As the nation continues to explore ways to diversify its sources of revenue to meet its development obligation, LEON USIGBE and TYAVZUA SAANYOL examine the impact of the Federal Inland Revenue Service (FIRS) on building sustainable infrastructure in tertiary institutions.
AS the World seeks to foster economic growth and development, revenue generation through tax collection has increased its imperative as an alternative and viable means to fund key infrastructural projects around the globe. This is even more so because of the damaging economic effect of the COVID-19 pandemic, the Russian vs. Ukraine war and other natural disasters. These and other factors have heightened the place taxes in sustaining developmental projects particularly in less developed countries such as Nigeria that require constant stream of income to fund social programmes, public investments including in the areas of health, education, capital infrastructure and other services that are important for the attainment of the common goal of a progressive nation.
The Minister of Works and Housing, Babatunde Fashola, pressed home this point recently when he emphasised the need for Nigeria to sustain infrastructural projects through tax revenue just as he noted the importance of tax collection to funding the budget. He expressed the belief that the government can only pay the contractor handling any development project in the country when there is money available.
Two recessions in less than five years left Nigeria in a situation of near economic stagnation that engendered more borrowing from sources. The consequence of the increased borrowing is a debt portfolio of about N77.7 trillion. To mitigate the impact of this, Nigeria realizes that it must necessarily seek alternative sources of funds for infrastructural development purposes. This is where the Federal Inland Revenue Service (FIRS) has kicked in. The Service has been able to contribute quite a chunk of resources to the nation’s Gross Domestic Product (GDP) despite the COVID-19 pandemic-induced global economic downturn.
Under the leadership of Muhammad Nami, the FIRS has, within the past few difficult years, considerably shortened the funding gap by providing the much-needed resources for government to sustain its programmes, pay salaries and embark on major infrastructural projects like the Kaduna-Kano rail project, the Second Niger bridge and the Mambilla power plant. In 2021, the Service achieved a record tax collection of N6.41 trillion, representing over 100 per cent of its collection target for the year. It was the first time it crossed the N6 trillion threshold.
In 2022, the FIRS took its game a notch higher, contributing N10.1 trillion in tax revenue to the Federation Account. This became the highest sum ever collected by any revenue-generating agency in Nigeria. The impact of this huge contribution to the nation’s purse was more funds for the government to carry on with its implementation of critical projects, pay salaries and to meet other running costs. It will, therefore, be understating the fact to say that the FIRS efforts also helped the economy to speedily recover from the effects of COVID-19 outbreak.
Very significantly, tax revenue has become a catalyst for human capital development through infrastructure projects in Nigeria’s tertiary education system. Over the years, the FIRS, through its collection of tertiary Education Tax, has contributed immensely to the development of human capital growth and infrastructure provision in the country’s tertiary institutions. The Vice Chancellor of Bayero University Kano, Prof. Sagir Adamu Abbas, affirmed that between 2020 and 2022, the Tertiary Education Trust Fund (TETFund) approved over N12 billion for the establishment of 12 research centres in the six geopolitical zones of the country in pursuit of the goal of improved human capital development in the country.
Previously, many public institutions of learning found themselves in decadent conditions, exemplified by poor infrastructure that were not close to fit enough for a meaningful learning environment. This was attributed to, majorly, inadequate funding. To ameliorate the situation, the Education Tax, a system of tax contributions from the profits made by companies in Nigeria, provided the desired revenue breather for the nation’s public tertiary institutions of learning.
At 2.5 percent of a companies’ profits, the education tax is imposed on all registered firms in Nigeria, while the FIRS is mandated to collect it on behalf of the TETFund, which in turn, dispenses the funds to the beneficiary public tertiary institutions. Sunday Echono, the Executive Secretary of TETFund, confirmed that the Fund has spent about N2.5 trillion in the last three years financing infrastructural development in public universities, polytechnics and colleges of education. He had kind words for companies in Nigeria over their compliance to their tax obligation, affirming that because of this, “We are seeing improved funding to our tertiary education institutions as a result of the education tax.”
Heads of tertiary institutions across the six geopolitical zones have also attested to the unprecedented impacts of the Education Tax funds collected by the FIRS in the development of infrastructure, human capital development, and research in their respective institutions. For the Provost of Federal College of Education Abeokuta, Dr Rafiu Adekola Soyele, the college has no doubt benefited immensely from taxpayers’ money. “Since 2011, the college has benefited a lot in terms of infrastructure, facilities and capacity building for staff, even non-teaching staff, in terms of conferencing, science laboratory equipment and more. I can testify that the federal government has really tried going by the several interventions that we have gotten.”
With the effort put in to make funds available for interventions in different sectors of the economy, the FIRS is seeking judicious use of resources by government at all levels as a means of encouraging citizens to comply with their tax obligations.
While commenting on the performance of FIRS in 2022 fiscal year, Nami attributed the historic tax feat to the “dogged implementation of strategic reforms over the past two years; a renewed commitment by officers of the service, accompanied by a boosted morale, as well as the innovative deployment of technology for automation of both tax administration and operational processes. This collection was possible through collaboration with our stakeholders, from our colleagues at the executive branch of government to the members of the judiciary, to our brothers and sisters at the National Assembly as well as the tax advisory committee, professional bodies, unions, and most importantly, our taxpayers.”
Nami does not believe that FIRS has already achieved all there is to attain in revenue collection enhancement as he continued: “We intend to maintain, and even improve on the momentum in 2023. We have peaked, but this is not certainly our peak. In fact, my hope is that this would be the least sum the service would ever collect going forward. Our goal is to identify more areas where we can improve in the delivery and efficiency of our collection, and plug loopholes, while deploying innovative reforms in data and artificial intelligence. Ultimately, we believe that the FIRS can shoulder the responsibility of providing the revenue needed for the governments across the federation to cater for the needs of the Nigerian people through taxes.”
Nami has a word of advice for the three tiers of government – the local, state and federal – if the objective of the FIRS to generate more funds must be fulfilled. They must apply the funds prudently and efficiently to enable the beneficiaries to give back to the society, an action, he hopes, will encourage citizens’ compliance in tax payment. “The reason being that the civilizations you find globally did not fall from heaven. If you go to Europe or the USA and see beautiful airports or roads, it is the government officials that applied taxes that their citizens paid to provide those facilities.
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