2018 Budget’s Revenue Target Is Feasible If…. – Prof. Somorin [EXECUTIVE INTERVIEW]

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As the National Assembly lawmakers begin to deliberate on the 2018 Appropriation Bill, particularly its non-oil revenue projections to ensure better performance of yearly federal budgets, a leading Taxation professional, immediate past president of the Chartered Institute of Taxation of Nigeria, (CITN) and currently a Professor of Taxation at Caleb University Nigeria, Professor (Mrs.) Teju Somorin, in this interview with the BRTnews.ng editorial team, speaks on sundry issues affecting the nation’s fiscal system, particularly the revenue generation initiativess and what should be done at national and sub-national levels to improve fiscal efficiency and national development. Excerpts:


Generally, as a tax professional, how would you rate the Federal Government’s total federally collectible revenue projection of about N11.893 trillion given the experiences of the current year with total revenue collections standing at about N      as at September this year?

To start with, readers need to understand clearly what is meant by federally-collectible revenue. They should also distinguish that out of the federally collected revenue, some are Federation items while some constitutes the Non Federation Account Items. When we talk of federally-collectible revenue, we are referring to two broad classes, namely Oil Revenue Crude oil sales (Oil and Gas Revenue), comprising Royalties, Oil and Gas Petroleum Profits Tax and Oil Petroleum Profit Tax; and Non-Oil Revenue comprising, the Companies Income Taxes,  Tertiary Education Tax, Petroleum Profits Tax, Stamp Duties and Capital Gains Tax; Royalties (collected by the Department of Petroleum Resources); Customs Duties, Import and Excise  (by Nigeria Customs Service); and Value Added Tax (VAT); and Fees

Others are, Federal Government Independent Revenue, Operating Surplus and Dividends, Ministries and Agencies and Consolidated Revenue. Just as you said, the figure is a mere projection or an estimate from which government intends to fund its proposed expenditures and deficits according to the fiscal framework. Be that as it may, we also need to know the components of the N11.893 trillion and which organ of Government is expected to collect what portion of the revenue and then assess the performance of such revenue agency. From the total projected federally collected revenue, with oil & gas accounting for N6.38 trillion and non-oil accounting for the balance of N5.60 trillion, this is an increase of 12% more than 2017 estimates.

“Now to my rating of likely performance of the projected earnings, at a quick glance, one is tempted to say that it is unlikely to be achievable, but then if we consider the strategies the Federal Government has put in place to achieve an effective tax collection projection and is still putting in place, I will say with all sense of professionalism that it will be about 85% achievable,”…Prof. Somorin

given the following factors: Nigeria has moved up 24 places from 169 to 145 on the 2018 World Bank’s ease of doing business ranking surpassing the target of 20 places set by government; Nigeria is named as one of top 10 reforming countries in the world and according to the NBS, on the 3rd Quarter GDP , Nigeria’s economy grew by 1.40%  compared to 0.71% in Q2 2017 due to the revision of oil GDP to 3.53%;  this represents the best performance since 2015 Q4 figure of 2.11%.


Other factors relevant to this projected revenue target are the fact that our external reserve has increased to US$34bn as at 30th October 2017 and a trade surplus of NGN506.5bn has been recorded since Q2 2017; Nigeria will launch the first African Sovereign Green Bond in December 2017 to finance renewable energy projects; the IMF projects a global growth of 3.7% for 2018 and the CBN exchange rate was N305.9/US$ as at 7 November 2017.


According to OPEC Oil Market Report, as at October 2017, year to date average oil price for Brent crude was $51.81. In addition, a new US$ 500 million has been invested in the Sovereign Wealth Fund since May 2015 while there is intensified effort to reduce wastages, plug leakages and eliminate ghost workers; improve the efficiency and quality of capital spending whille placing greater emphasis on critical infrastructure. The Solid Minerals Development Fund will be established and NGN30 billion set aside to consolidate efforts of ongoing work in the exploitation of bitumen in Ondo state. Also as has been indicated by government, he 2018 budget deficit of about NGN2.01 trillion will be principally financed mainly through new borrowing just as a sinking Fund of NGN220 billion will be created for the purpose of retiring maturing bonds.

Besides the above factors, Government has also instituted some reforms such as rationalizing  recurrent expenditure and strengthening access to credit by creating a centralized collateral registry. Thus the factors and the new reforms will surely make the budget achievable.


President Buhari has projected that Federal Government’s revenue collection in the non-oil sector would account for about N4.165 trillion compared to N2.442 trillion targeted from the oil sector. Do you think the projection for non-oil sector is feasible?


Your second question is tied to the first. Quite honestly, I think the strategies put in place in previous years have resulted in higher revenues in 2016 as revealed by the NBS and this trend is likely to continue.  Given the strategies newly introduced especially at the Federal level by the FIRS, I rate the projection as feasible. Now let’s quickly run through the measures government has put in place to improve revenue from non-oil. These include the review of operational guidelines such that taxpayers can now file tax returns online and/or at any of Tax Offices that is convenient for them and also pay taxes from the comfort of their homes, creation of a new Department in FIRS known as the Federal Engagement & Enlightenment Tax Team (FEET) to drive public awareness in order to increase voluntary compliance and ultimately the anticipated revenue yield, and collaboration of FIRS with the State IRS encouraging businesses and individuals to take advantage of the newly introduced Voluntary Assets  & Income Declaration Scheme (VAIDS) which is a time-limited opportunity for taxpayers to tidy up their tax affairs without fear of criminal prosecution or investigation.

One of Nigeria’s fiscal experts, Olomola, in one of his research papers this year, said and I quote “Indeed, I am of the opinion that the Nigerian budget can be solely funded from non- tax revenue without dependence on oil revenue. However, for this to be achieved, the adoption of an effective tax collection strategy is necessary. For instance, if the Government imposes an income tax of N100,000 per individual per annum as personal income taxes, assuming there are 70million tax paying individuals in a total population of 180 million people, the total tax collectible will be about N7 trillion per annum”

Apart from the enumerated strategies, the Medium Term Expenditure Plan Framework and the Fiscal Strategy Paper (MTEF) released by the Federal Ministry of Budget & National Planning the plan of Nigeria’s fiscal strategy from 2018 to 2020. The MTEF which is composed of the macroeconomic framework, fiscal strategy and medium term fiscal framework will enable Nigeria achieve the economic plans set by the EPRG.

One of the biggest challenges militating against non-oil revenue collection over the years is the inability of the revenue authorities to have a credible data base of tax payers in the informal sector. As a seasoned tax administrator, how do you think this challenge could be surmounted in the medium term?

I quite agree with you that unavailability of adequate data, poor internal record keeping with the cashbased nature of most transactions make it difficult to assess business transactions and track voluntary compliance. These inadequacies cause huge revenue leakages and greatly increase the tax gap within the Nigerian tax system. There has always been a huge gap between the tax revenue collected and the quantum left uncollected annually. For the nation to make meaningful and sustainable progress the gaps must be closed with clear strategies. The first way to go about it is to have a creditable data. How many taxpayers do we have, how many of them are paying taxes and adequate taxes, how many are corporate taxpayers, what is the quantum of those taxed under the PAYE? What is Nigeria’s projection on the number of employees that are likely to retire in the next five years as this will affect the steady revenue from the PAYE scheme? How many individual taxpayers pay N10 million and above in the big states? All these data are required before we can make a realistic projection.

Madam, the President of one of the real sector interest groups, NACCIMA, Iyalode Alaba Lawson, has expressed serious fears that the projected revenue from Companies Income Tax of N794.7 billion and another N207.9 billion VAT would hurt manufacturing and other tax compliant entities. Do you share this view? If yes, how do you think government could meet the target without creating additional burden for companies?


I don’t share this view because the measures put in place will place the manufactures in a comforting zone. Government has done a lot to curb multiplicity of taxes and streamlined the taxes to be paid by them. The tax laws provide many generous incentives for the manufacturing companies such as in areas of low rate of tax for the SMEs and generous capital allowances. To ease the foreign exchange crunch for businesses, the CBN announced in early second quareter of this year, the creation of an foreign exchange trading window for investors and exporters to enable them trade Naira at a market determined rate. This seems  to have significantly improved the supply of forex from non-CBN sources and facilitated in  stabilizng the market.


Recently, the Federal Government had on July 1 this year introduced the Voluntary Assets and Income Declaration Scheme (VAIDS). The Scheme provides non-compliant taxpayers with a nine-month window to regularise their tax status relating to historical period and in return, overdue interest and penalties will be forgiven. In addition, the Government assured that no investigations or criminal charges will be brought against participating taxpayers. Do you think the scheme could serve as a fiscal panacea to the perennial problem of tax evasion in the country?


Given the benefits derivable from the newly introduced VAIDS such as forgiveness of overdue interest and penalties, and the assurance that tax defaulters will not be prosecuted once they have truthfully declared, this will go a long way to promote voluntary compliance and ultimately, it could reduce the incidence of tax evasion even though it may not eliminate tax evasion.”… Prof. Somorin

There is hardly any country that can boast of 100% tax compliance. The scheme ushers in an opportunity to increase the nation’s general tax awareness and compliance and as a tax expert, this gives me some comfort.


Diversification of the economy has been described as holding the key to improved revenue collection for governments at all levels if properly pursued. Which sectors of the economy do you think governments nationwide should prioritize in their drive towards achieving the objectives of this desirable agenda?


As of priority, I think the Non-Oil sector with focus on Agriculture (crops), information and communication and then mining and quarrying in that order.


One issue that stakeholders have consistently canvassed is participatory budgeting in which the people would be involved in the budgetary processes. As the immediate past president of the Chartered Institute of Taxation of Nigeria (CITN), would you say the involvement of professionals and other relevant groups is adequate during the preparation of this year’s budget proposal? If No, how do you think professionals can make themselves more relevant in the processes?


I believe it’s a good idea to involve professionals in budgetary process. There is no harm in intensifying the participation of professionals. This can be carried out under the umbrella body of the Association of Professional Bodies in Nigeria (APBN), that is the body for all professionals in Nigeria. We at the CITN, we have always made our position known on national issues. Not only in budgeting. Currently, the CITN is collaborating with the Ministry of Finance in implementing the VAIDS. Last year, we also participated in putting together the Revised National Tax Policy. In previous years, we were part of the tax reforms of 1991 and 2003.


Finally, could you offer some suggestions on how states and local governments could improve their revenue collections without hurting the informal sector operators or the MSMEs?

I cannot but agree with you that the States and Local Governments need to improve their revenue collections because in 2015 and 2016 the internally generated revenue (IGR) of the 36 states in 2015 and 2016 disclosed by the National Bureau of Statistics (NBS) showed that apart from Lagos and one or two states or so, many states cannot survive without the monthly statutory allocations[1]. Indeed, until recently, many states could not meet their recurrent expenditure as staff salaries were owed. Thus, in a bid to remain afloat, they had to devise numerous strategies and new approaches to improve their tax revenue collection drive in Nigeria. Such measures include, the review of obsolete tax laws, simplification of tax laws, elimination of multiple taxes, harmonization and streamlining of processes, levies and taxes at the State and Local Government levels should be embraced in a holistic manner.

“On the issue of autonomy of States’ Internal Revenue Services, I believe a quick solution to dwindling Internally Generated Revenue (IGR) situation in any state is to make all the BIR autonomous and free from the day-to-day Government control, supervision and monitoring. I advise that the states that are not yet to be autonomous should join the states that are fully autonomous if the much needed IGR is to be actualized.”…..Prof Somorin

For example, the first step taken by the Lagos State in its tax reform programme was the full autonomy it granted to the Lagos State Internal Revenue Service (LIRS) with the enactment of Lagos State Revenue Administration Law. The autonomy gave LIRS the powers to hire professionals who have the technical know-how on tax administration and collection.  With financial autonomy firmly in place, adequate funding is continuously made available to ensure the efficient administration and providing the revenue authority with modern day technologies.

Other measures required to shore up states’ IGR are that the Executive Chairmen of the State Tax Authorities and Local Government Chairmen should be more creative in revenue generation efforts to enable them collectively meet the targeted revenue to fund the budget; State Governments should cut their costs, eliminate wastage and block revenue leakages; agents of Government for Withholding Tax should continue in their revenue remittances; continuous or sustained engagement and Taxpayers education, especially those in the informal sector; execution of developmental projects as evidence of tax revenue in action.

In addition, training and retraining of tax officials to enhance proficiency in their jobs is imperative just as tax authorities should be organizing trainings and workshops on taxation for judges to keep them abreast with the current tax practices and processes to enable them adjudicate well in tax matters. At the same time, they should automate tax processes and procedures. Finally and most importantly, all tiers of government should spend revenue tax judiciously.






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