Bottlenecks in federal tax policies limiting Lagos IGR — Sanwo-Olu

The Lagos State Governor Babajide Sanwo-Olu has decried the existence of bottlenecks in the nation’s taxation system as an hindrance to the increase in the Internally Generated Revenue (IGR) of the state.

Sanwo-Olu made this known when he received members of the Presidential Committee on Fiscal Policy and Tax Reforms at the State House, Marina.

The Governor said the current tax revenue accruing to the State is a far cry from actual projection, noting that the State has not fully optimised its tax potential.

He explained that Lagos had the capacity to widen its tax base and enhance efficiency in collection mechanisms, but noted that the State’s efforts had been slowed down by bottlenecks put in its way by the fiscal and tax administration framework whose authority is exclusively vested in the Federal Government.

Lagos, the Governor said, is carrying a governance burden that is not commensurate with its revenue earnings, stressing that the State required a yearly budget of over N7 trillion to adequately cope with pressure on its infrastructure.

He said the highest budget the State had was a little above N2 trillion due to constraints in national tax policies.

He said, “For us in Lagos, we know too well that we have capacity to do a lot from the revenue generation standpoint; more importantly, from the effective generation and utilisation of the tax. During our bilateral meetings in preparation to present next year’s budget, we pulled numbers up to N7 trillion based on our needs. But we are constricted by only the amount of revenue we can generate and pegged the value at N2.2 trillion.

“This speaks to the huge gap that we have in our capacity to develop the economy quicker and faster. We can no longer continue to complain. What are those things we can do to improve our revenue stream and our ability to be able to leapfrog and take governance in a more audacious way. This engagement with your committee is critical at this time, as you go round States to have feelings of what the bottlenecks are.”

Sanwo-Olu said the committee’s objective was not to generate abstract and non-implementable documents, but to practically identify tax issues facing sub-national governments and eliminate bottlenecks.

He also charged the committee to come up with quality intervention that would help the State attain their full potential in revenue generation and fiscal sustainability.

He said, “We all need to work collaboratively on this objective. If all constraints are attended to, we should begin to see monumental changes in our revenue projection. The potential is there and the numbers show the results we can achieve if fully explored, but we cannot sit back and think things will change overnight if we do not take the right approach to resolve the issues.

“We expect every member of this committee to put all your skills and mental resources into this task. I believe the committee will achieve the objectives for which Mr. President set it up. As a State, we are ready to give you all the support required. We will open our books and share data to learn where we also need to make changes for higher revenue performance.”

The committee, led by its chairman, Mr. Taiwo Oyedele, was in Lagos as part of the extended consultations with sub-national stakeholders to develop a viable tax administration framework for the country.

Oyedele said Lagos was the first port of call for the committee considered to visit in its nationwide consultation, noting that the State’s achievement in tax reform had been a model that had been adopted by other States.

The tax specialist said the country needed to address its revenue problems, which, he said, would involve creating a robust tax system and quality spending.

He said, “We are no longer at a point where we can continue to celebrate incremental progress in revenue generation; we need to accompany it with transformational shift in quality of spending of the generated revenue. Our spending on the ratio of GDP is the lowest in the world, we need to address this without taking attention away from the quality of spending.”