2023 Fiscal Year: N4trn differences make FIRS VAT waxing stronger
In a comparative study of the total revenue generated by the Federal Inland Revenue Service (FIRS) in the 2022 and 2023 Fiscal Years, one will discover that there is an increase in the revenue drive with a different of N4trillion in 2023 against the 2022 year.
Though, the figure made available for 2023 year only shown revenue generated for a half-year but the gap indicates a rise by N4trillion when compared to halfway of 2022 fiscal year.
Breakdown of FIRS Report, it generated a total sum of N10.1trillion as tax revenue in the year 2022.
Quoting the statement from Johannes Oluwatobi Wojuola, Special assistant on media and communication to the chairman of FIRS, Muhammad Nami last year.
Wojuola said the figure is the highest tax collection ever recorded in the agency’s history adding that the agency achieved over 96 percent of its collection target for the year.
Giving a breakdown of the N10.1 trillion generated, Wojuola said non-oil taxes contributed 59 percent of the total collection in the year, while oil tax collection stood at 41 percent of total collection.
“The FIRS, in the year 2022 collected a total of N10.1 trillion in both oil (N4.09 trillion) and non-oil (N5.96 trillion) revenues as against a target of N10.44 trillion,” the statement reads.
“Companies income tax contributed N2.83 trillion, value-added tax N2.51 trillion, electronic money transfer levy N125.67 billion, and earmarked taxes N353.69 billion.”
Citing the FIRS 2022 performance update report, Wojuola said a sum of N146.27 billion is included in the total revenue figure.He explained that the sum (N146.27 billion) is the total value of certificates issued by the service to private investors and NNPC under the road infrastructure development refurbishment investment tax credit scheme, created by executive order No. 007 of 2019.The special assistant also noted that the N10.1 trillion is exclusive of tax waived on account of various tax incentives granted under the respective laws, which amounted to N1.8 trillion.
Commenting on the revenue inflow, Muhammad Nami, executive chairman of the FIRS, was quoted as saying the feat was made possible through “dogged implementation of strategic reforms over the past two years; a renewed commitment by officers of the service, accompanied with a boosted morale; as well as the innovative deployment of technology for automation of both tax administration and operational processes”
Similarly, in the half-year of 2023 (January to June) the agency announced a whopping total revenue collection of N5.5 trillion for the half-year period of January to June 2023. Attributing it as the highest tax revenue collection ever recorded by the Service in any first six months of a fiscal year.
Mr.Nami, Executive made the declaration while presenting the 2023-2024 tax revenue outlook to the National Economic Council at its meeting held on Thursday 20th July 2023, at the Presidential Villa, Abuja.
The presentation, which contained FIRS’ 2023 Half-Year Collection Report, showed that the FIRS achieved over one hundred percent of its target for the first-half of the year when compared with a mid-year target of N5.3 trillion.
According to the report, tax revenue collected from the oil sector from January to June 2023, stood at N2.03 trillion, as against a target of N2.3 trillion; while non-oil tax collection stood at N3.76 trillion, as against a target of N2.98 trillion.
Mr. Nami, in his presentation, further stated that the Service collected a total of N1.65 trillion tax revenues in June 2023. This sum is the highest tax revenue collected by the Service in any single month.Speaking to what he described as “a good head start, despite stubborn headwinds,” Mr. Muhammad Nami, attributed the excellent performance to improved voluntary tax compliance enabled by the automation of FIRS’ tax administrative processes.
“This is a good head start as we work towards meeting our target for the year. And it was achieved despite stubborn headwinds such as the impact of the currency redesign and 2023 General Elections on the economy in the first and second quarters of 2023”, said Mr Nami.
“This half-year performance was achieved as a result of improved voluntary tax compliance by taxpayers, the continued improvement of automation of our tax administration processes, including the updated VAT filing processes; as well as our dogged engagement with stakeholders in both the formal and informal sectors of the economy.”,
Commenting on the outlook for the remainder half of the year, the FIRS Executive Chairman gave assurances that the country should expect “better days ahead” in terms of tax revenue collection.
”We believe that the performance in the second half of the year would be better considering the continuing improvement to our tax administration processes and positive impact of current government’s policies on the economy,” said the Executive Chairman.
It would be recalled that the Service achieved a total collection of N10.1 trillion in the year 2022, being the highest tax collection ever made by the FIRS in a single year.
Dissecting the figures above indicates if FIRS had raked in a total of N10.1trillions in the whole of 2022 and N5.5trillions half-year of 2023 clearly shown that the N4trillion differences signified growth in the VAT implementation by the agency.
Despite the 2023 electioneering year which the general Elections caused distraction with the sector of the Economy standing still but the revenue house still raised it head above the water by generating N5.5 trillion in the first and second quarters of the year.
The expectation from the revenue agency is go extra miles by dragging the revenue generation in December, 2023 beyond N11.
Eventually, it important that we must acknowledged policy drive by the Honourable Minister of Finance, Zainab Shamsuna Ahmed who announced that implementation of the 7.5% value added tax (VAT) rate under the new Finance Act will commence on 1 February 2020. This gives stakeholders a 2-week transition period to make adequate preparations to ensure compliance with the new law.
It is noteworthy to stressed that the rate of VAT was formerly 5% since inception in 1998 but was upgraded to 7.5% by the Finance Act 2019 by former Minister of Finance which came into effect by February 2020 to amend the VAT Act.
The FIRS on her part has provided updates on the implementation of the input value-added tax (VAT) filing procedures via its administration solution, TaxPro-Max.TaxPro-Max enables seamless registration, filing, payment of taxes, and automatic credit of withholding tax as well as other credits to the taxpayer’s accounts among other features.
While providing guidelines on VAT filing processes on the TaxPro-Max platform in a statement at the weekend, FIRS said “taxpayers are to file their April 2023 returns, in May 2023 as normal. All the disabled columns will be opened [and] the auto credit for purchases will be disabled.The service said from June 1, 2023, taxpayers claiming input VAT for purchases should upload a purchase schedule; while those claiming input VAT for withholding VAT (WVAT) were asked to upload a WVAT schedule.
The FIRS also directed businesses claiming input VAT for imports to upload a purchase imports schedule, while also providing steps on how all input VAT claims from June 1, 2023, can be applied for.For illustration purposes, June 1 to June 30 transactions are treated as month one.
The month following the month of transactions, in our example, using the month of June, will be July 1 to July 21 at midnight: file returns of month one transactions.The month following the monthly VAT returns were filed, in our example, using the month of July, this will be, August 1 to August 31: the input VAT claims that TaxPro MAX is not able to verify, validate and cross-check online, are manually traced, using the data entered by the taxpayer when filing.”
On the aggregate, Value Added Tax (VAT) for Q1 2022 was reported at N588. 59 billion, a growth of 4.41% on a quarter-on-quarter basis from N563. 72 billion in Q4 2021. Local payments recorded were N344.
During the Second quarter the revenue house generated N600bn from VAT in Q2 2022 — up by 2% from previous quarter. The National Bureau of Statistics (NBS) says the country generated N600. 15 billion as value-added tax (VAT) in the second quarter of 2022. The figure represented an increase of 1.96 percent from the N588.
The report shows a growth rate of 11.51 per cent on a quarter-on-quarter basis from N625.39 billion in Q3 2022.
According to the statistics office, the figure represents a growth rate of 1.75 per cent on a quarter-on-quarter basis from N697.38 billion in Q4 2022.
The NBS on said that the federal government generated N709.59 billion as Value Added Tax (VAT) in the first quarter of 2023.
The bureau disclosed this in its “Sectoral Distribution of Value Added Tax” report for Q1 2023,
Out of the total amount generated, it said local payments stood at N436.10 billion, foreign VAT payments were N151.13 billion, while import VAT contributed N122.37 billion in Q1 2023.
However, the NBS said that on a year-on-year basis, VAT collections in Q1 2023 increased by 20.56 per cent from Q1 2022
The NBS stated that on the aggregate, VAT for the second quarter of 2023 was reported at N781.35 billion, showing a growth rate of 10.11% on a quarter-on-quarter basis from N709.59 billion in the first quarter of 2023.
However, we are expecting a growth in VAT at the end of the third quarter next month (September), 2023
Eventually, with the creation of some new ministries by President Bola Ahmed Tinubu’s Administration especially Blue Economy Ministry, Creative Art Economy among others, we have optimism that the revenue drive from the Federal Inland Revenue Service FIRS- VAT will be waxing stronger on quarterly basis.
Conclusively, the FIRS is doing well though it needs to expand her coasts in providing more platform to educate and enlighten the citizens to play their roles, part in tax payment. In the other hand the federal government must ensure that taxpayers money are injected into providing basic amenities like good roads network, Energy, quality Power supply, effective health network, education, Housing and to ensure that the refineries are revived back to life.
