By Jeph Ajobaju, Chief Copy Editor
Expected collection by the Federal Inland Revenue Service (FIRS) for 2022 towers above N10.1 trillion, provided it is not scuttled by the fight over Value Added Tax (VAT) Rivers won for all states at the Federal High Court that is now on appeal.
VAT fetched N495.39 billion in the first quarter of 2021 (Q1 2021) and N512.25 in Q2 2021, a total N1 trillion generated for the treasury in the first half of the year ended June 30 (H1 2021).
If the trend holds, VAT alone may generate more than N2 trillion in 2021.
Court fight on VAT
However, federal collection of VAT is now in jeopardy with the Federal High Court in Port Harcourt ruling on August 9 that it is not constitutional for the FIRS to collect VAT or any other tax in any state in the country.
The court said only states can constitutionally collect VAT and Personal Income Tax (PIT).
Abuja has appealed to the Federal Court of Appeal, and the case may well go up to the Supreme Court, but there is no constitutional basis for the judgment to be reversed.
The ruling vindicates critics of federal revenue sharing formula which they say simply takes funds from Southern states to dole out to dependent Northern states, some of which get more money for producing little.
“The judgment was a landmark judgment and the impact of this judgment on the finances of the states will be enormous,” former Abuja Chapter Chairman of the Chartered Institute of Taxation of Nigeria (CITN), Ogbeide Benjamin, told Daily Trust.
“VAT is consumption-based and on several items, some of which are outlawed in some states. I believe the country stands to profit by allowing states to administer VAT.
“By this, states will be further encouraged to scale up their economic drive to attract more foreign direct investments and local investments since they will be the ones to get the VAT benefits,” Benjami added.
The Federal High Court in Lagos had also ruled in October 2019 that only Lagos, not Abuja, has the constitutional power to collect Consumption Tax from hotels, restaurants, and event centres in the state.
Daily Trust quoted a legal practitioner, Jude Ugwuanyi, as saying that the judgment means that it is within the powers of state governments to generate tax and other revenues and in so doing the federal government cannot interfere with such powers.
As Ugwuanyi puts it, value-added revenues ought to belong to states where those activities exist as distinct from mining resources which fall into federal coffers.
“For instance,” he stressed, “under the Nigerian Constitution, anything relating to oil tax among others is reserved for the federal government, but outside those, the federal government cannot interfere with state tax.”
FIRS projection
Per Nairametrics, FIRS Chairman Muhammad Nami made the projection in Abuja at the House of Representatives Finance Committee public hearing on the 2022-2024 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).
He said the N10.1 trillion is the global figure projected to be generated and remitted to the federal government in 2022 by the FIRS, which assesses, collects, and accounts for tax and other revenues accruing to the federal treasury.
Committee Chairman James Adeleke commended the FIRS for ensuring revenue generation targets are met but said it needs to put in the tools to make projections possible.
Adeleke explained that the MTEF provides the basic estimates and assumptions for the annual budget.
Share of FIRS revenue
TheCable quoted Nami as explaining that N2.053 trillion from the estimated N10.1 trillion is for the federal government, the balance for states and councils
He said 2022 projected revenue is about N5 trillion above that of 2021 because of the registration of social media platforms, including Twitter.
His words: “The total collection that we are trying to generate and remit to the appropriate accounts, including the federation account in 2022, is N10.1 trillion.
“On the issue of the digital economy, your suggestions are noted, we also have them as part of what we are doing because we already have a department called the international tax department that is handling those cases.
“Twitter and others are already registering with us, so we are aware. So we expect that the impact of those registrations would be felt positively by FIRS and that is why the targets are going up.”
FIRS performance in 2020
Nami said the FIRS collected N4.950 trillion of budgeted N5.076 trillion in 2020.
“The service achieved a total revenue collection of N4.950 trillion against budgeted N5.076 trillion representing 98 per cent.
“Out of the total collection, non-oil and oil components contributed N3.435 trillion and N1.515 trillion respectively.
“Consequently, the cost of collection (4 per cent net of 2 per cent Nigerian Customs Service NCS VAT) of N130.45 billion was achieved against the budget of N180.76 billion to fund the three operational expenditure heads for the year.”
FIRS performance in 2021
Nami said the FIRS achieved 43 per cent in June of projected revenue for 2021.
“The service 2021 approved MTEF projected revenue collection was N6.40 trillion representing N1.64 trillion (26 per cent) and N4.76 trillion (74 per cent) for oil and non-oil respectively.
“The service as of June 30, 2021 (half-year) achieved N2.762 trillion representing 43 per cent of approved projected revenue collection.
“The non-oil revenue collection during the period was N2.118 trillion against N1.5 trillion collected in the corresponding period representing 41.2 per cent increase.
“While the oil revenue collected for the same period was N644 billion against N971 billion collected in the corresponding period representing 33.68 per cent decrease in the oil collection.”
