Internally Generated Revenue(IGR) and the Challenges of National Development

7/25/2019 Internally Generated Revenue(IGR) and the Challenges of National Development

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CHAPTER 2:4

INTERNALLY GENERATED REVENUE (IGR) AND THE CHALLENGES OF NATIONAL DEVELOPMENT A

PRESENTATION ON THE OCCASION OF THE FIRST NATIONAL ROUNDTABLE FOR GOOD PROACTIVE LAWS AND

GOVERNANCE ORGANISED BY THE INITIATIVES; INTERNATIONAL CONFERENCE CENTRE, ABUJA; 24TH

APRIL

2008

PROTOCOLS

PREAMBLE

I feel honoured to stand before you all today to share thoughts with the faculty of league of cerebral federal legislators, constructively

concerned about how Nigeria will fulfill its historic mission. The birth of this forum is a welcome development. A forum for debating

issues strategic to the development of Nigeria as a basis for developing laws in a proactive manner, as required to address priority

issues that form the bedrock of good governance, is a most timely intervention today. I am delighted and humbled that your maiden

edition is focused on Revenue Generation. Indeed, without the requisite revenues and funding to drive development, there can be no

development. It is also instructive that not only are we discussing revenue generation, we are focused on that developed internally,

which for me is characterized by that which all of us here today are directly involved in generating. I have therefore in this discussion

today, placed less emphasis on revenues generated from natural resources such as oil, which whilst important as part of the equation of

revenue generated, is nature driven rather than individual based , even if all of us partake in its sharing! Indeed, this is an issue which

until we resolve the way forward should continue to be topical. In October and November 2007, I had the privilege to makepresentations at two retreats: The first, Building a Viable State: Deepening/Widening the Internally Generated Revenue Machinery for

Effective Capital Financingat a forum for all state Governors. And the second Developing an Efficient Tax Administration to Fund

the Recurrent Budgetwas at the Bayelsa State Government Budget Retreat. Also in February this year in Kano, the Public Accounts

Committee of the House of Representatives invited me to be part of those who will reflect on the nations revenue base. I spoke on

Harnessing Nigeria Revenue, the Problems and its Prospects.


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It is instructive that this maiden edition is coming in the same week that the National Vision Council and National Steering Committee

on Vision 2020 were inaugurated. The issues arising remain, the challenges are surmountable, and the time is NOW to have collective

action and responsibilityin effectively generating internal revenue for the awesome developmental challenges ahead of us.

OUR ETHOS AS A COUNTRY

A number of us repeatedly ask questions about where we are going? What is our vision? Etc. In the recent past, the public space has

been awash with commentaries on our past and what we need to focus on to get it right. Underpinning all this, is the need for us to beclear on the philosophy driving us in the first instance and to ensure that we keep such philosophy in constant focus. This philosophy

underpinning our actions can/should be seen in the words of our national anthem and pledge which we sing and/or recite at most

public functions. Let me restate what this are:

The National Anthem:

1. Arise, O compatriots,

Nigeria's call obey

To serve our fatherland

With love and strength and

faith

The labour of our heroes past

Shall never be in vainTo serve with heart and might

One nation bound in

freedom,

Peace and unity.


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2. Oh God of creation, Direct our

noble cause

Guide our leaders right

Help our youths the truth to

know

In love and honesty to grow

And living just and true

Great lofty heights attain

To build a nation where

peace

And justice shall reign.

The National Pledge:

I pledge to Nigeria my country To be faithful, loyal and honest To serve Nigeria with all my strength To defend her unity and

uphold her honor and glory So help me God.

I have taken the liberty to underline those key words/phrases which repetitively underscore what we are or should be about ineverything we doPeace, Unity, Justice.


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To further underscore this ethos, our coat of arms further underscores what we are and should be aboutUnity and Faith, Peace and

Progress.

Based on this therefore, whatever we do should at all times uphold the Unity of our country, engender peace, ensure progress and

provide justice in a manner that will constantly build faith in Nigeria. Therein lies the main challenge of National Development. How

can we achieve all these?

NATIONAL DEVELOPMENT

To have National Development in our context therefore, means that all components of the Nigerian federation will have equal or near

equal opportunities and near even resources, to grow and develop at their own pace. It also means that all citizens of Nigeria should

have opportunities to actualise their potentials and maximize their God given talents in a manner that constantly emphasizes and builds

on the unity of Nigeria as the bedrock.


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National development is thus a continuum in the life of Nigeria, where we the citizens and its residents, dream dreams, actualize our

dreams, when Nigeria continually conquers its environment, provides most of all the economic, social, technological and political

needs of its people, on its own terms. In short, national development must give Nigeria sustainable and continuous positive social

change.

National Development will also entail, I envisage, a condition where Nigeria constantly protect its own people, and relates with the

world, on its own terms. A steady flow of revenue that would enable Nigeria to lay the foundation for stability and relative self

sufficiency would help the countrys quest for national development. Even though this focus is on revenue, it is imp ortant to state at

this point, even if that is not the focus of this paper, that beyond revenue, a country must also be able to prioritize its expenditure

pattern and its national plan in a way that will give the country the best from whatever resources the country have. Though the

following is not exhaustive, development would involve the availability of the following:

a) Social infrastructure such as in education and health with emphasis on continuing education and constantly improving ourhealth care

b) Physical infrastructure to enable private sector investment: that is energy, transportation, security of life and propertyc)

Access to Property, Capital, and Opportunity for Individual and Communal Developmentd)

Provision of social amenities for the young, the disadvantaged, the physically challenged, the old and the deade) Security of Lives and Property

President Umar Musa Yar Aduas Seven Point agenda is apt on the core ingredients and things Nigeria must do to attain sustai nable

development. These are:

a)

Energy Production and Power Supply to jumpstart the economy and boost production from the current 4,000 MW to30,000MW in 2011 and 50,000MW in 2015

b)

Self Sustainability in Agriculture to have Food Securityc)

Wealth Creationfrom subsistence to self sustainabilityd)

Transportationmodern and well maintained network of roads, rail and waterwayse)

Land Reformschanging the structure of land ownershipf) Securitylasting peace and security in the country especially the Niger Delta


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g)

Poverty Eradication through Education

Having identified some of the things we need to do to drive national development, the reality is that no one component part of the

national fabric can address all these on their own. The federal government cannot do it on its own. In the same vein, states can not

attain national development on their own. Neither can local governments. The public sector cannot attain national development on its

own. Neither can private sector operators maximize/optimize their operations. No Non- Governmental Organisation or community or

individual can attain national development on their own. National development is a lofty end that requires uncommon harnessing of

mental, human, technological, administrative resources that a nation and a people can muster to make a country a better place to live.

To paraphrase John Donne, a poet, who spoke some centuries ago: No person is an Island unto himself. Every mans death diminishes

me because I am involved in humanity . No sector of the country is an Island unto himself. No sector can attain national development

on its own. It is an end that requires collective effort and responsibility.

Realities of Development Confronting Nigeria Today

At a recent lecture by Vice President, African Development Bank (AfDB), Ms Arunma Oteh, said: I am personally confident of the

prospects of Nigeria becoming one of the Worlds top 20 economies in the Year 2020 Nigeria is unique in Africa, with the country

accounting for half of the population and more than two-thirds of the output within the sub-region of West Africa. Nigeria contributes

11.0 and 16.0 per cent of total output and foreign reserves respectively in Africa while accounting for 15.0 per cent of its population

(African Competitiveness Report, 2007). She however noted that Nigeria's Human Development Indices (HDIs) as reported by the

United Nations Development Programme (UNDP) report are still low and that despite efforts to date, the welfare of the people is yet tobe impacted. .Nigerias HDI score is 0.470 and is lower than the average score for SSA (Sub Saharan Africa) countries of 0.493.

Nigerias HDI score is also lower than those of South Africa (0.674), Algeria (0.733), Egypt (0.708) and those of Brazil (0.800),

Russia (0,02), India (0.619) and China (0.777). In fact, Nigeria is ranked 158 of the 177 countries that are covered by the UNDP

report. That even though there is a slight improvement from 0.448 and a ranking of 159 in the previous year, at 127, 149, 151 152 and

155 respectively, countries like Equatorial Guinea, Djibouti, Zimbabwe, Togo, and Eritrea are ranked above Nigeria. Equally dismal

is Nigerias ranking for the individual components of the 2007 HDI. Nigeria ranked 165th, 104th, 138th and 160th in life expe ctancy,


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adult literacy, gross educational enrollment and GDPper capita respectively. Nigerias 2007 Gender-related Development Index (GDI)

of 0.456, ranked the country as 139th of the 157 countries. The GDI captures inequalities in achievement between women and me n.

The 2007 Human Poverty Index for developing countries which focuses on the proportion of people below a threshold level living a

long and healthy life, having access to education, and a decent standard of living ranks Nigeria 80th among 108 developing countries

with a value of 37.3%. The poverty index measures severe deprivation in health by the proportion of people who are not expected to

survive age 40.

Again, Nigerias poverty index like the, countrys HDI rank, compared poorly with the rest of the SANE and the BRIC economies.

SANE economies are the four largest economies in Africa South Africa, Algeria, Nigeria and Egypt. BRIC economies are those

which according to the investment banking firm - Goldman Sachs - may become among the four most dominant economies by the

year 2050Brazil, Russia, India and China.

There is Work to be Done

The challenge pertaining to the sheer amount of revenue required to address some of the developmental challenges that confront

Nigeria today is huge. In addition, even whilst recognizing that government alone cannot fund the developmental requirements alone

(Private-Public Partnerships and Financial Institutional involvement will also be sorely required), there is still much that Government

can do in growing IGR and attempts will be made to suggest how we can improve on the machinery for improving IGR.

Developmental Challenges

In my speech at the Governors Forum in October 2007, I had indicated issues which were relevant then and still remain today:

a) Revenues generated by Government to date are insufficient for development.

b)

Reports have indicated that we need about 50,000 MW of electricity from our present 4,000 MW. Roughly estimating the needto immediately correct the power situation to achieve about 25,00030,000 MW for our present level of development andbased on rough estimates of about $1.75m per MW for new infrastructure ($ m per MW for a new power stationcombined


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with transmission and generation (2.5 times)), we would need about $36.75bn - $45.5 bn (N4.4N5.46 trillion) to fundinfrastructure development TODAY. This amount averages at about 50% of the amount of monies allocated to the States andLocal Government over an 8 year period. In addition to the fact that this is an estimate it is noteworthy that this estimateexcludes the cost of what it would take to fund skills development/human capital, operations maintenance gas, consumables,spare parts, expertise, turnaround maintenance etc.

c)

An estimated 12-16 million units of housing deficit by the recent reports of the United Nations Centre for Human Settlement(Habitat) will cost over between N42 N56 trillion Naira to fund based on an estimated average cost of N3.5 million perhousing unit

d)

Provision of Educational Infrastructure at Primary, Secondary and Tertiary levels will require no less than N20 trillion Nairaper annum etc

In all of the above, we have not considered the cost of health care, provision of incentives to encourage individual and communal

development, provision of social amenities for the young, old and dead, as well as the sheer running of the Public Service. Meanwhile,

total monies allocated from Federation and VAT pool accounts (including excess crude allocation) for the period from June 1999 to

May 2007 to the three tiers of Government, which represents the higher amount of revenue collected relative to that collected

individually within each State and Local Government, amounted to N16.5 trillion. We are dependent on a revenue source that is

neither sustainable nor enlists the collective will and accountability of the people of Nigeria. Of the monies allocated to the threetiers of government, over 85% derived from Crude Oil and Crude Oil related revenue. Specifically from the CBN figures in 2001,

percentage was 77%, and in 2006 as a result of higher oil prices over the years, it averaged at 89% contribution. This would also get

worse as oil prices increase at a rate higher than we can grow non oil revenues, as in 2006, oil prices averaged about $65 per barrel

whereas in 2008, oil prices have been known to have gotten as high as $120 per bbl. A relative reduction in the contribution of oil to

the revenue pot started to become evident in 2007 with reducing oil production level as a result of the various issues in the Oil industry

and an increase in non oil tax revenue generation - see Table 1. As we try to improve on production levels in the Niger Delta and

have improved fiscal terms for Government from the production sharing contracts, the relative contribution of oil may be on the


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increase again in the wake of sustained high oil prices. This may however not be sustained in the long run as the developed economies

aggressively seek alternatives to oil. This means that if not properly managed, we not only become highly dependent on a non

sustainable revenue source- oil- but in addition, vast majorities of our tax paying public do not contribute to the development of their

own country. When someone else provides the money for you to develop your own country, the level of involvement in determining

exactly how such monies are spent will be abysmally low. That is the situation we find ourselves in today with the result that we may

be sub optimizing rather than utilizing the revenues generated even when such monies are generated from Oil. The increase in

sustainable non-oil taxes must therefore move at a much faster pace on a sustainable basis.

Unchecked population growth compounds the infrastructural support required as funding must keep pace with the needs of the people.

With an estimated population of 140 million people and a poverty incidence of about 54% (about 76 million people) we have serious

developmental challenges which can only worsen as long as population growth remains unchecked or as long as the revenue base to

support the population growth does not sufficiently support such growth. According, in a presentation to the National Economic

Council by the Central Bank of Nigeria on October 25th 2007, our Gross Domestic Product a measure of our economic state, was

about $143 billion in 2006 or about $1,050 per capita compare d to South Africas current $5,300 per capita (which in itself is not high

enough). At our current economic growth rate, it will be at least year 2065 before Nigeria reaches the current South Africas per capita

income. At 13% GDP growth rate, it will be about year 2033. I have done further research to show that the average GDP per capita as

at 2006 of the top 20 GDP countries was at about $46, 482 per capita. There is work to be done.

INTERNALLY GENERATED REVENUE (IGR)

Internally Generated Revenue in normal day to day parlance refers to those revenue sources that are generated solely by the State andLocal Governments. However, I have pointed out in the past, and wish to reiterate that the real focus should be on deepening and

widening the entire revenue base (especially non-oil revenue base) as collected by all tiers of government and not just internally

generated revenues as defined, as what is of utmost importance is that additional revenues are generated for the State and Local

Government regardless of how it is collected. We should focus more on the quantum of collection and how to grow that quantum and

allocate it, than on merely who collects it, as such narrow focus sub-optimizes what can be collected, and how monies are utilized.

Indeed, it accentuates the challenges of multiple taxation which is not only unconstitutional, but exacerbates the problems of the tax

payer and electorate who increasingly get frustrated at the numerous amount of taxes borne formal and informal for which a clear


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solution needs to be articulated and implemented by all of the State Governors on behalf of both State and Local Governments as

provided for in the Constitution.

A major challenge facing the growth in the generation of revenue nationwide, beyond the typically mentioned administrative

challenges being tackled at the revenue authority, is in the nature of our fiscal structure. We still are debating how the fiscal federalism

will work and the role of each component part. The Federal Inland Revenue Service (FIRS) in addition to dealing with the day to day

challenges of improving tax administration for the benefit of all Federal Government (FG), State Government (SG) and Local

Government (LG), is also faced with

a)

Working with the Attorney General of the Federation to defend the Federal Government in a suit by the Lagos StateGovernment challenging the constitutionality of the VAT law at the Supreme Court even after decided cases in the lowercourts (note85% of VAT proceeds collected by the FIRS is allocated to the SG and LG),

b)

Working with the Attorney General of the Federation to defend the Federal Government in a suit brought against the FG bysome State governments at the supreme court challenging the basis of the cost of collection mechanism for funding the FIRSand the Nigeria Customs Service (NCS),

c) Working with the State Revenue authorities to understand that the quest for the uniformity/harmonization of the PersonalIncome Tax system is in the interest of all to create a national system available to all, and notto centralize tax administrationand take away the responsibilities of the State Governments,

d) Working within the Joint Tax Board to address issues of multiple taxation which goes beyond the law as the constitution isclear on not being supportive of multiple taxation etc..

e) Having to respond to drafts of bills (and in one case a new tax law which the FIRS was not aware of until it was passed) which

still support additional taxation when the focus had been to make sure that the existing taxes work better rather than create newtaxes

f) Working with the National Assembly and National Economic Council to get FG, SG and LG Ministries, Departments andAgencies (MDAS) to remit taxes collected completely and on time which they ultimately benefit from

g)

Having to defend actions taken in the best interest of the Countryfor example, why we are seeking interpretation of the lawon the use of tax clearance certificates for political office holders at a time when we are battling with solving the hydra headedchallenge of a parallel tax administration driven by fraud and the review of all tax clearance certificates in the possession ofall tax payers by the relevant tax authority is a sine qua non for building an effective compliance oriented database


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These are constant tensions that are making the work of the tax administrator more difficult and do not support collaborative effort and

focus that would drive effective internal revenue generation for development. These issues should be behind us so we can build a tax

administration system that is a win-win for all parties.

The earlier there is clarity in the nature of fiscal federalism supporting the country, and the role of governments in making such fiscal

federalism work for the unity, peace and progress of Nigeria, the better.

THE QUEST FOR IMPROVED TAX ADMINISTRATION

According to a recent study on taxation, important as were the political and administrative factors which led to the amalgamation of

Northern and Southern Nigeria in 1914, the fiscal and economic forces were even more compelling. Indeed the article goes further to

suggest that Amalgamation of the protectorates was a solution to the economic inequalities of the two protectorates and the need to

ensure sustainable funding for government with an economically integrated Nigeria. In achieving this solution, the article indicates

that both the governments of Northern Nigeria Protectorate and of the Colony and Protectorate of Southern Nigeria had separate and

widely different fiscal systems which had to be integrated to create true amalgamation. Even though Amalgamation resulted in the

revenue of the Southern Nigeria protectorate falling from 2.5 million pounds to 0.2 million pounds as most of its revenues accrued to

the central government (that of Northern Nigeria was 0.5 million pounds), by making possible the integration of the economies of both

parts of the country, an impetus was given to trade and development. The value of domestic exports rose from 6.78 million pounds in

1913 to 14.5 million in 1919 (an increase of 214%), while the value of imports increased from 6.28 million to 10.8 million pounds (an

increase of 172%) during the same period.

These issues of the whole being larger than the sum of the constituent parts remains with us today as tensions continue to exist as to

whether States should handle fiscal issues on their own or whether we should do so as one working together for the interest of the

other. Some of the issues related to this, pertain to the unresolved issues of revenue allocation and how this should be handled justly

for the benefit of all. We are yet to fully address these issues, 94 years after the amalgamation.

Evolution of Tax Laws in Nigeria


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Post amalgamation, various laws were enacted to consolidate and cleanse the pre colonial tax system of its imperfections, as well as

to provide a source of revenue for both the government and the native authorities. The direct tax became the financial foundation on

which the native authority system was built.According to Mr. Agbetunde Lateef Ayodele1 After the amalgamation in 1914, the

Native Revenue Ordinance was enacted in 1917 in the North and in 1918 in the South (first applicable in Abeokuta and Benin). The

ordinance was not in existence in the East until 1928 which subsequently resulted in the Aba Womens Riot of 1929 that kicked

against tax payment. Other laws enacted in 1937 were the Native Direct Taxation Ordinance and Colony Taxation Ordinance. They

were all replaced by Direct Taxation ordinance (1940) providing for taxation of Nigerians. A supplementary and more comprehensiveIncome Tax Ordinance was introduced in 1943 to cover all parts of Nigeria (including Lagos) providing for taxation of foreigners and

companies. Nigeria became a Federation of three (3) regions in 1954 with regional jurisdiction over taxation of personal incomes of

Africans, under the Macpherson Constitution of 1954. According to Arogundade 2, the Eastern and Western regions had the Finance

Law, 1956 (repealed by the Finance Law, 1962) and the Income Tax Law (No. 16 of 1957) but these were limited to the taxation of

Africans. It is instructive to note that the well touted Western regional policy of free education was funded by taxation.

In 1958, the Raisman Fiscal Commission was set up to look into fiscal issues in the country to solve problems of inconsistency

and confusion inherent in the existing laws. Also to examine the jurisdiction and powers of the various tiers of government in

Nigeria, post independence. The Commission came up with a recommendation that there should be harmonisation of taxation

principles throughout the country. This report formed the basis of the tax system in Nigeria to the present day. The Commissions

recommendations culminated in the enactment of five (5) legislations, namely:

a) The Petroleum Profit Tax (PPTA), 1959 a Federal law dealing with the taxation of petroleum producing and marketingcompanies in Nigeria. This was enacted given the discovery at the time of Oil in Oloibiri

b)

The Stamp Duties Act (SDA), 1959a Federal law for the assessment and Collection of duties on instruments at both Federaland State levels

c)

Companies Income Tax Act (CITA), 1961a Federal law enacted for the collection of income tax from corporate bodies by theFederal Government through the agency of the Federal Board of Inland Revenue (FBIR)

1the Principles and Practice of Nigerian Personal Income Tax, by Mr. Agbetunde Lateef Ayodele, 20042Nigerian Income Tax and its International Dimension, J. A. Arogundade, 2005


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d)

Income Tax Mgt Act (ITMA), 1961known as the Principal Act, enacted to bring some uniformity on the taxation of PersonalIncome in Nigeria as a whole, particularly in the areas of rates of tax; types of reliefs and quantum of reliefs.

The uniformity notwithstanding, this tax was administered by the regions and used to drive development within the region. Personal

Income Tax Lagos Act (PITLA) 1961 which dealt with the taxation of residents of the Federal Territory of Lagos, the Armed Forces,

the Police, Officers in the Foreign Service and Non-Residents. However, with the creation of Lagos State in 1967 along with eleven

other states, PITLA was simply adopted by the new Lagos State while the Federal Government enacted the Income Tax (ArmedForces and Other Persons) (Special Provisions) Act no. 50 of 1972 to accommodate the categories of who had been automatically

removed from the tax jurisdiction of Lagos as a State. The Federal Territory as well as mobile workers had always been treated

differently. Other tax legislations enacted include the Capital Gains Tax Act 1967 and the Capital Transfer Tax Act (Repealed in 1986)

Other Changes Overtime

The Income Tax Management (Uniform Taxation) Act 1975 which took effect from 1st April 1974 brought uniformity to the taxation

of individuals throughout the Federation. The 1978 Task Force on Tax Administration by Alhaji Shehu Musa brought in the following

changes:

a)

the introduction of the withholding tax regimeb)

the imposition of a special levy of 10% on the excess profits of Banksc) the imposition of a turnover tax of 2.5% on building and construction companies

The 1979 Constitution of the Federal Republic of Nigeria made all State Income Tax laws unconstitutional. The import of this was that

only the Federal Government could legislate in matters of taxation. Two study groups were set up in 1992to further improve on the

tax system. One focused on the Nigeria Tax System and Tax Administration was headed by Professor Emmanuel Edozien, whilst the

otherthe Study Group on Indirect Taxation, was headed by Dr. Sylvester Ugoh. Recommendations arising from this process resulted

in


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a)

the Companies Income Tax Act no. 3 of 1993codified all income tax laws into the Companies Income Tax Act (CITA) Cap.60 Laws of the Federation of Nigeria (LFN) 1990. The Act established FIRS as the operational arm of the Federal Board ofInland Revenue (FBIR).

b) The Personal Income Tax Act no. 104 of 1993codified all personal income tax legislations into one uniform Personal IncomeTax Act. The Act also established the Internal Revenue Service (IRS) as the operational arm of the State Internal RevenueBoard (SBIR) of each States. In the same vein, the Act introduced the Joint Tax Board consisting of the Chairman of theFederal Board of Inland Revenue (now the Federal Inland Revenue Service) as the Chairman of the Joint Tax Board and one

member each State being a person experienced in income tax matters, to amongst others, use its best endeavours to promoteuniformity both in the application of the Act and in the incidence of tax on individuals through out Nigeriac)

VAT Act no. 102 of 1993introduced the Value Added tax and significantly moved the country into the regime of indirect andconsumption tax; it also repealed the Sales Tax Act no. 7 of 1986 administered by some States in a move to improve theoverall revenue base of the country and achieve improved efficiency in administration

d)

The Education Tax (ET) Act no. 7 of 1993introduced a special tax on corporate income specifically to fund the upgrading ofinfrastructure and facilities in the education sector.

In 1998, to address the issue of clarifying and delineating responsibilities between the Federal, State and Local Government

Authorities, the Taxes and Levies (Approved list for Collection) 1998 was promulgated.

The 1999 Constitution retained the supremacy of the Federal Government on matters of legislation on Taxation but reintroduced some

flexibility in administration. Under the concurrent legislative list, a provision was added that the collection of any such tax or duties or

the administration of the law imposing it may be delegated to a state or any authority of a state by a law of the National Assembly

Recent Changes

In 2002, a Study Group on the Review of the Nigeria Tax System headed by Professor Dotun Philips was set up to address the need to

place more importance on taxation in the face of a decline in focus on taxation and increased dependence on oil as a source of revenue.

The report of the Study group was further subjected to a Working Group setup in 2003 and headed by Mr. Oluseyi Bickersteth. The

outcome of both reports were largely consistent but with significant differences in the manner in which tax should be administered

nationwide.


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Whereas the Study group recommended a more centralised system of administration, the Working group recommended a centralised

tax administration system with Fiscal federalism implemented through the way revenues were allocated and distributed. In

harmonising both reports, the major areas of agreement were adopted and issues of a central administration of taxes deferred for

further consideration at a later date given the rejection of the proposal by the State authorities. This notwithstanding, it was agreed that

a harmonised system was still very much desirable to ensure both Federal and State tax authorities benefited from synergies arising

from such a harmonised system with improved efficiencies. It was also agreed that the tax system should be simplified to reduce the

incidence of multiple taxation and at the same time improve the mode of revenue distribution should more equitable resulting in aclause in the VAT Amendment Act entrenching a minimum percentage of derivation as a basis for distributing VAT proceeds as is the

current practice but with room to improve on the percentage as may be desirable. The outcome of this latest effort at reform resulted in

the following enactments:

a)

FIRS (Establishment) Act 2007b) Companies Income Tax (Amendment) Act 2007,c)

Value Added Tax (Amendment) Act 2007d)

National Automotive Council (Amendment) Act 2007

Four bills still remain outstanding:

a) Personal Income Tax Amendment Billb)

Petroleum Profits Tax Amendment Billc)

Customs and Excise Tariffs Amendment Billto remove Sugar levyd) National Sugar Development Council Amendment Billto remove Sugar levy

Tax Administration Challenges that subsist

Inspite of the above changes in the tax system, several challenges still remain as the country moves to improve tax administration.


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a)

Agreeing on how to make the Union- Nigeria workSince the amalgamation, Nigeria is still beset with issues of making ourunion a lot more productive than it is today. Defining Federal and state relationships, how to effectively distribute centrallyadministered revenue, how to administer a uniform personal income tax administration system, how to ensure that each of theStates can effectively operate interdependently (not independently) remain issues that puts a burden on tax administration asthese tensions seldom sufficiently enable the degree of collaboration that should exist between Federal and State and betweenStates to happen as they should

b) Working within the Constitution (until it is amended, if required) and making the Constitution work-Under the 1999

constitution of the Federal Republic of Nigeria, every citizen is obligated to declare his income honestly to appropriate andlawful agencies and pay his/her tax promptly. The tax system as envisaged by the Constitution (see items 16, 25, and 59 of theExclusive Legislative List and item D paragraph 7 of part II of the 2nd schedule in the Concurrent Legislative List) places thehighest responsibility for ensuring effective taxation or indeed for ensuring good governance on the Federal Government andyet also behoves on the Federal Government to collaborate with the States and Local Governments in this regard. In practice,however, it would appear that the trust levels between Federal and State and between State and Local Government impair theability of the Federal and the State to collaborate and work effectively together. More time is spent in Court and in dousingtension than in building an effective tax system beneficial to all

c)

Manner of Revenue Allocation and Distribution is affecting issues pertaining to collection of taxes For as long asperceptions remain as to the level of equity or otherwise in the manner of revenue distribution, the tax administration systemmay not be as optimal as expected as benefits of collaboration in terms of improved revenue to the State are not directly felt asmuch as expectedPls see Table 2

d) Overdependence on OilThe above issues need to be addressed urgently to ensure that the tax system required to avoid an

overdependence on oil is built in the shortest possible time. Petroleum has been our dominant revenue source for nationaldevelopment over the years. It accounts for about 40% of the entire national economy, 80% of government revenue and 95% ofexports. The danger signals observed both within and outside the country underscore the need to move away from total relianceon petroleum related revenue. One of the danger signals is the crisis in the Niger Delta which has interrupted petroleumoperations in the past four years. Between 2006 and 2007, crude oil production reportedly declined by an average of 500,000million barrels per day! - Pls see Table 3 for the changing estimates in 2007 for JV. Another negative effect on revenues in thenear future lies in the movement from Joint Venture Operating Agreement (JV) to Production Sharing Contract (PSC) whichhas better fiscal terms for the oil companies to the detriment of Government take:


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PSC terms require that cost incurred by contractors must be recovered first before tax can be exigible so in terms of ranking,

the distribution/allocation of crude oil is:

i. royalty oilii.

cost oiliii.

tax oiliv.

profit oil

At each stage of the production life (especially at the onset), what is available may not be sufficient to have any tax oil.However, the only hope for PPT/tax oil is in the instance of NNPC to apply higher prices in valuing crude oil thereby leading

to fast recovery rate for cost by contract. Added to this is the early high yield from production. Note -Between March 2004

and May 2007, NNPC was lifting tax oil and selling same like any other crude oil sales, thereby attributing nothing to PPT.

With effect from June 2007, the position has been reversed such that all tax oil liftings are sold and paid into FIRS PPT

Domiciliary Account.

Another looming threat is the global search for alternative sources of energy. The United States of America, the highest buyer

of Nigerian crude oil, Brazil and several other countries are seriously engaged in research in this area. Some of these research

projects have recorded positive results. Sugar cane, ethanol, and other forms of biofuel are very imminent substitutes for

petroleum products as energy sources. What this means is that Nigeria and other oil producers may be holding on to a product

that few would need in the future. The economic consequences of this will be very devastating.

e)

Need to Grow and Reposition Non-Oil Tax Revenue- The need to reposition non-oil tax revenues as the number one sourceof sustainable revenue for national development cannot be over emphasised. This underscores the need to continue with theongoing tax reform initiatives at all tiers of government. For effective tax reform, collaboration within the Federal Governmentand State Governments, between States, between the Federal and the State Governments is critical. Central to effective taxreform is having effective access to the right information, having the right skills in sufficient numbers, working within the rightsystems which preferably should be as automated as is possible with minimal human interference in determining taxassessments and collecting taxes due.

Federal Inland Revenue Service and Tax Reforms


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Some of the major work done to date, with significant improvement still required, made possible by the unparalleled support of the

National Assembly and various stakeholders are as follows:

a) Articulation of a Clear Strategic Direction: To drive FIRS, the FIRS management and staff, articulated a 2004-2007Strategic Plan, agreed on its Vision, Mission, Values and Goals through which its performance would be measured. This Planis now being reviewed, with the articulation of a Vision 2020 for the Nigerian Tax System (to be done in collaboration with theJoint Tax Board) and a medium term plan (2008-2011).

b)

Improved funding of the Service: Improved funding kicked of in 2005. The FIRS Establishment Act was promulgated twoyears later. These funds (which are appropriated by the National Assembly and budgeted for along the sub heads of Personnel,Recurrent and Capital Expenditure) are primarily to enhance the ability of the Service to collect more revenue and enable theService to recruit and pay for the appropriate complement of staff.

c)

Passage of four bills: Of the eight bills debated on at the National Assembly, four bills were signed into law in April 2007 The FIRS Establishment Act, VAT Amendment Act, National Automotive Council Act, and the Companies Income Tax Act. This is the first comprehensive amendment to tax laws passed in the last twenty (20) years. The most notable and impacting onTax administration is the FIRS (Establishment) Act 2007 which provided a solid basis for pursuing improved taxadministration with increased vigour. Four bills remain outstanding and are currently awaiting the third reading in the Senate Personal Income Tax (Amendment) Bill to reduce personal income tax, Petroleum Profits Tax (Amendment) Bill toimprove overall tax administration; National Sugar Development Council Act (Amendment) Bill to remove sugar levy;Customs and Excise Tariffs Act (Amendment) Bill to remove sugar levy. It is commendable that the House ofRepresentatives had passed all eight bills presented and are awaiting harmonization with the Senate. I am pleased to note thatthe current Senate is particularly interested in ensuring the passage of the outstanding four bills. Amendments to tax laws arean ongoing process. Additional amendments as required to enhance efficiency and effectiveness of tax administration will beproposed once approved.

d) Reorganisation of the Service: the reorganisation of the operations of the FIRS has led to the merger of offices and creationof one-stop- shops for improved service delivery to the tax payer. This has lessened the burden of taxpayers who can nowtransact their tax business at a single point instead of going to different tax offices for different services. The merger of officeshas also provided improved career opportunities to staff of the Service to be rounded tax professionals.

e) Job Creation/Career Development:As a result of the reorganisation and realignment of functions, over 2,000 new jobopenings in specific skill driven areas, have been created with improved opportunity for career growth and development withinthe Service. The Service is encouraging staff without the required skills to acquire the necessary skills through institutionalsupport for training and personal improvement of their competency levels.


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f)

Training: About 4,400 management, senior and junior staff (out of the current 5,600 staff in place), have enjoyed specializedand industry/issue specific training and Study Tours, within and outside the country in the last three years. Hitherto, very littletraining was in place. Most staff had received no training for over ten (10) years.

g) Better remuneration/Improved Welfare: There has been considerable improvement in staff remuneration with the newsalary scheme approved by the National Salaries and Wages Commission effective April 2007. The improved welfare packageis to motivate FIRS staff to higher performance levels. The FIRS has also given loans to some staff to purchase houses underthe sale of Federal Government houses. Staff Cooperative Societies have also been supported. Offices are being renovated

nationwide to make staff more productive and create a conducive work environment for taxpayers.h) Automation of Collection: This has ensured that tax collected daily by the FIRS from all parts of the country, is swept

automatically, electronically, into the Central Bank of Nigeria (CBN) through our collecting and lead banks. This has largelyaddressed the issue of trapped funds in banks and reduced fraud in the collection system. Automation gives the FederalGovernment real time, almost minute by minute report on taxes collected by the FIRS. Cases of trapped or unremitted funds,were rampant when the FIRS operated the manual system. FIRS offices are also being computerized and tax administrationprocesses, starting with the most critical, being reengineered, in preparation for an automated and fully integrated taxadministration system.

i)

Audit, Investigation and Enforcement: This is continually being strengthened and has yielded increased revenue. Large Taxpayers especially those in the Oil and Gas are being audited with Joint Arrears reviews with other agencies of government ofthe accounts of Government agencies charged with the responsibility to collect taxes on behalf of the FIRS . This has yieldeddividends in payment of tax arrears of about N40 billion to the Federation Account for appropriation.

j) Database & Taxpayer Registration: Real time data and information is the live wire of any tax agency. The development of arobust tax payer database and registration process is being addressed to support effective taxpayer assessment. Taxpayerregistration is ongoing with unique Taxpayer Identification Numbers (TIN) being issued to taxpayers. As at Monday, April 212008, FIRS has issued 172,916 TIN to corporate and individual tax payers. A tax card scheme, that will provide a one-stopaccess to taxpayer records and with which taxpayers could pay taxes is being finalized.

k) Interagency Collaboration:The FIRS is working to ensure linkages with relevant federal agencies including but not limitedto the Corporate Affairs Commission (CAC) - for registered companies and organisations, the Central Bank of Nigeria (CBN) -for bank customer data, the Nigeria Deposit Insurance Corporation (NDIC) - for updates on Bank reports, the Department ofPetroleum Resources (DPR) - for information on all licensed companies in the downstream and upstream sectors, the NationalPetroleum Investment Management Services (NAPIMS) and Oil and Gas Companies (for contract awards), the Crude OilMarketing Department of the NNPC (COMD) - for shipping companies, shipping and marketing agents in the sale ofGovernments crude oil equity, Nigerian Maritime Authority (NMA) and the National Ports Authority (NPA) - for export


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information, the Nigerian Stock Exchange (NSE) and the Central Securities Clearing Scheme (CSCS) - for stockbrokersdaily transactions, the Securities and Exchange Commission (SEC) - for public offers and private placements, the Bureau forPublic Enterprises (BPE) - for information on divestments of interests in companies and corporations, Due Process Office forFGs contract awards, the Nigeria Customs Service (NCS), the Economic and Financial Crimes Commission (EFCC), NigeriaPolice Force and the Nigerian Financial Intelligence Unit (NFIU) to name a few relevant agencies. Memoranda ofUnderstanding are being signed to institutionalize such arrangements once agreed upon.

l) Taxpayer Education:Since tax must be collected in a professional manner, we owe the taxpayers the required education and

support services. Efforts are ongoing to improve on this aream)Adjudication Machinery: A tax administrative machinery cannot be said to be efficient, if it fails to provide for a robust and

efficient dispute resolution mechanism. Towards this, the erstwhile Body of Appeal Commissioners and the Value AddedTribunals were invigorated. With the promulgation of the Federal Inland Revenue Establishment Act 2007, these have beenreplaced with the Tax Appeal Tribunals, which now cover all taxes. These provide all tax payers with the opportunity forredress if dissatisfied with the decision by the revenue authority. Beyond this, as before, taxpayers are free to appeal at theFederal High Court, Appeal and Supreme Courts.

n) Refund System:Given the several complaints by tax payers, the FIRS Establishment Act 2007 now has provision for refundto taxpayers within 90 days, with suitable amounts now appropriated by the National Assembly.

o) Performance Management: Annual financial and non-financial targets have been introduced with ongoing performancereviews. This has created a benchmark against which staff performance is being measured.

p) Improved Revenue accruing to Government for Appropriation: The Federal Inland Revenue Service generated about N10trillion from various taxes in the last twelve years. A large part of this revenue was generated in the last four (4) years. pls seeTable 1. Though these figures show that the revenues generated by the FIRS have grown overtime, the reality is that we shoulddo a lot more as the revenues generated are not sufficient for development.

INTERNAL REVENUE GENERATION ENHANCING ACTIVITIES REQUIRING IMPROVED COLLABORATION

Developing a unified Vision 2020 and beyond with supporting Medium Term Plan

The end begins with having a burning desire to build a viable Country at the national and sub-national levels. This must be supported

with plans which are costed to ensure that the expenditure to support the plan is well articulated and to avoid wrong strategies at

implementation.


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National Tax Policy Development

Though tax policy pronouncements exist in various documents, till date these have not been harmonized into a documented tax policy

that clearly articulates how to use taxation to drive development at the national and sub-national levels. The draft has been presented to

the Federal Executive Council, FEC to note and the Honourable Minister of Finance has given a go ahead for sensitization and

dialogue, which will enable stakeholders to articulate how taxation could be used as a means of promoting development. All

stakeholders at all tiers of government and in all arms of government will be expected to contribute to developing an enduring tax

policy which would then guide future legislation.

Boosting Federal Collectible Revenue

Revenues collected at the Federal Level, that States benefit from include:

a) Crude Oil Salesb)

Federal TaxesPetroleum Profits Tax, Companies Income Tax, Stamp Duties and Capital Gains Taxc)

Royalties (Department of Petroleum Resources)d) Customs Duties (Nigeria Customs Service)e)

Value Added Taxf)

Education Tax

Other taxes by agencies which are currently not being accounted for, which now need to be accounted foras provided under theFIRS (Establishment) Act 2007.

The fact that these revenues are collected at the Federal level should not exclude the State and Local Governments from collaborating

with Federal Agencies involved in boosting the revenues from these sources. State and Local Governments should also be involved on

the expenditure end as the less value for money is achieved from such revenues; the less revenue is available for distribution and

utilization.

Boosting State and Local Government Collectible Revenues


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At date, the Constitution clearly notes that the collection of Personal Income Tax, Capital Gains Tax and Stamp Duties which are

Federal Taxes can be collected at the State level where a law of the National Assembly has been enacted. In addition, beyond the

provision in the Constitution which specifies charges that can be charged by the Local Governments, the Constitution also provides

that the State House of Assembly can enact such laws as maybe necessary and are not in conflict with the Constitution for the peace,

order and good government of the State. These general provisions give scope to the State to enact laws (for both State and Local

Government) that would ensure good governance beyond those taxes and revenue sources that are enshrined in the Constitution.

As a result, States and Local governments have taken advantage of this provision in the constitution and the enactment of the Taxes

and Levies (Approved List for Collection) Act 21 of 1998, to have several sources of revenue within the State see Table 3. For

clarity and to avoid misrepresentation, SGs need to codify all taxes, levies and user charges chargeable in the SG and LG. In addition,

recent studies have indicated the need to further refine this law to be in line with the constitution and to ensure a clearer definition of

tax, levy and user charge.

Apart from revenue for development, taxation strengthens governance in a way: since it flows from citizens pocket, the payment

compels citizens to ask questions and show interest in how those entrusted with the management of our common wealth, discharge

such responsibility.

Accounting for revenue generated at national and sub-national levels

Improved information and statistics of all revenue generated at FG, SG and LG is required for improved decision making. To date, a

holistic picture of such statistics is not readily available in a complete and on a timely basis.

National Taxpayer Data Base Development

To overcome the problem of dearth of data on the taxpayer population, each tier of government must carry out a taxpayer population

census to create a taxpayer data base. The FIRS is currently conducting a nationwide taxpayer enumeration exercise. Without a clear

knowledge of the taxpayers and their profiles, it will be difficult to have any articulate plan or strategy for effective tax administration.

This would be further enhanced with the institutionalisation of the unique taxpayer identification system as is practiced in other

developed tax jurisdictions. The FIRS Act empowers the FIRS to collaborate with States and Local Governments to make this


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happen. Every taxpayer would be assigned a unique identification number which should be inserted in every documented transaction

(sales, purchases, payment of bills etc). This will enable tracking for tax purposes. This can only work effectively with full

automation. In Argentina, this same tax number is what is used on driving licenses, passports and other personal documentation.

Capacity Building

Each Tax Authority should have a robust training programme driven by clear nationwide standards that are set in a manner that will

ensure focus on the needed competencies for effective and efficient performance, based on proper training needs analysis. Recruitmentpolicies and practices should also be based on needed skills, knowledge and experience. Capacity building should emphasise what it

takes to ensure proper and effective administration of the tax and related laws. Existing laws that abhor the use of tax consultants who

take over the responsibilities of the revenue officers should be retained to encourage renewed focus on building the tax institution and

having a core of well trained staff within the institution.

Automation and Information Sharing

Automation is critical for an effective tax administration. It will help eliminate wastage and tremendously improve efficiency,

transparency and accountability.With automation, information sharing and collaboration among tax jurisdictions become easier. Such

automation must necessarily be standalone and should link tax authorities to various databases that enable the assessment of income to

be handled in a more effective mannerThese include land registries, banking systems, vehicle registration systems etc

Taxpayer Education and creating Friendly Service oriented Environment

The taxpaying public needs to be given proper and adequate sensitisation on a sustainable basis to let them know their rights, duties

and obligations under the relevant tax laws. The Tax Authorities should also strive to create a friendly tax environment without

creating confusion to the tax payer. The more tax authorities and governments work together, the better for the revenues that can be

generated from such collaboration.

Tackling the Underground Economy


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The underground economy, otherwise known as the informal sector, is made up of businesses which are not only intractable but also

intentionally outside the tax net. While this is a global phenomenon, it is more pronounced in the developing world. In Nigeria it is a

serious threat to the integrity of the entire tax system. All hands should be on deck to work together to effectively tax this sector. For

individual taxpayers, apart from those in regular paid employment, the problem of tracking taxpayers outside the tax net is even more

challenging especially with certain communities where the house numbering system is a major challenge and the national

identification system is still in its infancy. The underground economy includes individuals, registered businesses and corporate bodies

generating billions of Naira in business transaction in:

a) Petty businesses such as dress making, car wash, mechanic workshops, hair dressing, etcb)

Rentals, Barbing Salons, etcc) Taxi business (registered and unregistered)d)

Cargo handlinge)

Drug dealing, Money laundering, Smuggling, Prostitution

The underground economy also includes a situation where taxpayers are reporting to the relevant tax authority but do not report on all

items they should be reporting on. Collaboration amongst all tiers of Government and with the leadership of vocational bodies, trade

associations and community leaders will greatly assist this process

Use of Tax Revenue

Judicious and transparent use of tax revenue, through visible projects, should be encouraged at all tiers of government. The culture ofdemanding accountability from the executive arm of government through media briefs and town hall meetings should be developed

and sustained and would help build a culture of voluntary tax compliance

Delineation between Tax and User charges

We should increasingly differentiate between taxa compulsory levy and user chargewhich is tied to recovering costs from services

provided to users. Both provide sources of internally generated revenue but with separate manner of application and use at all tiers of


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government. This way issues of multiple taxation could be reduced and combined with improved tax payer education, taxpayers can

relate payments to services rendered.

Wealth creation and equitable income distribution as the ultimate panacea to Multiple Taxation

For years, the Joint Tax Board has issued communiqus educating the public on the laws abhorring multiple taxation and the need for

the individual tax payer to understand his rights and responsibilities. However, all these havent worked and a deeper understanding of

the problem suggests that it is much more than a taxation issue but more of a source of income for individuals who believe that they

have no other means of creating wealth. There is also the need for equitable distribution of income at both the government and

individual level to give to each their due and to reduce the gap between the rich and the poor. Increasingly, creating wealth and a

growing economy beneficial to all the residents and citizenry would not only assist in curbing multiple taxation, it also assists in

growing the tax base. In addition, improved support for and enforcement of tax laws should also assist in this regard.

Constantly improving Tax Legislation

The nature of collaboration between the Executive and the Legislature in the promulgation of the tax laws in 2007 is an excellent

example of how collaboration should be. Let me use this opportunity to once again thank members of both houses for the diligence

and painstaking efforts during the public hearing and to get the bills passed into law. The current National Assembly has also shown

interest in continuing this collaboration, with their resolve to get the outstanding bills passed a most welcome development. Even at

that, additional amendments are still required across board and we look forward to strong collaboration as such bills are brought up for

deliberation and conclusion. Continuous amendments of the tax laws for improved compliance are a sine qua non for an effective tax

system. This not withstanding, reviews of tax laws should not become a state of paralysis such that no other work takes place

particularly if the process of amendment was an all inclusive and long drawn out process. New tax laws should be given at least two

years for implementation before the process of review begins to ensure that all identified areas for review are effectively understood

and identified


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CONCLUSION

Tax is the vital fluid that ensures that Government is run effectively and in a sustainable manner. Tax effectively applied not just

provided necessary internally generated revenues for development but also assures the prosperity of the nation as a whole and its

component parts. The nature of a tax system defines the essence of how a country either works together for the common good or

divides the polity in a manner that makes focus on the nation state as distinct from its component parts difficult. How we handle thetax system must be very delicately handled to support unity and bring equity to its sub component parts. In the end, based on the

continuous stream of disagreements that seem to dominate the discourse rather than how we can build an effective system for the

nation, the time is right for us to go back to first principles and clarify the philosophy of the tax system that we want to run in the

context of the kind of country we want to build. Such a philosophy must address issues of revenue distribution and not just issues of

revenue administration. The philosophy should then drive an assessment of whether the laws we have are sufficient or whether further

amendments are required. The current drive for a national tax policy should help put such philosophy in focus and we should truly put

on hands on deck to get the elements of this policy agreed on by all. If the process of putting the national tax policy together to enable

such dialogue needs to be amended, lets address such now so that we can collectively, have a policy that is embraced upon by all. The

earlier we start working together to truly have an effective tax system the better for us all and the more funding would be available for

development.

Any other plans would at best be sub-optimal.

I thank you all for listening.

PART B: Relative shares of Tax-types in the Total Collection (%)


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Typ

es

of

Tax

es

2000 2001 2002 2003 2004 2005 2006 2007

Targ

et

Actu

al

Targ

et

Actu

al

Targ

et

Actu

al

Targ

et

Actu

al

Targ

et

Actu

al

Targ

et

Actu

al

Targ

et

Actual Targ

et

Act

ual

% % % % % % % % % % % % % % % %

PPT

63.9 73.5 70.6 69.4 51.3 51.7 62.0 62.0 58.9 73.5 67.2 77.6 67.1 72.4 65.4 107.9

CI

T

17.1 11.7 14.0 11.8 22.7 20.5 15.7 16.5 17.9 10.9 13.3 9.8 15.7 13.2 17.1 84.3

VA

T

17.1 12.7 14.0 15.6 22.7 25.0 19.5 19.5 20.1 13.7 17.7 11.1 15.4 12.5 15.1 81.3

ET 1.4 1.8 1.4 2.8 2.5 2.3 1.7 1.4 2.3 1.4 1.3 1.3 1.5 1.5 2.1 104.

4

Co

nso

-lida

ted

0.5 0.3 0.0 0.4 0.8 0.4 0.0 0.6 0.9 0.4 0.5 0.3 0.3 0.3 0.3 92.8

Tot

al

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 470.

7


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Source: FI RS Collection Records

Part c

Account Types

Federation Account :PPT, Stamp Duti es, CIT & CGT

VAT Account :VAT(AI I )

Education Tax Account :Education Tax

Consolidated Account : PIT & POL


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Table 2 - Collection vs Distribution Matrix of taxes collected in Nigeria

Type of Tax Who

Collects

How Distributed (Vertical)

Federal

(%)

State

(%)

Local Govt.

(%)

Derivation

(%)

Personal Income Tax

(within States)

SIRS 100%

Personal Income Tax

(FCT, non residents

and selected persons)

FIRS 100%

Stamp Duties/Capital

Gains Tax

(individuals)

SIRS 100%

Stamp Duties/Capital

Gains Tax

(Companies)

FIRS 52.68 26.72 20.6

Company Income Tax FIRS 52.68 26.72 20.6

Petroleum Profits Tax FIRS 52.68 26.72 20.6 Min 13%

Value Added Tax FIRS 15 50 35 Min 20%

Education Tax FIRS To ETF

Technology Tax FIRS TO

NITDF

Trade Taxes NCS 52.68 26.72 20.6


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Table 3Taxes and Levies as Approved for Collection

Federal Taxes collected at the State Level:

a)

Personal Income Tax in respect ofb) Pay-As-You-Earn (PAYE); andc)

Direct taxationd) Stamp Duties on instruments executed by for Individualse) Capital Gains for Individuals

Taxes and Levies under the powers imposed by the Constitution and as specified in the Taxes

and Levies Act No 21 of 1998 to be collected by the State Government:

a) Pools betting and lotteries, gaming and casino taxesb) Road taxesc) Business premises registration fee in respect of-

d)

urban areas as defined by each state, maximum of-e) N10,000 for registration: andf) N5,000 per annum for renewal of registration; andg) rural areash) N2,000 for registration; andi) N1,000 per annum for renewal of registrationj) Development levy (individuals only)k) Naming of street registration fees in state capitall) Right of Occupancy fees on lands owned by state government in urban areas of the statem)Market taxes and levies where state finance is involved

Taxes and Levies under the powers imposed by the Constitution and as specified in the Taxes

and Levies Act No 21 of 1998 to be collected by the Local Governments including but not

restricted to:

a) Shops and Kiosks ratesb) Tenement ratesc) On and Off Liquor License Feesd) Slaughter Slab Feese) Marriage, birth and death registration feesf) Naming of street registration fees excluding streets in the State Capital

g)

Right of Occupancy fees on lands in the rural areas eluding those collectible by theFederal and State Governments

h) Market Taxes and levies excluding market where State Finance is involved Motor Parklevies

i) Domestic animal license feesj) Bicycle, truck, canoe, wheelbarrow and cart fees , other than mechanically propelled

truckk) Cattle tax payable by cattle farmers


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l) Merriment and Road closure levym)Road and Television licenses fees (other than radio and television transmitters)n) Vehicle radio license fees (to be imposed by the Local Government of the State in which

the car is registered)o) Wrong parking charges

p)

Public convenience, sewage and refuse disposal feesq) Customary Burial Ground Permit feesr) Religious places establishment permit feess) Signboard and advertisement permit fees

Table 4 - Review of 2007 Estimates (Joint Ventures Only):

Initial Final % change

Mb Mb

Production 354 288 -19

Lifting 312 288 -8

$ $

OPEX 1.9billion 3.4billion +79

CAPEX 3.7billion 3.5billion +5

EST. PPT 6.2billion 5.3billion - 15

Price: $ $

SDPC 50.00 73.65 +47

MOBIL 51.61 58.84 +14

EPNL 42.40 65.85 +55

CHEVRON 58.12 74.63 +28

NAOC 55.32 57.84 +5

PHILIPS 53.58 65.35 +22

PAN OCEAN 66.71 66.71 0


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Documents

Internally Generated Revenue(IGR) and the Challenges of National Development