Executive Chairman of Federal Inland Revenue Service (FIRS), Mohammed Nami, on Wednesday, disclosed that the sum of N10.104 trillion revenue is expected to be realised in the 2022 fiscal year, with the formal capturing of Facebook, Twitter and other social media platforms into the country’s tax net.
Nami who gave the hint during an interactive session on the 2022-2024 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) held at the instance of at the House Committee on Finance, chaired by Hon James Faleke, also unveiled plans for the introduction of Road Tax.
Breakdowns of the projected revenue for the year 2022 include; N113 billion from Personal Income Tax; N305 billion from Education Tax and N21 billion from NITDA.
While speaking on the observation made by the Chairman, House Committee on Customs and Excise, Hon. Leke Abejide on the need to factor in revenue from Twitter and Facebook, as part of the Service’s projected revenue for the year, the FIRS Chairman said: “On the issue of the digital economy, your suggestion is well noted. We also have it as part of what we are doing.
“We already have a department called the International Tax Department which is handling such cases. Twitter and others are already registering with us. That is why in our revenue projections, we are raising it from N5 trillion in 2021 to N10 trillion in 2022. We expect the impact of those registrations to take effect.”
While noting that the signing of the Petroleum Industry Bill into law will negatively impact government revenue expected to be generated from Petroleum Profit Tax (PPT) in the 2022 fiscal year, however, expressed optimism that government revenue is expected to increase significantly in 2023.
The FIRS helmsman said: “We expect that with the new Petroleum Industry Act, there are some reconciliations that will be carried out that might affect the projections for 2022. We expect that there are new expenditures that will be rolled-over to the new regime. So, what we are trying to do is to ensure that we adjust those expenses for the year 2022.
“We know that if we do that, it is going to affect our ability to collect more revenue in that area. There are currently some allowances they have been able to use, but they will use them because this will be a new regime. It is not going to be the one that has investment tax allowance anymore. It is going to be based on actual performance.
“But we are going to recognise whatever they have now as a cost before you arrive at the actual profit they are going to generate. So, what we have planned to do is aggressively conduct audits and investigations in the year 2022. So, we are projecting that by 2023, the result of that audit will begin to manifest. That is why we have projected 2023 to be N6.2 trillion.
“With the digitalisation of the economy, we now sit in the comfort of our offices and homes to place orders for the food that we eat. That became a big challenge to FIRS. With the digitalization of our tax administration, those taxes that were not visible to us are now becoming visible,” Nami noted.
While giving an update on the revenue performance from both oil and non-oil sectors, the FIRS helmsman disclosed that oil revenue dipped from N971 billion at the end of Q2 2020 to N644 billion in the corresponding period of 2021 while non-oil revenue increased from N1.5 trillion to N2.118 trillion as at June 2021.
“The decrease in oil and gas revenue collection this year is not unconnected with the problems we have been facing since last year, which is the issue of COVID-19. Between January and March last year, the entire economy of the world was still open as there was no lockdown and we were collecting tax revenue every month using the usual calculations used by the oil and gas players.
“But from April, the issue started degenerating to the extent that at a time, the oil and gas players produced their finished products and up-takers were not there to buy the finished products. The cost that they incurred especially in 2020 is the thing we are still adjusting to because if you incur cost or loss, you have to recoup it.
“So, if you recover the loss, you will have to recover that loss before you remit the difference. So that has been the impact. We are aware that the situation has improved because prices have gone up. But the adjustments of the loss they incurred last year is what we are still suffering.
“The issue of surpassing our target is a possibility because we have gotten all the required support from the relevant quarters. The most important is that you have granted us the power to automate our tax administration. That process has begun, but developing technology is not a joke.
“We have invested heavily in the technology and the efficacy and efficiency of the system has been tested and found to be good. It is only in the month of June that we started using that technology for the purpose of generating taxes. So, because of the support we are getting and the technology we have put in place, we should be able to surpass our target by the end of this year.”
Responding to a question from the Chairman of the House Committee on Finance on the projected revenue to be given to the Federal Government in the 2022 fiscal year, he said: “the total collection that we try to generate and remit to the Federation Account in 2022 is N10.1.
“However, for the Federal Government, we are going to remit Personal Income Tax of N113 billion, Education Tax of N305 billion and NITDA of N21 billion.
“The total amount for the Federal Government will however be N2.053 trillion while the balance will be shared among States and Local Government. When you remove Education Tax, Personal Income Tax and NITDA, what you have left is about N9 trillion and we take 15 percent of that and add VAT to it, it will give you N2.053 trillion,” he informed the lawmakers.
While noting that the projections were prepared using the template of $56 per barrel of crude with an exchange rate of N410/$, he disclosed that an estimated sum of N7.010 trillion is expected to accrue into the Federation Account; N2.441 trillion going into the VAT account while N113.298 billion will go into the Consolidated Account.
According to him, the cost of collection (4 per cent net of 2 per cent Nigerian Customs Service – VAT) of N130.45 billion was achieved against the budget of N180.76 billion to fund the three operational expenditure heads for the year.
Reviewing the 2021 budget performance, the FIRS Chairman said: “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 a 41.2 percent increase.
“While the oil revenue collected for the same period was N644 billion against N971 billion collected in the corresponding period representing a 33.68 percent decrease in the oil collection.”