Following the outbreak of the Coronavirus COVID-19 pandemic and its impact on the economic and fiscal revenue outlook for 2021, the Federal Government has urged the governors of the thirty-six states of the Federation to strategize and reposition their fiscal revenue management systems for this era called the ‘new normal’.
According to the Federal Government, with the impact of COVID-19, the revenue outlook for 2021 depends on the willingness of State governments to embrace the right tools, technology and strategies to transform, enhance as well as strengthen revenue growth and sustainability, and adopt what it termed, cost optimization plans.
In a keynote address yesterday in Abuja at the 6th Annual Internally Generated Revenue Peer Learning Events organised by the Nigeria Governors’ Forum, NGF, Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed said, “Going forward, the impact of COVID-19 on the economic and fiscal revenue outlook for 2021 presents a significant opportunity.
Fiscal reforms are important now, more than ever, to mitigate against current and future risks, bearing any future pandemics or other global crises. “Considering the impact of COVID-19, the revenue outlook for 2021 depends on the willingness of State governments to embrace the right tools, technology and strategies to transform, enhance and strengthen revenue growth and sustainability, and adopt cost optimization plans.”
The event by the NGF Secretariat provides a platform for discourse, shared learnings and experiences on tax policy and administration reforms at the sub-national level. Meanwhile, the Chairman of NGF and Ekiti State governor, Dr.Kayode Fayemi who noted that this year has presented us with a perfect storm of difficulties to deal with – from a health pandemic to the second economic recession in five years, said that the decline in oil prices that followed the global lockdown and the social unrest that amplified the demands of the EndSARS protests worsened the country’s economic and social conditions.
According to Fayemi, the 2020 half-year year-on-year IGR performance reported a negative growth of 11.7 percent for the 36 States and the Federal Capital Territory (FCT), even as he said that despite the overall decline, some States recorded positive growth, adding that three States in the category were Ebonyi, Gombe and Yobe which recorded more than 50% in growth.
He said that the state governments were currently professionalizing Internal Revenue Services to be taxpayer-centric and responsive to the new normal of digitalizing tax administration.
Fayemi said: “This year has presented us with a perfect storm of difficulties to deal with – from a health pandemic to the second economic recession in five years. At the wake of the COVID-19 pandemic, the Forum worked with the federal government, international partners, and the private sector to deliver the necessary response needed to contain the virus and ease out its impact on the lives of our citizens.
These include the set-up of intervention funds, roll-out of social investment programmes, distribution of palliatives, initiation of tax incentive programmes to protect and support livelihoods and businesses. “Unfortunately, the decline in oil prices that followed the global lockdown and the social unrest which echoed the demands of the ENDSARS protests further worsened the country’s economic and social conditions for months. This exacerbated the already vulnerable fiscal environment for governments at both the national and sub-national level.
Other accompanying trends have included rising inflation rate, degrading exchange rate and growing unemployment. As we work together to reflate the economy, the need to improve government revenues to adequately service planned expenditures cannot be overemphasized. “We are not canvassing or proposing for new taxes to be introduced but emphasizing the need for our Internal Revenue Service’s to be more strategic, innovative and pragmatic in administering those taxes, fees, levies and charges that have been legally prescribed for collection across various jurisdictions.
“At the federal level, a new Finance Bill is being proposed to provide a legal framework that underpins many of the reform recommendations to stimulate the economy and deliver an effective but friendly tax system. “The Forum is actively engaging with the Federal Ministry of Finance Budget and National Planning on the provisions of the Bill, especially those impacting State taxes and jurisdiction. It is important the Bill services the interest of all and not a few…
“Already, most States have passed a consolidated State revenue code as required under the World Bank SFTAS Program for Results (P4R) but more importantly to limit the incidence of multiple and illegal taxation. This implies that taxes, levies, fees and charges in these States are now harmonized. “Other reforms being implemented by State governments under the SFTAS programme and as detailed in the ‘COVID-19 Response for Tax Authorities’ issued by the NGF Secretariat and endorsed by us at the Forum earlier this year include: ending the contracting-out of tax collections and assessments; increased collaboration between the Internal Revenue Service, MDAs, and local governments; roll-out of tax-for-service initiatives; scale-up of cashless payments; and the deployment of a Geographic Information System (GIS) to support effective land administration and property taxation. “Pivotal to the success of these series of reforms is taxpayer enumeration which is still very much weak.
While technology presents us with a platform to strengthen our taxpayer databases, we must collaborate, share data, intelligence and information, and embrace advanced taxpayer profiling techniques to inform our approach to taxpayer management.” Speaking further the Finance Minister said, “These are indeed challenging times for the global and local economy brought on by the unforeseen impact of the COVID-19 pandemic. As with most countries of the world, the Nigerian economy is in a recession. Despite this, global analysts posit that Nigeria remains the fastest growing economy in Africa. Furthermore, business and economic indicators anticipate that the country’s path toward economic recovery will commence in the fourth quarter of 2020.
“Overall, economic analysts have predicted that the global economy will recover in 2021, especially with the positive outcomes of the race toward the discovery of a vaccine. For Nigeria, economic analysts forecast that the economy will experience positive growth in the first or second quarter of 2021. On policies put in place so far by the Federal, Zainab Ahmed said,
“The Federal Government has embarked on a fundamental strategy that comprises wide-ranging reforms in its tax policies and administration in the last few years. For instance, the Finance Act 2019 and Finance Bill 2020 have brought significant changes and consolidation to tax administration and management in the country.
“As with the previous version, the Finance Bill 2020 seeks to achieve the promotion of fiscal equity; reform domestic tax laws in alignment with global best practices; introduce tax incentives; support MSMEs and raise revenues for the government. Some of the key provisions of the Bill include: tax relief for companies that donate to a COVID-19 relief fund; a reduction of 50 percent in the minimum tax rate from 0.5 percent to 0.25 percent of gross turnover for financial years ending January 1, 2020 to December 31, 2020; an exemption from tertiary education tax by companies with turnover of less than 25 million Naira; among others.
“Furthermore, in terms of tax policy reforms and consolidation, the Finance Bill 2020 will amend the following laws in order to facilitate and strengthen revenue mobilization and growth in 2021 – the Capital Gains Tax Act, Companies Income Tax Act, Personal Income Tax Act, Tertiary Education Trust Fund (Establishment) Act, Customs and Excise Tariff, Etc. (Consolidated) Act, Value Added Tax Act, Federal Inland Revenue Services (Establishment) Act, Nigerian Export Processing Zone Act, Oil and Gas Export Free Zone Act, Fiscal Responsibility Act, Companies and Allied Matters Act 2020, and the Public Procurement Act.
“Some of the other ongoing initiatives of the Federal government include the Integrated Revenue Monitoring System; the implementation of the National (Single Window) Project; and the full nationwide adoption of the Joint tax Board – TIN. With these initiatives, we seek to chart a new course for the tax system while addressing tax encumbrances for individuals and businesses in Nigeria. “For instance, the Integrated Revenue Monitoring System and the Tax Expenditure Statement are already incorporated, for the first time, in the 2021 – 2023 Medium Term Expenditure Framework and Fiscal Strategy Paper. Both measures are geared towards improving transparency of revenue generation and accountability for revenue utilization (including tax forgone) by way of incentives and waivers.
“In the area of tax administration, the government is leveraging on technology and digitalization to drive revenue mobilization, data management and cost optimisation. Some of the technologies being deployed include the government integrated financial management information system (GIFMIS), which focuses on the improvement of public expenditure management processes, to enhance greater accountability and transparency across Ministries, Departments and Agencies.
“Then there’s project lighthouse, which makes use of analytics to mine and analyse data for optimal tax collection. Technology is also being used for the purpose of assessing and collecting stamp duties; as well as for the automation of VAT collections in the retail, banking and telecommunications sectors – with more sectors being explored for onboarding. “All FIRS Offices are currently running on the Tax Pro platform for e-TCC, e-Receipt and e-WHT. Offices within the FCT are currently using the VAT module of the TaxPro. Other technology modules are being developed, even as more digital tools are being adopted and deployed across the spectrum of the revenue generation agencies of the federal government. Indeed, the use of technology have led to significant improvements in revenue generation and cost optimization in the medium term. The overarching aim of the Federal Government is to achieve revenue growth and sustainability for the foreseeable future.
“As I conclude, it is important for me to intimate you on the Strategic Revenue Growth Initiative, also known as the SRGI. The SRGI is a blueprint and mechanism for enhancing fiscal revenues from 6% to 15% of GDP by 2023. The initiative seeks to: (1) Achieve sustainability in revenue generation (2) Identify and enforce new and existing revenue streams, and (3) Achieve cohesion through people and tools. “Through this initiative, we are building and strengthening sustainable revenue generation systems through the application of the right incentives, safeguards, and performance management systems. There are several initiatives under the SRGI with revenue generation and enhancement potential, which are closely monitored using data-driven performance management to achieve the results and set targets.”
“With the SRGI, we are partnering with interested State Ministries of Finance and State revenue generating agencies in achieving the set target of attaining revenue to GDP of 15% by 2023. We are working on the second phase of the SRGI – having reviewed our strategies, identified the challenges and re-assessed the prospects and opportunities. Subsequently, the SRGI 2.0 involves a top down approach that is driven by enhanced data and technology to complement a bottom up approach aimed at improving operational efficiencies. We are willing and available to partner with all State governments yet to join us on this transformative journey.”
Earlier in his address of welcome, the Director General, Asishana Okauru said, “At the time, it was borne out of oil crisis which saw government revenues crashing resulting in the country’s economy sliding into a recession in 2016. Over the period, we have made a tradition to around this time bring together the Commissioners of Finance and heads of tax authorities from the 36 States of the Federation and the Federal Capital Territory to discuss yearly events of what has worked, what has not worked and areas that require collective action.
“This meeting is one of those mechanisms for these discussions – for States to share their experiences about what measures proved most effective during the period of lockdown and after, as well as plans for 2021 to stabilise public finance and incentivize business recovery for jobs, growth and stability.”
By Henry Umoru,
Vanguard News Nigeria