Taxation: Voluntary compliance is our goal — FIRS Chairman
Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, in this interview reviews the praises being lavished on the agency for growing tax revenue, saying the goal of the agency is voluntary compliance on the part of businesses for smooth sailing. He also shares insights into the reforms carried out at the agency under his leadership, the new customer-focused approach to tax administration, among others. Excerpts:
You are saddled with mobilising domestic revenue to oil the engine of the economy. How did you imagine it was going to be when you got that job?
One thing you probably know President Bola Tinubu for is head-hunting the right talents to deliver the goods. Even before he became the presidential candidate of the All Progressives Congress (APC), he had a plan about how to run the country. The President is reputed for his ability to get water out of the rock. One of our key strengths is the ability to mobilise resources to solve our problems. If you look at our antecedent in Lagos State, you will see that we have always had a plan. This also applies to me and other members of the team. I knew I would be working on domestic revenue mobilisation and my initial appointment as Special Adviser to the President on Revenue was a precursor to my being appointed FIRS chairman. As Special Adviser, I was always working on the strategy to deploy to succeed in domestic revenue mobilisation to fund the Renewed Hope Agenda of the Administration.
What specific mandate was given to you, and how are you working to achieve that?
The mandate given to me and to my boss, the Minister of Finance, Mr Wale Edun, is one: we need to mobilise domestic revenue to meet our goals. So, we set a target. Remember that in 2023, the government set a revenue target of N10 trillion for FIRS and internally we reviewed it upwards to N11 trillion. By the grace of the Almighty God, we surpassed that set target and collected N12.374 trillion. And for 2024, we have a target of N19.4 trillion. By God’s grace we will equally meet and surpass that target.
Expanding the tax net has always been a challenge and I think the President has made reference to that: widening the tax net, getting many taxpayers on board and not to increase taxes. Somehow, you have been able to report a 58 percent increase in the first quarter of 2024 when compared with the same period in 2023. How did you achieve that?
I don’t want to use the word ‘I.’ So, the question should be, how did ‘we’ achieve that? President Tinubu deserves all the credit we can give him on this on account of some of the courageous decisions he took at the beginning of this Administration, namely the removal of fuel subsidy, allowing the Central Bank of Nigeria to unify the exchange rate, which essentially is removing the distortion we had in the economy. Don’t also forget that he signed four Executive Orders into law, a development that paved the way for the removal of obstacles to businesses as he had promised in his inaugural address to Nigerians. He also set up a Presidential Committee on Fiscal Policy and Tax Reforms led by Taiwo Oyedele with the mandate to review so many things about the fiscal ecosystem, including complaints of multiple taxes and give hope to Nigerians that this is a business-friendly Administration.
As a revenue collection agency, our mandate is clear: assess, collect and account for revenue accruing to the Nigerian Federation and administer relevant laws to achieve this. Let me use this opportunity to correct an erroneous statement. FIRS is not a revenue-generating agency as some people call us. We only collect the revenue. The President made our job at FIRS easy by helping us set certain economic parameters right through fuel subsidy removal, unification of rates, the Executive Order, setting up the tax committee and much more. The President has always emphasised that our job is to tax the fruits, and not the seeds. We want to focus on prosperity and not poverty, tax returns on investment and not the capital. Our focus is not actually on revenue the way people misconstrue it. We just want to grow the economy. When the economy grows, we are better off because when you have 10, we will have three. If you have 20, we will have 6 and if you have 30, we will have nine. So, the focus for us is growing the economy. That is what the President and all the team members are doing and that is what resulted in the figure that you saw about what we collected in Q1 of this year, N3.94 trillion. We are going to continue with that trajectory to make sure that businesses flourish, and from there, we can actually have more revenue.
One of the measures that you put in place when you assumed office was the concession you granted businesses, that is granting a waiver on interest and penalties, a kind of amnesty for businesses to extinguish their tax liabilities. Can you tell us what impact this had on compliance?
It had a wonderful impact on voluntary compliance which is actually our goal. We believe taxpayers are not criminals who should be pursued with horsewhip. We are also clear in our minds that we are not law enforcement agents. President Tinubu has always reminded us that our plan is to make sure that we remove hurdles and create a conducive environment for businesses to flourish. And if you look at what happened over a year ago, talking about the cashless policy, a lot of businesses were struggling which was the reason they could not pay their taxes as and when due. So, the President, in his magnanimity, approved that we waive interest and penalty on tax liabilities for those owing to be able to pay. The President realised that it is when the businesses do well that FIRS, as a consequential agency, will also do well. What we did at the end of last year with the waiver policy was to help businesses do well. The business entities owing us actually took the opportunity to pay up all their outstanding liabilities, and that was one of the reasons we surpassed our target for 2023. We are doing many things now to ensure that taxpayers are not defaulting.
What was the rate of compliance on that initiative?
Honestly, we had more than 75 percent compliance rate at that time because the taxpayers actually saw seriousness and honesty in what the government is doing and they responded positively.
You keep saying that you want businesses to prosper. But multiple taxation is one of the things that businesses still complain about. We know that the President has set up the Taiwo Oyedele led-Committee to work on harmonisation of these taxes. Are you working with them, what are the things that you have been able to do in this regard?
Actually, we are part of them. On the issue of multiplicity of taxes, we cannot over-emphasise the President’s directive that at the end of the Committee’s assignment, we will have a single digit type of taxes in the country, meaning that we will have a maximum of nine tax types that we are paying. Based on the research that we have done, only eight tax types account for more than 90 percent of the tax revenue we collect. That means the remaining 54 tax types are impediments to business growth and the President has directed that these tax types should be removed. I know, in the next few weeks, when the report of the committee becomes public, people will see the wonderful work that has been done by the committee.
Are there any successes you want to highlight in particular?
Generally, our success is founded on the fundamentals of economic development being set right, which is what the President has done and this is the bedrock of everything that we are doing. The Administration is investing heavily in infrastructure and food security which are the foundations for industrialisation. The President is committed to the welfare of the people and then we have a wonderful team, the ones you know and those working behind the scenes to make sure that Nigerians are happy and prosperous.
Are there any areas that you think that tax incentives might be helpful to economic growth?
Tax incentive on its own is not bad. Everywhere in the world, you have targeted incentives that governments do. For instance, if you look at the way we localised cement production in Nigeria, they were given a tax holiday for 10 years. Government allowed cement companies to bring in equipment. But today, if you look at the tax revenue collected from cement manufacturers, it is more than all the taxes collected from all the banks in Nigeria. These cement manufacturers were given incentives at a point. But what we are saying now is that all incentives must be measured and reviewed to know if it is the right thing to do or not. So, there is nothing bad in incentive and it is a part of the fiscal policy to actually stimulate the economy.
Apart from the cement industry that has benefited from that, is there other industry which has benefited?
A few months ago, the President signed three Executive Orders on gas production in Nigeria. I foresee that in the next three to five years, we will see the benefit of that kind of incentive that the President has given for gas production, given the green posture of the world.
Let’s talk about your key priorities in the FIRS. What are the areas you are focusing on?
At FIRS, we completed a restructuring exercise earlier in the year. Before my assumption of office, the agency was structured along functional/group tax type lines. With our coming on board, we have changed the orientation and birthed a new structure which puts our only customers, that is, the taxpayers at the centre of our operations. We are customer-centric now. We have re-arranged the structure according to taxpayers’ turnover thresholds. We classify you as large taxpayers if your turnover is more than N5 billion; medium, if you are between N1bn and N5bn, and small if your turnover is less than N1bn. And then, we have services that support them. For our strategic pillars, we have people, process and technology. The focus now is to develop the workforce at FIRS. We want to make sure that at the end of the day, 80 per cent of our core duty is done by our people in FIRS because of the confidential nature of our service. We also need to have domestic skills development that is required to match the President’s aspiration and vision. We want to make sure that we standardise our process in order to increase our service delivery to taxpayers. Lastly, we are deploying and investing in technology because we cannot meet our aspiration using a manual system. So, we are focusing and investing huge resources on technology so that we can serve our customers well.
How has lack of data impacted revenue collection? What investment have you made in that area. Have you been able to make progress?
We are making progress there. One wonderful initiative the President has just approved is the National Single Window Project. This is a unified platform where you just have a single point of truth as far as a data is concerned for the nation. The significance of this project is that we will now have a single window export, a single window import and scanning system. If you go anywhere in the world, when people compare GDP to taxes, you wonder where the data comes from. The truth is that they have only one point where all data relating to revenue and expenditure can be transparently and honestly accessed. That is what President Tinubu has done with this commendable initiative. So, there is huge investment that we are making now on data mining that the President is leading. We are lucky to have the National Single Window project domiciled at FIRS.
Another laudable initiative on data mining is the partnership we have with the National Identity Management Commission (NIMC). What we are doing is to follow the law. If you read the Act that established NIMC, it says when you are above 16 years, you must have a National Identification Number (NIN). We want to make sure that the primary source of identity for everybody living in this country is NIN and everything is linked to that. It is like a code, a social security code. With this, identity theft will be a thing of the past. For us to be able to mobilise revenue, we must be able to match movable assets with immovable assets. When we are able to match them, it will be impossible to evade tax.
Do you foresee any challenge in implementing these initiatives?
There are always challenges. But I am always happy when I look at the capacity of my team at FIRS: the Coordinating Directors, my Special Advisers, and the entire workforce. We are aware there will be challenges. In fact, that was what informed the choice of the people we brought to work with us. They are people that we are aware will help us overcome the challenges. Not only that, we are motivated by the leadership of President Tinubu. The challenges will be there, but we are hopeful that we have what it takes to overcome the challenges and turn them to miracles for the country.
How are you making it easier for the average Nigerian to comply with their tax obligation?
That is actually our duty. That is why I said that we have services within FIRS that support taxpayers. I have said that we now have a customer-centric attitude. Before now, we used to VAT and Stamp Duty offices separately. But now, we have provided a one-stop shop for taxpayers as part of measure to simply tax payment by removing all the hurdles in the way of our customers. So, if you are a large taxpayer, you can just go to one office to clear your VAT, Withholding, Company Income Tax and any other form of tax you are paying. And even audit is done within the same shop. The era of multiple audit is gone. People have begun to feel the impact of the restructuring we have done. We have made it easier to use technology. People can do everything from the comfort of their homes and offices. And if you are complaint, you won’t even receive any update from us, because like I said, our aim is to make sure you do well because it is in your prosperity that we also prosper.
Let’s talk about tax education. Because there is always resistance from the taxpayers when it comes to paying taxes over the years. People ask, the taxes they have paid, what has the government done with it. Are there plans for tax education?
It is part of our duty to make sure that we educate people. But I must make it clear that paying taxes is a civic responsibility. Our role as a tax authority is to assess, collect and account for what is collected. If you look at what the President is doing, just take for instance the Students Loan scheme. The money that will be used to fund the scheme is mainly from the taxes we collect. Look at the Renewed Hope Infrastructure Fund that Mr President has put together for signature projects like the Lagos to Calabar coastal road, Sokoto to Badagry will soon follow as well as a train line from Port Harcourt to Maiduguri and Lagos to Kano. These are projects which cover the whole country.
Funding for these projects is coming from domestic revenue mobilisation because there is no way you will have these infrastructural projects without mobilising revenue to fund them. Not only that, look at the security situation in the country. It is improving because we are mobilising resources to provide what is required by our military men and all other security providers. Let me use this opportunity to appeal to Nigerians that they should be good citizens by paying their taxes. I said it before that we are not a law enforcement agent. They should see FIRS as a partner that is interested in their progress and prosperity.
How do you get feedback from businesses?
We get feedback a lot. We have people’s service group in the agency. We also have a customer service unit and there is servicom as well. They call us from time to time and also read out notices in the newspapers and other media platforms. Don’t forget, we don’t only collect taxes. We also provide them with advisory services. We just take taxpayers like a tree you planted in your vineyard. You will have to do weeding, watering because it is the fruit of the tree that you will enjoy. Sometimes, without them calling us, we call them. If you look at what we have done, most especially since Mr President assumed office, we suspended road taxes, because in our wisdom, we feel that it is not going to be good to people. You just made mention of waiver of penalty and interest. Those are the things that we do and we have good feedback from Nigerians.
What can Nigerians look forward to within the next three years of President Tinubu’s administration?
What I sincerely encourage Nigerians to do is to keep hope alive. The vision of Mr President has come to stay; I mean the Renewed Hope Agenda. We have the capacity. When you have a wonderful edifice you want to build and you are doing the foundation, you will see rubbles. This can be likened to what we are experiencing in the economy now. From now on, Nigerians will begin to see the superstructure, the wonderful edifice being built by President Tinubu and this edifice will accommodate all. By God’s grace, we will achieve our goal, vision and aim for the country.
