The Federal Inland Revenue Service (FIRS) is poised to meet and surpass its revenue target with its new organisational structure, a critical milestone in the Service’s commitment to revolutionise tax administration, writes JOSEPH INOKOTONG.
THE ambitious N28,777,404,071,861 Federal Government 2024 Appropriation Act with N8,270,960,606,831 earmarked for debt servicing and N8,768,513,380,852 for recurrent (non-debt) expenditure has placed the Federal Inland Revenue Service (FIRS) on a very hot seat. This is because the service is saddled with the responsibility of turning into the government coffers a large chunk of the anticipated revenue through tax collections.
Indeed, the Minister of Finance, Mr Wale Edun, minced no words about the government’s quest to grow its revenue when he told a gathering of experts last week that the Federal Government is targeting a 77 percent increase in Internally Generated Revenue (IGR). Edun, who is also the Coordinating Minister of the Economy, said this in Abuja at the opening of the 2024 Strategic Management Retreat of the Federal Inland Revenue Service (FIRS). The theme of the retreat was ‘Re-imagining To Tax Administration for Equity and Economic Growth’. Edun reminded the FIRS that tax plays an integral role in government’s quest to boost revenue that will help bridge infrastructure deficit and build social safety nets that will cater to ordinary Nigerians.
However, he commended the management of the FIRS for its commitment towards meeting its set revenue target, saying, “It is commendable that the FIRS is holding this retreat at the beginning of the year to rub minds on how to increase government revenue. We are projecting a 77 percent increase in IGR. Our revenue as a percentage of Gross Domestic Product (GDP) is low at below 10 percent. It should be much higher. Government needs so much to spend on infrastructure and social services. The idea is to shift from expensive debts to domestic revenue mobilisation”.
The ability of the FIRS to rise to the challenge of raking in more revenues to the government has never been in doubt. This was amplified by the remarks of the Accountant-General of the Federation, Dr Oluwatoyin Madein. She informed that the FIRS now contributes about 70 percent of the total federation revenues, although a lot of taxes are uncollected. For Dr Madein, an effective tax administrative system is a very strong tool for economic growth and development. To translate tax administration to economic growth, appropriate taxes must be collected to fund government infrastructure and social contract while, at the same time, support government operating environment. “If all taxes are collected and there is no accountability, fulfillment of social contract between the taxpayers and government will be nearly impossible. Nigeria has never been short of effective tax laws but rather, it has been plagued by ineffective tax administration. However, the story is changing. We have seen a massive improvement in tax collection with the changes at FIRS over the years.
“The FIRS now contributes about 70 percent of the total federation revenues, yet a lot of tax revenues are left uncollected.”
The views of the Accountant-General of the Federation on the capacity of the FIRS to deliver are morale boosters, even with the widely accepted notion that the current tax base needs to be expanded while, at the same time, finding new and improved ways of collection and partnership.
Rising to the challenge, Dr Zacch Adedeji, Executive Chairman of the Federal Inland Revenue Service (FIRS), announced that a new organisational structure, a critical milestone in the Service’s commitment to revolutionise tax administration in Nigeria, will kick off from February 2024. He remarked at the unveiling of the new FIRS structure that the cornerstone of the paradigm shift is the establishment of a customer-centric organisational structure, designed to streamline processes and enhance efficiency in the country’s tax operations, stressing that the FIRS is not merely adapting to change but leading it.
“The forthcoming structure, set to kick off from February, embodies our dedication to modernise and digitise the tax administration landscape in Nigeria,” Dr Adedeji pointed out. He stated that in the FIRS’s pursuit of a more efficient and contemporary tax administration methodology, the Service is embracing an integrated tax approach, leveraging technology at every step. The approach, he added, positions FIRS at the forefront of innovation, ensuring that it meets the evolving needs of taxpayers in a rapidly changing world.
Dr Adedeji said, “The structure advocates for a comprehensive approach to taxpayer services, consolidating our core functions and support under one umbrella. By tailoring our services to specific taxpayer segments, we aim to simplify the taxpayer experience. No more complexities, no more overlaps – just a seamless and user-friendly interaction for every taxpayer. In a groundbreaking move, we are shifting away from traditional tax categorisation. Instead of maintaining different departments for distinct tax categories, the new structure formulates taxpayer segments based on thresholds. This tailored approach ensures that taxpayers are guided and serviced according to their specific needs, eliminating confusion and redundancy in tax administration.
“Behind this transformative initiative are carefully considered considerations detailed in our operations plan. We highlight the rationale behind our integrated approach, the benefits of comprehensive taxpayer services and the logic behind tailored taxpayer categories, which will be presented to management in the subsequent sessions of this workshop. These considerations set the stage for a more responsive, efficient, and user-friendly tax administration system”.
The FIRS boss has assured that due process will be followed in the reformation as extensive re-orientation and change initiatives will be implemented to ensure that no one is left behind. “We recognise the need for meticulous planning, effective communication and unwavering commitment to navigate this transformative journey successfully. As we stand united in this endeavour, let me reassure you that FIRS is already a formidable force, and with these new efficiencies, we can indeed meet and exceed our targets. This is not just a restructuring; it is a catalyst for a monumental leap forward, a collective investment in our shared future and an unyielding commitment to excellence in tax administration”.
He reiterated that the forthcoming structure is not just a set of reforms but a commitment to redefining FIRS’s role in shaping a modern, efficient and customer-focused tax administration system. Adedeji added, “Through innovative organisational restructuring and process optimisation, FIRS is committed to fostering a taxpayer friendly environment that aligns with global best practices and positions Nigeria as a leader in contemporary tax administration. As we unveil this new chapter in the history of FIRS, I urge all of you to embrace change, to be pioneers in this transformative journey and to envision the future we are collectively building. Together, we will redefine excellence in tax administration, setting new standards and inspiring others to follow”.
Exciting times are ahead as the FIRS fully aligns itself with the Federal Government’s revenue ambitions and prepares towards surpassing the revenue target for 2024.
The 2023 performance was sterling, as the Service surpassed its revenue target. Actual collection was N12.374 trillion, indicating N816 billion above the N11.56 trillion target, representing 107 percent performance. A breakdown shows that oil revenue was N3.17 trillion, showing 25.6 percent of the total; non-oil contributed N9.2 trillion, representing 74.4 percent. Data Insights point to a significant increase in non-oil taxes in 2023 compared to 2022, about +54 percent increase. PPT/HT performed only 75 percent of 2022 due to lower oil price in 2023; conversion of some deep offshore PSC OMLs to PMLs under PIA terms and arrears from NNPCL.
The impact of administrative reforms by the FIRS, for instance, increased use of Withholding Tax (WHT), use of data, expanding the tax net both local and international contributed in no small measure to the successes recorded and will continue to play major roles in the future.
Medium Term Expenditure Framework (MTEF) target for 2024 is N19,412.79 trillion for the FIRS. Oil revenue target is N9.960 trillion against N3.172 trillion actual in 2023, representing an increase of 214 percent, while non-oil target is N9.453 trillion against N9.202 trillion actual in 2023, showing an increase of only 2.7 percent. Oil revenue contributed only 25.6 percent of 2023 actual while 2024 MTEF target anticipates 51 percent contribution by Oil.
The FIRS is already fine tuning strategies for achieving 2024 revenue target through improve management of large taxpayers and sector contributors; development of proactive engagement strategies to establish regular communication; provision of customized and efficient services that address the unique needs of large taxpayers and key sector contributors. Improved understanding of key sectors and their value chains, and improved quality of desk reviews of all taxes and audit particularly of firms/sectors identified.
In achieving set goals and targets, there are potential risks and challenges that the FIRS must be conscious of, and take appropriate steps to nib them in the bud.
There may arise macroeconomic shocks as the revenue target is based on certain assumptions about economic growth, inflation, exchange rate, oil price, and other macroeconomic variables. However, these variables are subject to uncertainty and volatility.
On resource constraints, the revenue target is also constrained by the availability and quality of resources for the tax administration, such as human, financial, technological, and physical resources.
Leakages like tax evasion and other unethical practices could undermine the efficiency and effectiveness of tax administration and reduce tax collection.
Political interference is another sore thumb that must be kept at bay if good results are expected. Political interferences may impact tax policies and revenue collection efforts. The same can be said of resistance to change. Resistance to change from internal stakeholders, including staff could slow down the adoption of new strategies thereby impacting negatively on tax collection.
From all indications, the Executive Chairman of the FIRS is determined to ensure all hurdles on the way of taxpayers are dismantled to give them quick access to excellent service delivery and make tax returns filing for them very seamless. This will give them a good service experience. The new roadmap puts the customers, in this case, the taxpayers, at the centre of attention.
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