Interview: Tunde Fowler
What more can be done, in your opinion, to widen Nigeria’s tax base?
TUNDE FOWLER: Widening the tax base was the first step we undertook, and over the past few months we have increased the number of active taxpayers from 500,000 to roughly 900,000. We are aiming to get the Nigerian population active and up-to-date on tax rules. Although we have laws stipulating that firms should remit value-added tax (VAT) every month, we have had situations in which some companies did not remit any taxes for a year or more. We are enforcing this to widen the base.
To ensure the business community had information on tax laws, we embarked on education campaigns through the mass media, such as radio and news print. We also reached out individually to a few companies, and deployed technology to make paying taxes more transparent and make it easier to comply. We are now deploying enforcement on those that still decide not to obey the tax laws. In the past few weeks, we have had to shut down a few companies. The response has been positive and we have received billions of naira from previously unpaid taxes.
The Federal Inland Revenue Service (FIRS) is aiming for at least a 90% level of compliance in terms of tax payment at the corporate level. If I had to estimate, right now it is under 15%. Nigeria’s federal system means that each state has its own independent revenue board. FIRS is trying to work together with these stakeholders to have an effective and efficient tax system. Partnering with these organisations can lead to many benefits. For example, instead of having 10 or 15 boards of internal revenue as well as the FIRS check a firm’s books, we should have a single joint audit that covers a company for the year. We would then give what is due to each tax authority involved, and FIRS would take taxes due to the Federation Account.
From your perspective, what role do extractive royalties play in terms of overall tax revenues?
FOWLER: In terms of the amount of revenue that we expect, we believe th35at if oil can account for approximately 15% in 2016 then we are lucky. This will represent a sharp reversal from when oil accounted for 85-90%, and non-oil sectors accounted for the remainder of revenues. In 2016 the non-oil sector is expected to account for at least 80% of the country’s revenues. Within the non-oil sector, we expect telecoms to contribute a large volume of tax revenue.
We have also adopted technology that ensures any tax due will be remitted immediately when a transaction occurs. We have deployed this in the aviation sector and are collaborating with a few major airlines so that when a ticket is purchased, the VAT portion is remitted immediately.
We have also engaged with the Office of the Accountant-General of the Federation to ensure that whenever payments are made by any government ministry, department or agency, the taxes are automatically deducted.
Finally, FIRS has met with the finance minister to ensure that, before any payments are made to any vendor or contractor, they obtain a clearance from FIRS certifying that they are tax compliant.
How can the level of compliance be increased?
FOWLER: A question that many corporations and individuals have asked in the past is, what has the government done for me or my business?
I believe that improving trust with the private sector is key to increasing compliance. We are lucky in that the current leadership — the president, vice-president and other key officials — have the trust of the business community. More people believe that if they pay their taxes, the government will deliver on its mandate and its promises.
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