tax collection to make the process less cumbersome and check the loss of government funds.
He said one of the challenges facing this was the lack of verifiable data in the country.
He said a law would be sent to the National Assembly to ensure all Nigerians have one single identification number.
He said, “We are doing a lot of reforms, including the single window, because if you look at FIRS, what we collect mainly is company income tax. The problem we have is that we do not have verifiable data in the country. So one of the major things we are doing is, hopefully in the next two weeks or one month maximum, a law will be sent to the House to change so that all Nigerians must have one single number of identification, which by law today is NIN. The plan is to make sure everything we do as citizens is linked directly to this NIN. This would also help address the issue of tax leakage.”
Adedeji said the services were given the mandate to collect the sum of N10 trillion based on the Medium Term Expenditure Framework (MTEF) that was passed in 2023 which was reviewed upward to N11 trillion during the year.
He said the service was able to deliver N12.3 trillion in revenue collected for the year 2023, which was 11 percent above the target set by the government.
He said the performance was a result of the internal reform that they embarked upon and the favourable economic policy decision by the President.
The FIRS boss said the mandate of the service for 2024 through the MTEF is to collect N19 trillion, which is an additional N7 trillion compared to what was collected in 2023.
He said the bulk of it is coming from positive projections from oil and gas revenue.
He, however, said if this ambitious target of N19 trillion is to be met, there is a need to restructure the service to be more focused.
Adedeji said: “So instead of having types of taxes, what we do now is categorize by turnover, which is customer-focused. Now we have a large tax if your turnover is above N5 billion. Between N1 and N5 billion is medium, and anything less than N1 billion is a small tax payer.
“The reason for this is simple. We want to provide a one-stop shop for taxpayers. Where one can do all forms of taxes. This would reduce multiple audits and distractions for businesses. It is our intention that 80 percent of core service jobs are done by the service.
“The tax on GDP is very low compared to our peers, and that is why we have to come up with those reforms that Mr. President has approved. One of them is the setting up of that tax reform committee. What we see is that in other climes, you have single revenue-collecting agents. But here in Nigeria, we have more than 62 agencies collecting one way or another on behalf of the federal government.
“And when you see people focusing on revenue instead of going to their area of strength, when everybody tries to collect, the leakage is all there. Two is the law that we have. Most of them are obsolete. For example, with the digital tax that we are talking about, there is no law in Nigeria that empowers us to effectively tax all these digital businesses, which we know are on the rise.
“Also, in our processes, the president approved that going forward we should pay our contractors directly instead of moving money to MDAs, most especially capital funding. What that would do is that we could deduct taxes, which would also help us with cash management.
“We are also doing a lot of reforms, including the single window. If you look at FIRS, what we collect mainly is company income tax, which is the result of the difference between the cost of sales and gross sales. But the cost of sales, if inflated, means you would have less profits and less taxes.
“Today we don’t have anywhere to confirm the major cost of sales of all these companies because when they do the valuation sometimes, they do not have verifiable value to do that.”
Chairman of the Finance Committee, Hon James Faleke, queried if the proposed single window revenue would mean whether Customs, NIMASA, NPA and all the major revenue collectors would be subject to the FIRS or the Service would be collecting revenue on their behalf.
Adedeji said these agencies should rather concentrate on their primary mandates and leave the revenue collection to the FIRS.
He said: “This is the way. If you look at the basis of the collection as you mentioned, I use NIMASA as an example, the basis of collection for NIMASA is 3 percent of FOB. That has nothing to do with Marine. FOB, if you have the single window, you know the total number of vessels coming into the country and going out and the fee is just 3 percent, so what does NIMASA need to do about that.
“What we are saying is that these agencies were set up to do core duties. When you talk about Customs, they are border and trade facilitation. Revenue is not the core mandate of Customs. Customs is about border and trade facilitation. So when you have a single window, all that you say Customs collects because the real principle of the single window is that everything coming to the country is in advance notified, so you know the number of containers coming, the volume, what is there and you know the amount and they pay you once.
“When you do that, the Customs collecting this and that or the NPA collecting also, this would go. When we talk about single that is why they say revenue service. If you go to the UK or South Africa, you don’t see Customs collecting revenue. They are merged.
“I am not saying it is bad but it is not the duty of FIRS to be approving payment for roads. I don’t have people who would monitor whether that road is done or not. So my duty is to access, collect, and account for all revenue due to the federation. So any other job may be good and laudable but that is not my core duty. So the same thing happens when you see a lot of other agencies collecting revenue. And that is when you see leakages.”
Chairman of the Committee, Faleke lauded the initiative to ensure payments are made directly to the contractors and not the MDAs.
He expressed the commitment of the Committee to ensure that leakages are addressed and revenue increased to make life better for the ordinary Nigerian.
He said: “No one here will doubt your capability, it’s just the political will. Thank God that we have a president who has given you the authority and of course back you with that political will to reform our tax system. What you have to do is to look inward and ensure that you have directors and staffers who will not negotiate you out.
“We have documents to show that we have operators of our revenue collection who also negotiate and say you can pay this, we will do this. That is exactly what we are facing.
“With all the things you have enumerated, only you cannot do the job. You also have to delegate. So what this means is that every one of your staff who are on oath will ensure that they do the right thing.”