...as businesses lament multiplicity of taxes
The 36 states of the federation and the Federal Capital Territory (FCT) have intensified efforts to generate more revenue as allocations from the Federal Account Allocation Committee (FAAC) continued to fall.
The states and the FCT, according to the National Bureau of Statistics (NBS), raked in N1.89 trillion in Internally Generated Revenue (IGR) in 2021, up from the N1.56 trillion IGR realised in 2020.
The 2021 figure represents a positive growth of 22 percent year-on-year, as states intensify efforts to boost revenues occasioned by the persistent decline in revenue to the federation account which has impacted negatively on statutory allocations.
Business Hallmark findings revealed that the three tiers of governments have been having revenue challenges as a result of multiple factors, especially the withdrawal of major International Oil Companies (OIC) from the nation’s onshore oil fields, as well as production shutdowns caused by the breakdown of old equipments and activities of oil thieves and vandals.
Also, the Nigerian National Petroleum Company Limited (NNPC) has failed to make remittances into the federation account since January 2022.
In its monthly presentation to the Federation Account Allocation Committee (FAAC) meeting on Friday, September 23, the corporation claimed it yet again deducted N525.71 billion as under-recovery (subsidy) on petrol in August 2022, making it the eighth consecutive months the recently privatised company would not be making any payment into the federation account.
According to BH analysis of documents obtained from FAAC, NNPC had spent N2.565 trillion on petrol subsidy payments since January, revenue that normally should have been shared by the three tiers of governments.
A further breakdown of the figure showed that the sum of N525.8 billion that should have been paid into the federation account for sharing was used to defray fuel subsidy costs in August 2022.
Also, in July, June and May 2022, the NNPCL spend N448.78 billion, N319.18 billion, and N327.07 billion respectively on subsidy.
Likewise, the national oil company utilised its whole share of revenue gotten in the months of April, March, February and January 2022 from Joint Venture Contracts (JVCs), N271.13 billion, N245.77 billion, N219.78 billion and 210.38 billion respectively to write off subsidy payments costs.
To make matters worse for the states, the Federal Government, in the 2023 budget proposal, plans to spend N6.7 trillion on fuel subsidy in the financial year.
The depletion of revenue from crude oil proceeds, experts argued, exposes states to severe revenue crises, as funds available to FAAC for distribution now come from taxes generated by the Federal Inland Revenue Service (FIRS) and duty collected on imported goods by the Nigeria Customs Service (NSC).
BH findings, meanwhile, revealed that the 36 states government have gone on an aggressive revenue drive in their resolve to reduce their over-dependence on revenue from the federation account.
As suggested by available reports, states have upped their appetite for more IGR.
According to the breakdown of the 2019, 2020 and 2021 IGR reports compiled by the NBS, the 36 states and FCT generated a combined sum of N5.10 trillion IGR in the periods under review.
IGR at the state level grew by 21.54 per cent to N1.90 trillion within the three year period, with Lagos coming top with N2.06 trillion of total revenue.
In 2021, Lagos State alone generated the highest IGR of N753.3 billion, about 40% of the combined IGR generated by states, up from the N660 billion it received in 2020.
The 2020 figure achieved by Lagos was an improvement of N15 billion from N646.61 billion generated in 2019 despite the negative effects of the COVID-19 scourge.
The FCT and other states also posted impressive growth in 2021. According to the NBS report, the FCT came distant second with a revenue of N131.92 billion, Rivers third, generating N123.3 billion IGR and Ogun came 4th with an IGR collection of N100.73 billion
Others are Delta N80.2 billion; Kaduna N52.9 billion; Oyo N52.1 billion; Edo N42.4 billion, Kano N40.4 billion and Akwa Ibom N31.4 billion.
At the bottom end of the list are the northern states of Yobe, with the IGR of N8.5 billion; Taraba N9.6 billion; Gombe N10.6 billion and Katsina N12 billion.
Further breakdown of the report by zones indicated that the South-West zone top the list with N972.6 billion IGR, followed by the South-South zone with N313.6 billion, while the North-East zone came last with with N78.3 billion.
Sokoto recorded the biggest growth, more than doubling it 2020 revenue of N11.8 billion to N23.8 billion (N12 billion appreciation) in 2021.
The aggressive revenue drive, BH learnt, is however, coming at a steep cost to citizens and businesses operating in these states who contribute the revenues through Pay-As-You-Earn Tax (PAYE); Direct Assessment; road taxes, Land Use Charges, Parking Charges, fines for contravening states laws, as well as other revenues from Ministries, Departments and Agencies (MDAs).
In Lagos State for instance, both workers in the civil service and private sector complained about the high taxes deducted from their salaries as P.A.Y.E.
“I pay as much as N8,500 as P.A.Y.E on my salary of just N103,000, while my colleagues in other states pay as little as N4,500.
“What I don’t understand is how they arrived at the figure. My basic pay is just N43,000, with allowances such as housing, transport and dressing making up the lot.
“With the way I see it, I think they (government) are taxing the whole package instead of just my basic salary”, lamented a civil servant with the Lagos State Civil Service who did not want his identity disclosed for fear of retribution.
BH also gathered that government regulatory agencies such as the Lagos State Traffic Management Authority (LASTMA) and the Vehicle Inspection Service (VIS) have become revenue generating agencies.
Lagos motorists daily narrate their bitter experiences in the hands of officials from these agencies.
For instance, the least offence in the books of the VIS carries a fine of N20,000, while heavier crimes like driving against traffic or without a valid licence could earn a lucky offender between N100,000 to N200,000 fine. Unlucky ones most often end in jails, apart from having their vehicles impounded and auctioned.
Findings, however, showed that the Federal Road Safety Corps (FRSC) operates a more lenient fines regime.
For instance, the least fine in FRSC books is N2,000 for offences such as a non-functional pointer light, while the most severe infraction of assaulting an operative attracts a maximum fine of N50,000.
A survey conducted by BH in states of the federation showed that the unfriendly tax regime instituted by the Lagos State government is not peculiar to the state.
In fact, the situation is worse in many states. In Ogun, Oyo, Abia, Delta, Kano, Ebonyi, Enugu, Rivers, Kogi and many others, revenue teams, in the guise of enforcing laws such as traffic and sanitation, often harass and extort hapless citizens.
A medical doctor in Port Harcourt, the Rivers State capital, who spoke on the condition of anonymity, shared his bitter experience in the hands of officials of the state’s health facilities monitoring agency.
“My facility (clinic) was raided by the agency’s enforcement team in May on the excuse that the environment was dirty.
“They based their evidence on just one biscuit wrapper blown from the outside into the clinic by winds.
“I initially though it was a joke until they gave me a fine of N500,000 to be paid immediately. I refused to pay the fine and my clinic was shut.
“It took the intervention of the guild of private medical practitioners and some prominent persons in government I called for the agency to unseal the facility.
“Despite that, I still coughed out the N500,000 fine, or my clinic will have remained under lock. The case is presently in court as I had challenged the powers of the health monitoring agency to arbitrarily impose fines.
Economic experts who spoke on the development argued that governments’ aggressive revenue drive, coupled with the crippling economic crisis, could lead to the closure of many businesses.
“The just released NBS report which showed that the 36 states of the federation and the FCT generated N1.9 trillion revenue in 2021, which is an improvement of N300.3 billion, is an attestation to the fact that states are gradually waking up to the realisation that those periods they totally rely on Abuja for crumbs is over.
“However, government should thread with care. They have been going around shutting companies and businesses, accusing them of not paying the required taxes.
“The Kogi State government is particularly guilty of this sin. If you remember, the state government recently closed down some base stations belonging to telecoms companies in the state for not paying taxes.
“The recent invasion of Dangote Cement factory in Obajana, I learnt, is an attempt to bully the company into a tight corner so that it can negotiate a better tax deal with it.
“If they (governments) are not careful, they will end up killing the hens that are laying the holden eggs”, declared Toyin Martins, an economist and Managing Partner at Max Consult.
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