Presidential Tax Committee Moves to Stop Nigerian Customs, other MDAs from Collecting Revenue

The era of revenue collection by ministries and other federal government agencies will soon be in the past as the newly-inaugurated Presidential Committee on Tax Policy and Fiscal Reforms said it is moving to unify the process.

The committee, headed by former PriceWaterhouseCoopers (PwC) fiscal and tax policy chief, Taiwo Oyedele, said the new approach will mean that the Nigeria Customs Service and 62 other Ministries, Departments, and Agencies (MDAs) of the government will have to eventually stop their direct revenue collection responsibilities.

Oyedele, who disclosed this during an interview on Channels Television Sunrise Daily Breakfast programme on Wednesday, said the collection of taxes from different agencies has contributed to the deficiencies in Nigeria’s tax revenue, which he described as among the lowest globally.

“Ironically, our cost of collection is one of the highest. And the reason for that is that we’ve got all manners of agencies. The Federal Government alone, we have 63 MDAs that were given revenue targets last year; no, actually in the 2023 budget,” Oyedele pointed out. Among the many challenges of having multiple agencies collecting revenue noted by Oyedele is the cost of operation. But he also pointed out two other major challenges.

“On one hand, these agencies are being distracted from doing their primary function which is to facilitate the economy. Number two, they were not set up to collect revenue, so, they won’t be able to collect revenue efficiently,” he said.

The solution he proposed entails assigning the exclusive role of revenue collection for these MDAs to the Federal Inland Revenue Service (FIRS). Oyedele said moving those revenue collection functions to the FIRS comes with two-fold benefits.

“The cost of collection and efficiency will improve, these guys will focus on their work, and the economy will benefit as a result,” he said.

The tax fiscal policy expert explained that by relocating the revenue collection duties to the FIRS, the committee can tackle the issues head-on. It means these institutions can return to focusing on their core tasks, ultimately leading to a healthier economy.

“If you are Customs, focus on trade facilitation, border protection, and if you are NCC (Nigerian Communications Commission), just regulate telecommunications. You are not set up to collect revenue,” he said.

“It can be your revenue, and someone else can collect it for you. There will be more transparency because you will see what is being collected and what is being accounted for properly. It is also a way of holding ourselves to account as to how we spend the money we collect from the people.”

Nigeria’s tax revenue generation has been characterized by shortfalls that Oyedele said are estimated in the region of N20 trillion.

He said that a lot of people are not (tax) compliant, particularly the middle class and the elite. “Some of them are in the tax net with one or two fingers, you pay a thousand naira as tax when you should have paid N10m,” he said, adding that there is a need to focus more on the few major taxes – Value Added Tax, Corporate Income Tax, Personal Income Tax.

However, Oyedele acknowledged the anticipated pushback from stakeholders who presently gain from the current system. Nonetheless, he emphasized that the committee’s central aim is not to deprive anyone of their legitimate earnings, but rather to guarantee the precise and efficient collection of government revenue.

In addition to centralizing the collection of taxes, the head of the tax committee said it end the issue of excessive bank charges, which has added to the many burdens placed on businesses in Nigeria. Oyedele noted with disappointment that Nigerian businesses have around 70 levies and taxes placed on them, which the committee intends to reduce to at least 10.

“In fact, we plan to repeal many of the taxes that currently make doing business difficult without introducing new ones and yet collect more,” he said.