*VAT receipts increase by N50.79bn
Some analysts monday expressed optimism that improved technology adoption and expansion of the current tax net could boost the federal government’s ambitious revenue projection of between N13 trillion and N18 trillion.
This is coming as the total Value Added Tax (VAT) revenue recorded by the federal government increased by N50.79 billion to N651.77 billion in the first half of the year (H1 2020) compared to N600.98 billion in H1 2019, according to the National Bureau of Statistics (NBS).
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, had last week said the federal government had discovered new revenue initiatives that could fetch it between N13 trillion and N18 trillion from both oil and non-oil revenue sources.
This, according to her, will be done under the federal government’s Strategic Revenue Growth Initiative (SRGI) that was launched last year.
Analysts, however, told THISDAY that the projection may be realistic, especially amidst the impact of the COVID-19 pandemic if the government is able to use technology to plug enormous revenue leakages from oil transactions.
They said the stamp duty regime would also provide yet another opportunity to boost tax revenue.
The analysts advised the government not to increase existing taxes but to expand the tax bracket so as to accommodate more businesses and individuals who are not currently fulfilling their tax obligations to the government.
An economist and former Director-General, Abuja Chamber of Commerce and Industry (ACCI), Dr. Chijioke Ekechukwu, said technology could help put an end to decades of revenue leakages.
He said: “The projection of new N18 trillion revenue sources by the federal government is realistic and possible. The Minister for Finance had said the new sources would come from the oil and non-oil sector.
“From the oil sector, when we indeed deploy technology to determine real oil production output and real revenue from oil, it will shock Nigerians the big hole that existed in that sector for decades. Once we block these holes using technology, the figures will grow exponentially.
“From the non-oil sector, the introduction of stamp duty on rents and leases in Nigeria, a stamp duty of between 0.78 per cent to six per cent, depending on the duration of the lease contract will provide the projected revenue.
“There are also many businesses and companies not declaring profits to match their income size and so, pay taxes far less than they should have paid. The FIRS, therefore, must continue to seek efficient ways of tracking all hidden incomes. When this is achieved, a lot of revenue will accrue to the government.”
Another economist, Dr. Muhammad Rislanudeen, said: “The best way to expand the revenue is not to look at the existing taxpayers but to expand the tax base and get those who are not paying taxes into the tax bracket.
“If from oil sources, perhaps there’s been an underpayment of revenues and even if that’s the case, there may still be a challenge now because of the impact of COVID-19 as prices have gone down.
“And if it’s from non-oil sources, also with the impact of COVID-19 and the imminent recession which we are getting into, it will now be very difficult to have an ambitious expansion in revenue generation.
“What the government needs to be more focused on expanding the tax net other than overtaxing the existing individuals and companies that are already in the tax net because there’s a limit to what the government can actually collect.
“But if it is about expanding the tax net, we may be able to take on people who are not currently paying taxes and who are still doing well despite the pandemic and are not paying tax as and when due; that is a window for expansion.
“If it’s taxing the people such as house rent, I don’t think in this period we will be able to actualise the revenue projection.”
Prof. Uche Uwaleke of the Nasarawa State University said: “It is achievable in a country where non-oil tax revenue to GDP is less than eight per cent leaving wide room for improvement.
“The implementation of the 2020 Finance Act, especially with respect to the stamp duty holds a lot of potential. Government can also develop new revenue lines through sale/privatisation of some government assets such as the refineries.”
VAT Revenue Increases by N50.79bn
The total VAT revenue recorded by the federal government has increased by N50.79 billion to N651.77 billion in the first half of the year (H1 2020) compared to N600.98 billion in H1 2019, according to the NBS.
This represented 8.45 per cent growth year-on-year with the professional services generating the highest amount of VAT with N95.92 billion.
According to the sectoral distribution of VAT data for H1 2020 report released yesterday by the statistical agency, the other manufacturing segment generated N67.63 billion followed by commercial and trading, which generated N31.10 billion.
Textile and garment industry as well as pharmaceutical, soaps and toiletries generated N499.19 million and N648.78 million respectively while mining recorded the least VAT of N127.58 million.
According to the report, a total of N327.19 billion was generated from VAT in Q2 2020 compared to N324.57 billion (revised) in the preceding quarter.
Quarter-on-quarter, VAT increased by 0.81 per cent.
Non-import (foreign) VAT rose by 3.92 per cent quarter on quarter to N82.42 billion from N79.31 billion in Q1.
On the other hand, the Nigeria Customs Service (NCS) import VAT rose by 12.44 per cent to N81.66 billion compared to N72.59 billion in Q1.
The marked improvement in VAT performance in both Q1 and Q2 has been attributed to the recent hike in VAT from five per cent to 7.5 per cent which became effective from February 1.
In Q1, the federal government generated additional N30.46 billion helped by the increment in VAT.
VAT receipts from banks and financial institutions amounted to N10.53 billion by half year and N5.11 billion in Q2 compared to N5.42 billion in Q1.
Also, federal ministries and parastatals recorded N12.37 billion of VAT revenues, while N802.38 million was recorded from local government councils in H1.
However, state ministries and parastatals recorded 11.05 per cent increase in VAT from N10.66 billion in Q1 to N11. 84 billion in Q2 with H1 receipts at N22. 50 billion.
VAT from hotels and catering services dropped to N1.36 billion in Q2 compared to N2.52 billion in Q1.
The NBS said receipts from petrochemical and petroleum refineries declined by 29.97 per cent to N918.86 million from N1.31 billion in Q1.
VAT from the textile and garment industry stood at N193.13 million, representing a decline of 36.89 per cent compared to N306.05 million in the preceding quarter.