FG outlaws tax contractors in states

The federal government on Monday said it is now a crime for any state in the country to engage anybody or an organisation other than the Board of Internal Revenue Service (BIRS) to collect approved taxes.

These taxes are to be published soon by the Joint Tax Board (JTB), an umbrella body of all tax jurisdictions of the three tiers of government in the country.

The new policy, which is with immediate effect, will henceforth attract serious penalties for any state that contravenes it. Accordingly, the JTB has been instructed to 'immediately monitor compliance or otherwise by all tax authorities and report cases of infraction to the National Economic Council (NEC) for action.'

Stakeholders, comprising Federal Government's representatives led by the Co-ordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala and state finance commissioners as well as representatives of local councils in Nigeria, met yesterday to adopt the tax policy in Abuja.

The policy stated in part: 'Tax authorities should desist from engaging the services of consultants, and agents to assess and collect taxes and levies listed in the Taxes and Levies Act as this is in contravention of Section 2(1) of the Act. States should be strongly advised to discontinue this action immediately.'

Another major outcome of the new tax road-map is the resolution banning Federal Ministries, Department and Agencies (MDAs) from collection of taxes and levies because this is a violation of the Taxes and Levies Act.

The resolution said: 'Mr. President is to issue an Executive Order to all federal MDAs to stop collection of taxes and levies in violation of the Taxes and Levies Act and also directing the Inspector-General of Police to dismantle all road-blocks across the federation for tax collection. Commissioners of Police will be required to ensure compliance within states.'

This action, under the road-map is a short-term measure and is expected to be concluded by the end of 2013. To enforce this, the NEC Secretariat is mandated to work with the Head of Service and the Office of the Accountant-General to prepare the draft Executive Order and a memo for the Vice President to convey the decision of NEC to the President.

Okonjo-Iweala had earlier while disclosing the discussion of the review resolution appealed for the understanding and co-operation of the states in the final adoption of the resolution, saying that the scourge of multiple taxation was harmful to the nation.

She gave a background to the committee's task and the expected outcome of its assignment: 'As we all know, the issue of multiple taxation is one, which has been on the front-burner for many years now in Nigeria. Despite several attempts by the government to tackle this issue, it has remained unabated – affecting both big and small businesses and the movement of goods and services in the country.

'This is particularly harmful to the economy because multiple taxation increases the cost of doing business in Nigeria, discourages local trade and investment and also gives a negative perception of the Nigerian business environment to foreign investors. According to the MAN report, some states have as many as 97 different taxes, levies and charges that are imposed on businesses. This is simply not economically viable – the costs to the government of administering these various taxes and the costs to business of paying these taxes outweigh their benefits to both the private businesses and the government. A recent World Bank report shows that for every 100 naira that businesses have to pay in taxes, they pay about 35 naira in compliance costs. This is a waste of capital that could be reinvested in these businesses to grow them and create more jobs for our economy. By streamlining and harmonising taxes across the federation, we would increase Nigeria's productive potential.

'In addition, the multiplicity of taxes on the transportation of goods impairs the integration of internal markets and the establishment of a fully integrated economic space within Nigeria. By impairing the integration of the national market, these mobile levies also reduce competition between companies located in different states in Nigeria. With increased competition, we could bring down prices for consumer goods produced by these companies and make our local companies and exports more competitive in the global market.

'The implementation of these recommendations will not only increase economic efficiency but also make enforcement simpler. Reducing the total number of taxes paid, increasing transparency as to how and what to pay, and facilitating procedures for filing taxes, will be essential to reducing high compliance costs and in so doing, increase Nigeria's tax compliance rate and also the revenue. This is going to be a historical piece of work. We are very happy to embark on it because it is something that needs to be done. I know that uncertainty in the tax environment makes it difficult for businesses to thrive. Therefore, we have to have a transparent process that makes it easy for people to know what taxes and levies to pay and to harmonise these activities across the country.'

Okonjo-Iweala then challenged the stakeholders that they must view the task set before them as an important component of the President's transformation agenda.

This development follows complaints to the Federal Government by operators of the real sector under the aegis of Manufacturing Association of Nigeria (MAN) in the country that the multiplicity of taxes and levies country-wide numbering over 79 were impinging on their expansion and was equally responsible for the shutdown of some businesses in the country.

The implication of the new policy to states and the Federal Capital Territory (FCT) Administration is that it will lead to downturn in their internally-generated revenue (IGR) which at the moment is buoyed by the appointment of tax contractors who in most instances are not tax professionals and who introduce all manner of levies to raise revenue for the states.

Normally, the compensation for these contractors is based on a percentage, hence the more revenue they raise, the more their level of reward. This understanding is the attraction for the contractors to introduce illegal levies and employ thugs who sometimes manhandle citizens to force compliance.

The immediate past Executive Chairman of the Federal Inland Revenue Service (FIRS), Mrs. Ifueko Omogui-Okauru, campaigned vigorously against the syndrome and even sought a law to outlaw the practice which normally renders the statutorily recognised tax administrators in the states redundant and leaves tax-payers at the receiving end.

The Acting Chairman of the FIRS, Alhaji Kabir Marshi and the Secretary, JTB, Alhaji Mohammed Abubakar Lawal, in separate presentations expressed delight at the development and said the new resolution would bring sanity to the tax profession in the country.