For anyone who has given more than a fleeting attention to the activities of the Federal Inland Revenue Service (FIRS) in the past four years, the agency’s tax collection receipt in the first six months of 2023 would certainly not be surprising.
This is because the FIRS under the leadership of Muhammad Nami has constantly reached new heights.
But even so, a total tax revenue collection of N5.5 trillion between January and June this year is a significant accomplishment, especially considering that it surpasses the N4.95 trillion collected by the FIRS in the entire 2020 fiscal year and falls short by only nine hundred billion naira compared to the N6.4 trillion collected in 2021.
It is the highest ever tax collection by the service for the first six months of a fiscal year. Undeterred, the tax agency is convinced that it will surpass that figure in the last six months of 2023.
In the words of the FIRS Executive Chairman on the day he made the record-breaking announcement at the meeting of the National Economic Council (NEC) a few days ago, there are “better days ahead”. And he attributed this to the “continuing improvement to our tax processes and positive impact of the current government’s policies on the economy”.
A breakdown of the 2023 half-year tax collection figure shows that while non-oil taxes continued to perform well with N3.76 trillion, oil taxes stood at N1.73 trillion.
Listening to Muhammad Nami on that day, it would be challenging for anyone to doubt the agency’s ability to surpass that achievement by the end of the fiscal year. This is because the agency collected a total of N1.65 trillion tax revenues in June 2023 alone, the highest tax receipt by the agency in a single month.
Anticipated Success
A quick look at FIRS trajectory since at least 2020 when the Muhammad Nami-led management assumed office shows that signs of a successful tax collection regime were present from the beginning. This is despite the grim shadow of COVID-19 looming over the country, which was bound to have negative consequences on the economy.
In the year when the pandemic held the world in its grips, the agency’s tax receipt fell slightly short of its N5.07 trillion target when it generated N4.95 trillion despite a global slump in crude oil prices and disruptions to businesses.
It is easy to recall how the FIRS Executive Chairman explained that the global oil slump negatively impacted tax returns through the Petroleum Profits Tax, which accounted for only 30.6% of the tax revenue generated in 2020, compared to previous years.
Therefore, the country had to rely more on non-oil taxes, which rose significantly due to the implementation of a tax reform based on a 4-pronged approach, including: rebuilding FIRS’ institutional framework, enhancing collaboration with stakeholders, transforming the agency into a customer-centric institution, and ultimately making it a data-centric institution.
Even with COVID-19 still present, the tax reforms began to manifest in 2021 through increased stakeholder collaboration and technological advancements. It was the year of Tax Pro-Max, so it was no surprise that FIRS exceeded its N6.401 trillion target for that year.
In a performance update personally signed by the FIRS helmsman for the 2021 fiscal year, the agency collected a total of N6.405 trillion in both oil (N2.008 trillion) and non-oil (N4.396 trillion) revenues, surpassing a target of N6.401 trillion.
A further breakdown shows that Companies Income Tax amounted to N1.896 trillion; Petroleum Profits Tax brought in N2 trillion; Value Added Tax contributed N2.07 trillion; Electronic Money Transfer Levy reached N114 billion, while Earmarked Taxes recorded N208.8 billion, among others.
What this meant was that the non-oil sector accounted for 68.64% of the total collection in 2021, while the oil sector contributed 31.36% of the total collection.
However, in 2022, the oil sector performed better as FIRS surpassed the N10 trillion mark, contributing 41% of the total tax collection for the fiscal year with an unprecedented figure of N4.09 trillion, compared to N5.96 trillion from the non-oil sector, as reported in the year’s performance update.
All of these can be credited to a significant improvement in stakeholder engagements under the current FIRS leadership, an automated system with Tax Pro-Max as the guiding principle for tax administration, as well as training and retraining of FIRS staff to enhance their capacity.
Therefore, it is quite easy to trace the performance index of FIRS from 2020 and conclude that its 2023 half-year collection of N5.5 trillion was not entirely unexpected.
It is indeed a story of anticipated success right from the beginning, not only due to the ongoing tax reforms but also because of improved stakeholder collaboration. And indications are that things can only get better.
Dapo Okubanjo is a journalist/public affairs analyst based in Abuja. He can be reached at [email protected]
