Governors to stop levying taxes due to declining state revenues
The governors of 36 federal states have decided to end outsourcing taxes to consultants, saying huge commissions paid to contractors will help boost state internal revenues (IGR).
Chairman of the Nigerian Governors Forum (NGF) Dr. Kayode Fayemi, who is also the governor of Ekiti state, said yesterday that the planned revision of the state’s revenue collection policy is part of the reforms under consideration. improve financial prospects at the subnational level.
Many states, especially Lagos, have outsourced their tax collection responsibilities to consultants, despite having internal revenue collection agencies.
This resulted in a loss of internally generated revenue in the form of commissions to contractors.
Fayemi at the sixth national IGR peer education event in Abuja also listed other reforms planned by the states.
He said: “Other reforms implemented by state governments under the SFTAS program are detailed in the Tax Response to COVID-19 issued by the NGF Secretariat and approved by us in the forum at the beginning of this quest. “Year includes: end of contract – from fees and taxes”.
According to him, another decision of the governors is to strengthen cooperation between the tax service, ministries, departments and agencies (MDA) and local authorities; launching service taxation initiatives; a gradual increase in non-cash payments; and the deployment of a geographic information system (GIS) to support effective land administration and property taxes.
He said states are facing the perfect storm of deprivation this year to tackle, from a health pandemic to its second economic downturn in five years.
He explained that in the aftermath of the COVID-19 pandemic, the forum worked with the federal government, international partners and the private sector to provide the response needed to contain the virus and mitigate its impact on citizens’ lives.
These, he said, include setting up intervention funds, launching social investment programs, expanding palliative measures, and launching tax break programs to protect and support livelihoods and businesses.
“Unfortunately, the fall in oil prices following the global blockade and social unrest, which echoed the demands of the #EndSARS protests, further worsened the economic and social conditions in the country for several months. This has exacerbated an already vulnerable fiscal environment for governments at both the national and subnational levels.
“Other concomitant trends include rising inflation, lower exchange rates and rising unemployment,” he added.
Faymi said the governors worked together to revive the economy, adding that the need to increase government revenues to adequately service planned spending should not be underestimated.
It says that for the half of 2020, IGR numbers showed negative growth of 11.7% for 36 states and the Federal Capital Territory (FCT).
However, he said that despite the overall downturn, some states were seeing positive growth, adding that the three states in this category – Ebony, Gombe and Yobe – were growing more than 50%.
He said the three states have experiences to share with their colleagues.
Regarding the new finance law, Faymi said: “At the federal level, a new finance law is being proposed, providing a legal framework that underpins many of the reform recommendations aimed at stimulating the economy and ensuring an efficient but friendly tax system.
“The Forum actively interacts with the Federal Ministry of Finance, Budget and National Planning regarding the provisions of the draft law, especially concerning state taxes and jurisdiction. It is important that the bill serves the interests of all, not some. “
At the state level, the governor said he plans to professionalize his internal tax services to be taxpayer-focused and responsive to the new digitalisation rule of tax administration.
He added: “The global financial and trade market is going digital and we must adapt or stay behind. We do not advertise or propose the introduction of new taxes, but emphasize the need for our internal tax services to be more strategic, innovative and pragmatic in administering those taxes, fees, charges and levies that have been mandated by law to collect. in various jurisdictions. “
Minister of Finance, Budget and National Planning Ms Zainab Ahmed quoted global analysts as saying that Nigeria remains the fastest growing economy in Africa.
Economic and trade indicators suggest that the road to economic recovery in the country will begin in the fourth quarter of 2020, he said.
He said: “Overall, economic analysts have predicted that the global economy will recover in 2021, especially given the positive results of the race to discover the vaccine. As for Nigeria, economic analysts expect positive economic growth in the first or second quarter of 2021.
Going forward, the impact of COVID-19 on economic and fiscal revenue prospects for 2021 represents a significant opportunity for states to strategize and reposition tax revenue management systems for this era called the “new normal”. Tax reforms are more important now than ever to mitigate current and future risks, regardless of any future pandemics or other global crises. ”
He said the federal government has embarked on a fundamental strategy that includes far-reaching reforms in its fiscal and administrative policies in recent years.
For example, he pointed out that the 2019 Finance Law and 2020 Finance Law have brought significant changes and consolidation to tax administration and governance in the country.
The minister explained that the 2020 budget bill aims to ensure financial fairness; bring national tax legislation in line with international best practice; introduce tax incentives; support MSMEs and increase government revenues.
Some of the key provisions of the bill include: tax breaks for companies that donate to the COVID-19 relief fund; reduction of the minimum tax rate by 50% from 0.5% to 0.25% of gross turnover for financial years ending from January 1, 2020 to December 31, 2020; higher education tax exemption for companies with a turnover of less than NOK 25 million. among other things, “he said.
Ahmed also clarified that the 2020 Finance Law will amend existing laws to facilitate and strengthen revenue mobilization and growth in 2021.
She listed laws that need to be amended, such as the Capital Gains Tax Act, the Corporate Income Tax Act, the Personal Income Tax Act, the Higher Education Trust Fund Act, tariffs. customs and excise duties, etc. (Consolidated) Law, Value Added Tax Law, Federal Tax Services (institution) Law, Nigeria Export Processing Zone Law, Oil and Gas Export Free Zone Law, Tax Responsibility Law, Law on Companies and Related Matters 2020 and the Public Procurement Law.
Some of the federal government’s other ongoing initiatives include an integrated revenue tracking system, he said; implementation of the National Project (“Single Window”); and full national adoption of the Joint Tax Council – TIN.
“With these initiatives, we seek to chart a new course for the tax system while reducing the tax burden on individuals and businesses in Nigeria,” he said.
Earlier, NGF CEO Asishana Okauuru said that given the impact of the COVID-19 pandemic, governments at the national and subnational levels have experienced declining revenues and a shrinking tax base due to the decline. Business activity.
He said governments have been forced to increase public spending to mitigate the impact of the pandemic by building testing and treatment centers from scratch and implementing targeted responses in public health, safety, community works, welfare and other incentive measures. including tax incentives for individual and corporate taxpayers.