Tuesday, September 08, 2015 09:29AM / FBN Capital Research
The FIRS has achieved its target for revenue collection every year since 2000 with the exception of 2006, when the authorities’ expectations were unduly high. This appears a good record although we should bear in mind that the combined non-oil collections of the revenue agencies in 2014 amounted to just 3.8% of GDP. There are good reasons for thinking that this year’s target may also prove overly challenging.
The first reason is that for the first two quarters the target was necessarily set at N1.02trn on the basis of the 2014 budget. This year’s budget was only signed off in mid-May, and was framed against a background of a sharply lower oil price and a weaker domestic economy in demand terms.
A second reason is the slowing economy, with growth down to 2.4% y/y in Q2.
In Q1 the FIRS collected N757bn, and in Q2 N1.19trn. This outperformance stemmed from the collection of N502bn in companies’ income tax in June, compared with a monthly target of N81bn. This feat was due in part to higher contributions from the banks, and we are not convinced it can be repeated.
The FIRS is the largest but not the only revenue collection agency. It collected N2.26trn of gross federally collectible non-oil revenue of N3.40trn in 2014. The service is also responsible for the collection of petroleum profits tax.
The office of the accountant-general has high hopes of the e-collection project, which was launched in January. We would add that political will can have as strong a positive impact. A report by the last House of Representatives found that 60 revenue generating federal agencies had failed to remit dues of N9.4trn between 2009 and 2012. We would suggest that remittances would have been far greater under political pressure to deliver.