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FG generates N586.17bn from taxes in 90 days

By on June 13, 2016

The Federal Government generated a total sum of N586.17bn as tax revenue through the Federal Inland Revenue Service in the first quarter of this year, a document showing the fiscal position of government has shown.

An analysis of the document, obtained by our correspondent from the Office of the Accountant General of the Federation on Friday, indicated that the tax revenue generated within the period indicated a shortfall of N170.54bn when compared to the N756.71bn earned in the first quarter of 2015.

According to the fiscal document, the first quarter tax receipts of N586.17bn was earned from petroleum profit tax where the sum of N213.35bn was collected in three months; the corporate tax (Companies Income Tax, stamp duties and capital gains tax) where N176.25bn was earned and Value Added Tax, which recorded a total receipt of N196.57bn.

A breakdown of the N213.35bn PPT revenue showed that the sum of N90.87bn was collected in January. The figure dropped to N50.74bn in February before rising to N71.72bn in March.

For VAT, the N196.57bn breakdown showed that the sum of N62.07bn was earned in January while February and March recorded N69.71bn and N64.78bn, respectively.

In terms of corporate taxes, the sums of N50.82bn, N71.20bn and N54.21bn were collected in January, February and March, respectively.

The low tax collections by the FIRS in the first quarter of this year may threaten the N4.9tn revenue target set for the agency by the Federal Government in the 2016 fiscal period.

The government had while setting the N4.95tn tax revenue for FIRS said a total of N2tn, representing 40.35 per cent of the entire revenue, is projected to be generated from VAT.

This would be followed by the Companies Income Tax with N1.87tn, representing 37.87 per cent; the PPT, N800bn or 16.14 per cent; and education tax N180bn or 3.63 per cent.

Others are the National Information Technology Development Fund N20bn or 0.4 per cent and the consolidated development levy N80bn or 1.61 per cent.

But investigations by our correspondent revealed that unlike in the past where the agency would have generated almost N1tn at the end of the first quarter, the harsh economic situation had reportedly affected the profitability of many companies, thus reducing their tax yields.

Findings also showed that the banking sector, which before now was paying a huge amount as taxes, had been badly hit as a result of the withdrawal of government funds into the Treasury Single Account as well as the huge non-performing loan portfolio.

For instance, five banks quoted on the Nigerian Stock Exchange, recorded a decline of about N13bn in their Profit Before Tax, from a total of N119.63bn to N106.29bn for the three months period ended March 31, 2016.

The banks are Guaranty Trust Bank, GTBank Plc, Union Bank of Nigeria Plc, Zenith Bank Plc, Ecobank Group, and United Bank for Africa, UBA Plc.

The drop in profitability, according to analysts, is expected to reduce the amount payable in taxes to government by the banks.

Speaking on the need to boost tax revenue, the President, Chartered Institute of Taxation of Nigeria, Dr. Olateju Somorin, said that a review of Nigeria’s tax laws was necessary if the country hoped to generate substantial revenue from taxation.

She said sustainable economic growth could not be achieved without tax reforms, adding that the institute had been at the forefront of this review.

She argued that despite the rate of growth in terms of Gross Domestic Product, the country’s tax to the GDP ratio had not surpassed seven per cent as against 20.8 per cent in Ghana; 15.4 per cent in Benin Republic; 18.2 per cent in Cameroun; 23.2 per cent in Cape Verde; 15.3 per cent in Cote D Voire; 15.8 per cent in Egypt and 26.9 per cent in South Africa.

Somorin said, “It is acclaimed that taxation is an instrument of economic growth for funding the government budget universally.

“But then, the huge gap between tax collections and the quantum left uncollected year after year needs to be addressed if the nation must make meaningful and sustainable progress in the face of the huge infrastructure gap it is currently faced with.

“A review of some of the Nigeria’s tax laws has indeed become overdue if the country hopes to rake in substantial revenue from taxation. Our tax reforms must be enablers for voluntary tax compliance and not discourage same.”

“Our tax laws must be devoid of ambiguities and not give room for either the tax payers or tax administrators to interpret same in an inconsistent manner.”

Also speaking on how the government could generate more revenue from taxes, the Deputy Country Director, ActionAid Nigeria, Mrs. Ifeoma Charles-Monwuba, called on the Federal Government to review all existing laws on tax incentives, noting that the country had lost billions of dollars to tax holidays.

While acknowledging the motives of the government in granting tax incentives, she noted that from studies, the losses incurred by the country to tax waivers outweighed the benefits derivable from such measure.

Charles-Monwuba said the discretionary and political natures in which these tax incentives were given had subjected the process to abuse.

 

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