Nigeria 2019 approved budget is N8.92 Trillion, as at the time the budget was passed their was evidently a deficit of N1.92 Trillion because the estimated revenue as at that time was just N7 trillion.
To make matters worse, it has been disclosed that the projected revenue of government falls behind recurrent expenditure even without having factored in capital expenditure, due to depletion in tax revenue among others.
Consequently, Nigeria is heading for a fiscal crisis if urgent steps are not taken to halt the negative trends in target setting and target realisation in tax revenue.
Sequel to this depletion in Tax revenue, the Chief of Staff to President Muhammadu Buhari, Abba Kyari, wrote a letter to the Chairman of the Federal Inland Revenue Service (FIRS), Mr. Babatunde Fowler, asking him to explain the shortfall in revenue generation in the last five years.
Chief of Staff to President Buhari, Abba Kyari’s letter to the Chairman of the Federal Inland Revenue Service (FIRS), Mr. Babatunde Fowler
“We have observed significant variances between the budgeted collections and actual collections for the period 2015 to 2018.
“Accordingly, you are kindly invited to submit a comprehensive variance analysis explaining the reasons for the variances between budgeted and actual collections for each main tax item for each of the years 2015 to 2018.
“Furthermore, we observed that the actual collections for the period 2015 to 2017 were significantly worse than what was collected between 2012 and 2014. Accordingly, you are kindly invited to explain the reasons for the poor collections. You are kindly invited to respond by 19 August 2019.”
The letter was leaked and it created a lot of uproar, and this is mainly because the letter provides indices about the things people have been complaining about relating to companies closing down and job losses.
The issue was so popular and some even alleged that the FIRS boss was been investigated for Fraud, the Presidency had to issue a statement that the FIRS boss was not been investigated.
Statement form the Presidency on the FIRS Boss.
“Following reports making the rounds in some media outlets,it is necessary to state categorically that the Chair of Federal Inland Revenue Service, Babatunde Fowler, is not under any investigation.
The letter from the Chief of Staff to the President, Abba Kyari, on which the purported rumour of an investigation is based, merely raises concerns over the negative run of the tax revenue collection in recent times.
Taking a cue from today’s (Monday) presentation of Vice President Yemi Osinbajo at the Presidential Retreat for Ministers-Designate, Federal Permanent Secretaries and Top Government Functionaries, which dwelt on an ‘Overview of the Policies, Programmes and Project Audit Committee,’ a body he chaired, projected revenue of government falls behind recurrent expenditure even without having factored in capital expenditure.
Consequently, it would appear that the country might be heading for a fiscal crisis if urgent steps are not taken to halt the negative trends in target setting and target realisation in tax revenue.
Anyone conversant with Federal Executive Council (FEC) deliberations would have observed that issues bordering on revenue form the number one concern of what Nigeria faces today, and therefore, often take a prime place in discussions of the body.
It is noteworthy and highly commendable that under this administration, the number of taxable adults has increased from 10 million to 20 million with concerted efforts still on-going to bring a lot more into the tax net.”
Chairman of the Federal Inland Revenue Service (FIRS), Mr. Babatunde Fowler, also responded to the letter sent to him by the Chief of Staff to President Muhammadu Buhari, Abba Kyari asking him to explain the shortfall in revenue generation in the last five years.
FIRS Boss Response on Depletion in Tax Revenue.
“I refer to your letter dated 8th August, 2019 on the above subject matter and hereby submit a comprehensive variance analysis between budgeted and actual collections for each main tax item for the period 2012-2018 as requested (see appendix 1)”.
“Your letter stated that actual collections for a 3-year period were significantly worse than what was collected between 2012 and 2014. Total actual collection for the said period was N14.5 trillion, while total actual collection between 2016 to 2018 was N12.6 trillion. The highlight of these collection figures was that during the period 2012 to 2014, out of the N14.5 trillion, oil revenue accounted for N8.3 trillion or 57.28% while non-oil accounted for N6.2 trillion or 42.72% and during the later period of 2016 to 2018, out of the N12.6 trillion, oil revenue accounted for N5.1 trillion or 40.65% and non-oil revenue accounted N7.5 trillion or 59.35%. FIRS management has control of non-oil revenue collection figures while oil revenue collection figures are subject to more external forces.”
He explained further that: “The non-oil revenue collection grew by N1.3 trillion or 21% within the period 2016 to 2018.
“Kindly note that the total budget collection figure during 2012 to 2014 stood at N12.2 trillion compared to N16.7 trillion for the period 2016 to 2018, which represent an increase of 37.58%.
“Please note that the variance in the budgeted and actual revenue collection performance of the Service for the period 2016 to 2018 was main attributed to the following reasons:
“1. The low inflow of oil revenues for the period especially Petroleum Profit Tax (PPT) was due to fall in price of crude oil and reduction of crude oil production. Notwithstanding government efforts to diversify the economy, oil revenues remains (remain) an important component of total revenues accruable to the Federation. The price of crude oil fell from an average of $113.72, $110.98 and $100.40 per barrel in 2012, 2013 and 2014 to $ 52.65, $43.80 and $54.08 per barrel in 2015, 2016 and 2017. There was also a reduction in crude oil production from 2.31mbpd, 2.18mbpd and 2.20mbpd in 2012, 2013 and 2014 to 2.12mbpd, 1.81mbpd and 1.88mbpd in 2015, 2016 and 2017 respectively.
“2. The Nigerian economy also went into recession in the second quarter of 2016 which slowed down general economic activities. Tax revenue collection (CIT and VAT) being a function of economic activities were negatively affected but actual collection of the above two taxes were still higher in 2016 to 2018 than in 2012 to 2014. During the years 2012, 2013 and 2014, GDP grew by 4.3%, 5.4% and 6.3% while in 2015, 2016 and 2017 there was a decline in growth to 2.7%, -1.6% and 1.9% respectively. The tax revenue grew as the economy recovered in the second quarter of 2017.
“3. It is worthy of note that strategies and initiatives adopted in collection of VAT during the period 2015 – 2017 led to approximately 40% increase over 2012 – 2014 collections. In 2014 the VAT collected was N802 billion, compared to N1.1 trillion in 2018. This increase is attributable to various initiatives such as ICT innovations, continuous taxpayer education, taxpayer enlightenment, etc embarked upon by the Service.
“4. Furthermore, it is pertinent to note that when this administration came on board in August 2015, the target for the two major non-oil taxes were increased by 52% for VAT and 45% for CIT. Notwithstanding the increase, FIRS has in line with the Federal government’s revenue base diversification strategy has grown the non-oil tax collection by over N1.304 trillion (21%) when the total non-oil tax collection for 2016 – 2018 is compared to that of 2012 – 2014.
“I am confident that our current strategies and initiatives will improve revenue collection and meet the expectations of government.
“Please accept the assurance of my highest regards.”