Anyone who has paid more than passing attention to the activity of the Federal Inland Revenue Service (FIRS) in the last four years will not be surprised by the agency’s tax collection receipt in the first six months of 2023.
This is because the FIRS, led by Muhammad Nami, has consistently reached new heights.
Even so, an N5.5 trillion total tax revenue collection between January and June this year is no small feat, especially given that it was more than the N4.95 trillion collected by the FIRS in the entire 2020 fiscal year and about N900 billion less than the N6.4 trillion collected in all of 2021.
It is the service’s highest-ever tax collection for the first six months of a fiscal year. Nonetheless, the tax office is certain that it will outperform that figure in the final six months of 2023.
There are “better days ahead,” according to the FIRS Executive Chairman on the day he delivered the record-breaking declaration at the National Economic Council (NEC) meeting a few days ago. He ascribed this to “constant improvement in our tax processes and the positive impact of current government policies on the economy.”
According to a breakdown of the 2023 half-year tax collection result, non-oil taxes continued to do well with N3.76 trillion, while oil taxes stood at N1.73 trillion.
And, after hearing Muhammad Nami on the day, no one would bet against the agency surpassing that goal by the conclusion of the fiscal year. This is because it earned N1.65 trillion in tax collections in June 2023 alone, the agency’s biggest tax receipt in a single month.
Success Is Predicted
A brief examination of the FIRS trajectory since at least 2020, when Muhammad Nami-led’s management took office, reveals that signs of a successful revenue-collecting regime were present from the start. Despite the looming shadow of COVID-19 over the political landscape, which was likely to have a severe impact on the economy.
Despite a global decline in crude oil prices and economic disruptions during the year the epidemic gripped the world, the agency’s tax receipts fell just short of its N5.07 trillion target, coming in at N4.95 trillion.
The FIRS Executive Chairman easily recalled how the worldwide oil drop impacted tax returns through the Petroleum Profits Tax, which contributed only 30.6% of tax revenue generated in 2020, compared to prior years.
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As a result, the country had to rely more on non-oil taxes, which increased dramatically as a result of the implementation of a tax reform based on a four-pronged approach that includes rebuilding FIRS’ institutional framework, improving collaboration with stakeholders, making the agency a customer-centric institution, and finally, transforming it into a data-centric institution.
With COVID-19 still in effect, tax reforms began to take effect in 2021, with more stakeholder participation and the deployment of technology. It was the year of Tax Pro-Max, so it’s not surprising that FIRS exceeded its N6.401 trillion target.
The FIRS CEO said in a personally signed performance update for the fiscal year 2021 that the agency collected a total of N6.405 trillion in combined oil (N2.008 trillion) and non-oil (N4.396 trillion) revenues, compared to a target of N6.401 trillion.
A more detailed breakdown shows that Companies’ Income Tax totaled N1.896 trillion, Petroleum Profits Tax totaled N2 trillion, Value Added Tax totaled N2.07 trillion, Electronic Money Transfer Levy was N114 billion, and Earmarked Taxes totaled N208.8 billion, among other things.
This means that in 2021, the non-oil sector provided 68.64% of the total collection, while the oil sector contributed 31.36% of the total collection.
According to the year’s performance update report, the oil industry did better in 2022, as FIRS crossed the N10 trillion mark by providing 41% of total tax collection for the fiscal year, with an unprecedented number of N4.09 trillion to N5.96 trillion from the non-oil sector.
All of this can be ascribed to a significant increase in stakeholder engagement under the current FIRS leadership, an automated system with Tax Pro-Max as the guiding light for tax administration, and training and retraining of FIRS staff to increase their capability.
So it is pretty simple to track the FIRS performance indicator back to 2020 and conclude that its 2023 half-year collection of N5.5 trillion was not altogether unexpected.
It is a success story that was predicted from the start, not only because of continuous tax reforms but also because of enhanced stakeholder participation. And all signs point to things just becoming better.
Dapo Okubanjo is an Abuja-based journalist and public affairs commentator. Dokubanjo can be reached at dokubanjo@yahoo.co.uk.