How We Generate N808bn in Tax Revenue Within Six Months - FIRS Chairman The Chairman of Federal Inland Revenue Service, Mrs Ifueko Omoigu-Okauru, was born on December 10, 1962. She holds a First Class degree in Accounting from the University of Ibadan and Masters of Science Degree in Management Science from the Imperial College, University of London. She is a Fellow of the Institute of Chartered Accountants of Nigeria and a chartered tax practitioner. She was the valedictorian of her graduating class in the University of Lagos, with the highest number of prizes ever won by any individual in the Faculty of Business Administration. She also obtained one of the highest scores in the Chartered Accountants Examination. Her outstanding academic performance fascinated Arthur Anderson, now KPMG and Accenture, to engage her service which made her the first female professional staff hired in Nigeria by Arthur Anderson. She later became the first female professional manager and the first female national partner. Since her appointment as the Chairman of FIRS on March 3, 2004, the agency has witnessed tremendously progress in staff discipline, the process of tax monitoring and collection that has boosted revenue accruing to the Federation Account. In this exclusive interview granted the Economic Confidential, she talks on challenges and achievements made in tax administration in Nigeria. Excerpts:
How did you find the place when you were appointed the Executive chairman of FIRS?
I thank God that we have been able to address some of the challenges we met on the ground. The challenges were enormous. There were legal, administrative, policy and institutional challenges to drive a revenue generating agency as big as the FIRS. We were then not adequately funded which affected the morales of the staff to the extent that landlords were ejecting them from our rented offices scattered in several parts of the country. Some of the offices were dilapidated and the processing of works was done manually and with out-dated tax laws. It is interesting to note that with all the challenges, there existed a workforce with the will and resolve, to do everything necessary to make the FIRS a 21st century tax agency.
So how were you able to address some of the problems?
Some of the things that we have done since we have had the privilege to steer the affairs of the agency, in collaboration and with unparalleled support of the legislators and various stakeholders make the difference. For instance the FIRS management and staff, articulated a 2004-2007 Strategic Plan, agreed on its Vision, Mission, Values and Goals through which its performance would be measured. This Plan is now being reviewed, with the articulation of a Vision 202020 for the Nigerian Tax System. Improved funding kicked off in 2005. The FIRS Establishment Act was promulgated two years 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 the Service to recruit and pay for the appropriate complement of staff.
So can you point out as some of the achievements?
In the last five years, we have reorganized our operations significantly towards improved tax payer services, automated our collection system (e-payment), trained and re-trained staff, and increased revenue for the Government. We still however have some ways to go in building the institution of our vision.
When you talk early on the outdated tax laws how were you able to address it?
Precisely in 2005, we recommended nine tax bills through the Federal Executive Council to the National Assembly. This was the first comprehensive amendment to tax laws passed in the last twenty years. Of the nine bills debated at the National Assembly, one bill on the amendment of the Education Tax Act was withdrawn and 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. The most notable and impacting on Tax administration is the FIRS (Establishment) Act (FIRSEA) 2007 which provided a solid basis for pursuing improved tax administration with increased vigour.
So how many bills are outstanding?
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 – to improve overall tax administration; National Sugar Development Council Act (Amendment) Bill – to remove sugar levy; Customs and Excise Tariffs Act (Amendment) Bill. The House of Representatives passed all eight bills presented before the advent of this new National Assembly and were awaiting harmonization with the Senate. In addition, we are actively participating in the ongoing review of the fiscal provisions of the Petroleum Industry as encapsulated in the Petroleum Industry Bill that is before the National Assembly. Even as we do so, we are still pushing for the amendment of the Petroleum Profits Tax Amendment Bill as there is no conflict between this bill as earlier recommended in 2005 and the provisions in the Petroleum Industry Bill as may be amended. We are also working on a further wholesome internal review of all tax laws for further improvement. Amendments to tax laws are an ongoing process.
What about your staff strength and their ability to discharge their stator responsibilities effectively?
We have so far reorganized the operations of the FIRS to enable alignment of the structures of the FIRS to the expectations of a modern tax authority. The process has led to the merger of offices and creation of one-stop- shops for improved service delivery to the tax payer. This has lessened the burden of taxpayers who can now transact their tax business at a single point instead of going to different tax offices for different services. The reorganization and restructuring efforts have contributed to providing improved career opportunities to staff of the Service to be rounded tax professionals as a result of the reorganization and realignment of functions, over 2,000 new job openings in specific skill driven areas, have been created with improved opportunity for career growth and development within the Service through training. The Service is encouraging staff without the required skills to acquire the necessary skills through institutional support for training and personal improvement of their competency levels. We are trying to fill existing vacancies with qualified personnel within and outside the system. It may interest you to note that by May 2009 this year, virtually all staff: management, senior and junior staff (out of the current 5,600 staff in place), have enjoyed specialized and industry/issue specific training and Study Tours, within and outside the country in the last five years.
What are some of the revolutionary processes we bring in here?
Like I said earlier we have introduced Automated Bank Payment Process to ensure 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 largely addressed the issue of trapped funds in banks and reduced fraud in the collection system. Automation gives the Federal Government 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 administration processes, starting with the most critical, being reengineered, in preparation for an automated and fully integrated tax administration system.
What is TIN Number you introduced recently all about?
It is Taxpayer Identification Number (TIN) which we introduce to complement automation as to link to the FIRS collection system. The Taxpayer Identification Number (TIN) is a 14 digit sequential number generated electronically as part of the registration process of the FIRS and assigned to all taxpayers, whether they are companies, enterprises or individuals. The idea is to enable each taxpayer have a unique identification number. Efforts are on to expand this to entrenching a unique taxpayer identification number nationwide in a manner that would connect all revenue authorities with Federal, State and Local Government stakeholders. A tax card scheme that will provide a one-stop access to taxpayer records and with which taxpayers could pay taxes has been released. Taxpayers could now pay taxes from the comfort of their homes through our online portal at www.firsonline.com. I must add that we are developing a robust tax payer database and registration process to support effective taxpayer assessment. This is because real time data and information is the live wire of any tax agency. Taxpayer registration is ongoing with Taxpayer Identification Numbers (TIN) being issued to taxpayers. Today, FIRS is generating TIN numbers for the corporate customers of all banks and their individual customers in the Federal Capital Territory, FCT. About 400,000 TIN have been issued to date to corporate and individual tax payers.
How do you audit and enforce compliance to tax law, especially by big organizations?
Let me say that large tax payers especially those in the Oil and Gas sector are being audited. We have also computed the arrears of tax liabilities of some Federal, State and Local Government Ministries, Departments and Agencies (MDAs) and are in the process of enforcing the collection of all liabilities due. MDAs and companies are paying up their tax arrears. By mid-July this year- after just two months, we have realised N22. 6 billion from enforcement activities from payment of taxes due from MDA’s and companies. The efforts to collect all arrears and enforcement of liabilities due continues.
Do you prosecute tax defaulters?
Well what we did is to provide a robust and efficient dispute resolution mechanism, the Federal Inland Revenue Establishment Act 2007, which provided for the establishment of Tax Appeal Tribunals, which now cover all taxes. These are expected to be in operation from October 2009. This tribunal provides all tax payers with the opportunity for redress if dissatisfied with the decision by the relevant revenue authority. In the case of Personal Income Tax where, States have not set up any independent dispute resolution machinery, these tribunals will also be available for such appeals and provides a cheaper avenue than the court system. This notwithstanding, taxpayers dissatisfied with the dispute resolution mechanisms provided are at liberty to pursue their cases further at the Federal High Court, Federal Court of Appeal and Supreme Courts as may be required.
Can we know some of your major stakeholders?
You may know that we have a forum under the platform of Joint Tax Board. The Chairman of the FIRS chairs the Joint Tax Board. My colleagues in the State Revenue Boards as well as co-opted stakeholders - RMAFC, FRSC and FCT are members as we continuously strivie to improve the national tax system as a whole at both Federal and State levels. The Joint Tax Board activities through these efforts have been rejuvenated through the regular attendance of JTB meetings by the FIRS. This has helped to foster the needed cooperation between the FIRS and the State Boards of Internal Revenue [SIRS] towards reducing the spate of multiple taxation, training and data sharing, increasing automation of tax operations, improvement in the revenue accruing to States and increased number of States with autonomous State Board of Internal Revenue [SBIRs].
Can you give us an estimate of what FIRS has generated since the emergence of democracy in Nigeria?
The Federal Inland Revenue Service generated about N10 trillion from various taxes in the last twelve years. A large part of this revenue was generated in the last five (5) years. Though these figures show that the revenues generated by the FIRS have grown overtime, the reality is that we should do a lot more as the revenues generated are not sufficient for development.
What are you doing in the area of expansion of the tax-net to bring in the informal sector of the economy?
The underground economy, otherwise known as the informal sector, is made up of businesses which are largely cash denominated and in some instances 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 and the capacity of fiscal policies to be effective in regulating the environment. For individual taxpayers, apart from those in regular paid employment, the problem of tracking taxpayers outside the tax net is 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 under ground economy includes individuals, registered businesses and corporate bodies generating billions of Naira in business transaction in Petty businesses such car wash, mechanic workshops, Barbing Salons and Taxi business among others.
How do you deal with the issue of tax evasion?
There are many reasons why people evade tax. There are some who don’t know that they need to pay or what to pay. There are some people who don't see the need to pay tax in the first place. There are others who see the need but will still not pay tax. For those who don’t know either to pay or what to pay, we are providing tax education and also ensuring that we are increasing the level of education around taxes at the primary , secondary and tertiary level. Education will also help those who don’t see the need to pay. To those who after all the education is given still willfully do not pay, we have to enforce tax payment albeit whilst ensuring all courtesies and rights of the tax payers are met. I can't just wake up one day and take you to court because you are evading tax. It doesn't work like that. Tax is first and foremost a civic responsibility which if not discharged becomes a criminal responsibili¬ty. So because it is first a civic responsibility we owe you a duty to tell you what tax is all about; send you the first letter informing you about your tax obligation and we owe you a duty to send you a reminder. But if after we have done our own bit of letting you know what your obligations are and you still do not respond then we now have the justification to take you to court or use other enforcement provisions in the tax laws. We have given bite to Enforcement in FIRS. In May and June 2009, we made N22.6 billion from Enforcement alone.
What is your revenue target for 2009?
Our target for 2009 is to ensure adequate funding for government activities that could be unduly affected by the reduction in oil revenues arising from a drop in oil prices. Our target demonstrates our resolve to significantly improve non oil tax revenues in 2009 as a result in a sharp drop in revenues from petroleum. It has required business unusual and a constant harping on the need for enforcement, target achievement within the Service. We have had to fast track implementation of the performance bonus so that it is now done quarterly rather than at the end of the year, all in a bid to motivate early performance. If you look at our budget in 2008 Budget and the Actual you could see tremendous improvement in
So far in 2009, how are you able to meet your target and the amount generated?
It may interest you to note that so far this year we overshot our targets in the month of May and June, though there are still shortfalls from the Jan-March period, we are on the upswing and we will not rest on our oars. It is necessary to inform you that the bulk of our monthly collections come from Petroleum Profit Tax, Companies Income Tax, Education Tax, Value Added Tax, Personal Income Tax and Technology Level. Our 2008 Budget was N2.27trillion but we generated N2.97trillion. In the last six month, January to June 2009, we have so far generated N808.4bn. In January 2009 we generated N138.7bn, February N111bn, March N103.7bn, April N115.7bn, May N163.6bn and June N175.7bn. We still consider the N808bn as a shortfall from our target.
Some people and companies are complaining that it is difficult to obtain Tax Clearance Certificate. What make the process difficult?
It is also not difficult to obtain a Tax Clearance Certificate which is free and the process has been simplified over the years. The problem is that a number of tax payers do not either understand the process or do not have complete records with tax authorities, therefore they encounter delays when they make applications. We also have taxpayers who will rather work with unscrupulous taxpayers to defraud government rather than pay the right taxes at the right time. We plan to engage in a TCC campaign soon to explain the desired behaviour of tax payers. We also plan to explain that in the long run, it pays the tax payer to pay the right tax and use proper channels and processes to get TCCs. We are destroying our country by collaborating with those who are destroying our country. Rather than collaborate with such persons who negate all that we are seeking to achieve, taxpayers should expose such persons. The process of application for corporate and individual tax payers is similar. If you take individual tax payers for example, Section 85 of the PITA provides that where the tax authority is satisfied that a taxpayer has discharged his tax liability for the three years immediately preceding that year or that the person was not subject to tax for the three years, it shall issue a TCC to the person within two weeks of demand for the certificate. So the first point to note is that a taxpayer must have paid all his taxes for the period and thereafter demand for the TCC before its can be issued. Note that a Tax Clearance Certificate is issued free of charge on application at all times provided the applicant has discharged its tax liabilities for the three (3) years preceding the year of issuance of the TCC or any relevant period covered by the TCC. Any demand for payment before issuance of TCC should be reported immediately to any Tax Office throughout the federation. I enjoin taxpayers to note that the that issuance of TCC is free and any request for payment other than for outstanding taxes demanded by the tax authority before issuing a TCC should be promptly reported to relevant authority.
So what should we expect from you in the next three years?
The next two to three years, would be focused on consolidating the gains achieved and making further progress in building the FIRS institution and getting Nigerians to support the FIRS so that we can become a Nation of tax compliant citizens and generate the revenue required to assist the government achieve its developmental goals for the country in a sustainable manner. Our expectation is for every Nigerian citizen and resident to see himself / herself as a stakeholder in tax administration and co-operate with the tax authorities to see that we fulfill our obligations to the Government by paying taxes, in an accurate, complete and timely manner.