FIRS Collects N5.26trn in 2019; Equivalent to 59.8% of N8.80trn Target

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Thursday, March 12, 2020 / 09:55 AM / FBNQuest Research / Header Image Credit: Twitter; @dabiodunMFR

                                                                                  

The quarterly reports for 2019 from FIRS offer some crumbs of comfort for the federal finance ministry as it reworks the approved 2020 budget for the FGN in the light of the sharp fall in the crude price. The service collected N5.26trn in total last year, equivalent to 59.8% of the target of N8.80trn. The consolation is that non-oil collection amounted to N3.15trn in 2019 or 70.0% of the target. For petroleum profit tax, the ratio was just 49.1%. These figures are all gross (ie before distribution to the three tiers of government from the federation account).

                                                                                                              

In Q2 and Q3 2019 receipts from companies' income tax (CIT) exceeded the pro rata quarterly target of N427bn, reaching N507bn and N513bn respectively. This reflects the seasonality of CIT payments.

 

From last month the standard rate of VAT was raised from 5.0% to 7.5%.  Also, legislation approved by the National Assembly has increased the tax burden of energy companies operating under production-sharing contracts. Industry sources have put the additional take at about US$500m in a year.

 

These are welcome increases but we note that total FIRS collection in 2019 was just 5% higher than in 2012. Its efforts are hampered by: the size of the informal or unbanked economy; the poor culture of paying tax; and the fact that for many years the FGN took its collective eye off the ball in non-oil collection. If it depends just on boosting coverage, rather than adding selective rises in tax rates to the mix, then the FGN will have to be very patient.

 

 

Tax collection by FIRS (N trn)

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Sources: Federal Inland Revenue Service (FIRS); FBNQuest Capital Research

 

Our chart also shows that FIRS has consistently fallen short of its annual targets since 2015, which highlights the aggressive fiscal stance of this administration. The same is true of the other, smaller collection agencies. The FGN would make a greater contribution to the economy by pushing up spending substantially but cannot do so because revenue is pitifully low.


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