Tuesday, January 20, 2015 9:46 AM / FBN Capital Research
The halving of the oil price since mid-June has concentrated the minds of policymakers on the paucity of non-oil revenue.
Collection amounted to just 3.7% of rebased GDP in 2013.
The FGN’s initial proposals for the 2015 budget, presented to the National Assembly on 17 December, include some overdue taxes on luxury goods and services, a review of waivers and exemptions, and an extension of the McKinsey and Co consultancy. There are too many taxes, often duplicated, and too few taxpayers.
The FIRS has achieved its revenue targets every year but one since 2000 (see chart). This could indicate that its targets should be more challenging.
It met its full-year target last year in November and was promptly challenged by the FGN to raise an additional N75bn. The CME hopes that the FIRS/McKinsey joint initiative will yield N460bn over 2015-17 on top of the annual level in 2014.
The FIRS report for Q3 2014 shows collections totaling N1.19trn, compared with N1.45trn in Q2. The decline arose because the bulk of its companies income tax (CIT) was collected on schedule (and earlier than in 2013).
Nigeria’s VAT rate of 5% is among the lowest globally. The CME has estimated that a doubling of the rate would yield a further N610bn annually.
The FIRS is the largest but not the only revenue collection agency. It is responsible for petroleum profits tax on the oil side, and CIT, personal income tax, VAT (non-import) and other levies on the non-oil side. It collected N4.81trn in 2013 out of total federally collected revenue of N9.76trn.