Thursday, May 09, 2019 / 09:45AM /
FBNQuest Research / Header Image Credit: india.com
The FIRS is comfortably the largest revenue collection agency, responsible for petroleum profit tax (PPT) and the most important non-oil taxes. The revenue generation of the FGN can be judged on its performance. Its collection increased by 22% in 2017 and 32% in 2018 but remains short of budget and, more significantly, the level to fund the overdue transformation of the Nigerian economy. PPT collection achieved 93% of budget in 2018, and non-oil taxes just 70%, which highlights the areas where the FIRS should concentrate its efforts.
Our chart shows that the FIRS has not achieved its target since 2014 because the setting of budgets has become more aggressive. If we take the FGN’s share of company income tax (CIT), we see from data provided by the Budget Office of the Federation that collection in 2017 reached N543bn (vs a budget of N808bn). In the first nine months of 2018 it hit N500bn (vs a full-year target of N795bn).
Budgets are to remain aggressive. We note that the FIRS has an N8.0trn target for total revenue generation in 2019 (vs N5.3trn actual in 2018).
The FIRS has a number of initiatives in place to boost collection, centred upon the use of electronic systems, the pooling of information with government departments and working with external consultants. They are all commendable and apparently based upon on improving compliance and coverage.
Tax collection by FIRS (N trn)
Sources: Federal Inland Revenue Service (FIRS); FBNQuest Capital Research
The FGN seems reluctant to increase tax rates as well as tighten compliance. There were reports in the local media that senior officials had discussed raising PPT, CIT and VAT in meetings with a Senate commission (Good Morning Nigeria, 21 March 2019).
However, they are still just reports, and we await signs that the FGN will adopt the fastest route (some higher rates and improved compliance).