NESG Dialogue on Tax Policy and Administration Reforms

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NESG Dialogue on Tax Policy and Administration
Reforms
but in this world, nothing is certain but death
and taxes Benjamin Franklin

• Holding at the Golden Gate Chinese Restaurant,
  Ikoyi, Lagos
• Thursday 10 February, 2005
• Ms Ifueko Omoigui, MON
• Executive Chairman, Federal Inland Revenue Service

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Agenda

• Public/Private Sector Partnership to date
• The need for Change
• Policy/Legislative Reforms
• Administrative Reforms
• Public/Private Sector Partnership going forward

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Public/Private Sector Partnership to date

• The Study Group (SG) on the Review of the
  Nigerian Tax System, 2002, headed by Professor
  Dotun Phillips
• The Working Group (WG) on the Review of key
  recommendations of the SG headed by Oluseyi
  Bickersteth
• The Open Society Initiative/George Soros
• The IMF Mission on Tax Administration
• Inputs from other key stakeholders

• The Presidency
• The Federal Executive Council
• The National Assembly
• Ministry of Finance/Economic Team
• Directors, Management and Staff of FBIR/FIRS

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Reforming the Tax System
Sources Meetings Committee Work Visits
Consultations, Memoranda etc
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Types of Tax Payers

• Will Pay
• Right
• Less than Right
• Cannot Pay
• Will not Pay

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Compliance
Services
Enforcement


Efficient Tax Administration

Tax Payer Rights (Tax Payer is King subject fully
to the law)
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Our Stakeholders

• The Nigerian Public
• Government
• Executive. Legislature Judiciary
• Federal, State, Local Government
• Tax Payers
• Large Taxpayers
• Small Medium Scale Taxpayers
• Individuals
• Tax Agents/Representatives Consultants
• Researchers, Academicians Students
• International Community
• FIRS Management and Staff

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Why Reform Tax?

• In most economies, Tax is the major source of
  income for National Development
• Contribution to Total Revenue in Nigeria still
  lower than desired especially with regard to non
  oil taxes
• To achieve other fiscal objectives and for
  improved service delivery to taxpayer

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2004 Revenue Collection Performance
Actual
Target
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2004 Revenue Collection exc PPT
Actual
Target
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Country ComparisonTax Revenue / Total Revenue
()
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Tax Revenues (Budget) As a of Total Govt
Revenue
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Collect/Prevent Tax Arrears/Non remittances
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The need for Change

• Low contribution of Tax Revenue to GDP
• Wide gap between National Development needs and
  funding
• Over Dependence on Oil Revenue with its attendant
  risks
• - Non renewable resource
• - Volatile International Market.
• - Elitist/Exclusive Sector
• - Dependence on foreign Capital
  Expertise
• High level of Tax Evasion/Avoidance
• Systemic Corruption
• Weak/Incapacitated Tax Administration

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Reform Objectives

• Increase Voluntary Compliance through
• More Equitable System
• More Efficient System
• Strengthen FIRS - Adequately empower the human
  resources of the FIRS to act as required
• Eliminate obsolete and non realistic
  provisions/penalties in existing tax laws

• Increase Revenues Collected/Revenue Yield to
  Government
• Increase funding available for Development
• Increase the stake of Nigerians in the
  development of Nigeria

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Policy Reforms Phase 1

• Empowered FIRS with increased Autonomy (FIRS
  Bill)
• New Income Tax Table for improved equity (PITA
  Amendment Bill)
• Simplification/Reduction of Taxes (Education Tax
  Fund Amendment Bill National Automotive Council
  Act Amendment Bill Sugar Levy Amendment Bill
  VATA Amendment Bill)
• Support to Tertiary/Research Institutions (CITA
  Amendment Bill)
• Removal of ambiguities in the VAT law (VATA
  Amendment Bill)
• Improved Tax Refund System (FIRS Bill)
• Tidier but flexible provision for granting tax
  incentives in the Petroleum Industry ( PPTA
  Amendment Bill )
• Legalisation of the nature of information to be
  provided on a regular basis (PPTA Amendment Bill)
• Increasing shift in emphasis from Direct to
  Indirect Taxes (VATA Amendment Bill)

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Policy Reforms Phase 2

• Constitutional Amendments (VAT on exclusive
  legislative list)
• Development of harmonised Tax Administrative Code
• Introduction of Revenue Courts
• Development of National Tax Policy
• Reduction of Multiple Taxation at State and Local
  Government Levels
• Continuous review of Tax Laws (on an annual
  basis)
• Other areas as may be identified

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Administrative Reforms

• Clarify FIRS Mission, Values, Goals and Structure
• Stop the Bleeding leakages, systemic
  corruption etc
• Obtain Requisite Funding and Operational Autonomy
  to drive capacity to execute and increase speed
  of decision making
• Prosecute Offenders

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Administrative Reforms (2)

• Expand the Tax Net
• Build the FIRS Institution
• Right Selection/Posting of Staff
• Right Development of Staff
• Right Systems
• Right Controls
• Eliminate the Darbies

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Major Strategy Flanks
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Reform Road Map
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Reform Road Map
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Work Done to Date (1)

• FIRS has clarified its Mission, Values,
  Overriding Goal and Structure
• Mission - Operate a transparent and efficient tax
  system that optimises tax revenue collection and
  voluntary compliance
• Values Professionalism, Integrity, Efficiency
• Overriding Goal - Triple our 2004 target by 2007
  (at least in non-oil taxes)
• Major Priorities
• Secure Funding/Autonomy
• Build Capacity
• Improve Systems

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Work Done to Date (2)

• Amendments to the Tax Laws and the proposed FIRS
  autonomous Bill were presented to the EMT with
  the President Presiding on Wed 12/01/05 for
  comments/inputs
• Tax Bills are awaiting presentation to the FEC
• As part of process, plans are in process for the
  Legislators and the Judiciary to be sent on
  Parliamentary training at UK and the US b/w Feb
  May 2005
• The FIRS Bill hopefully shall be passed into Law
  in the 1st Quarter of 2005

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Work Done to Date (3)

• FIRS has established new organisational
  structure, made up of Large Taxpayers Offices and
  Integrated Tax Offices under Regional Controllers
  yet to be fully implemented
• Establishment of Investigation and Intelligence
  division and CC/TPES Division
• Set up of Large Tax Payers Department/Large Tax
  Offices
• Set up of Integrated Tax Offices, Regional
  Offices etc
• More focussed tax offices with clearer
  organisational structures
• 1st Phase of Staff posting/ alignment has been
  concluded and the new offices took off February 1
  2005

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Principles driving Structure

• Integrated Tax offices dealing with all tax types
  and one stop point for the Tax Payer
• Strengthened Audit, Collections and Tax Research
  and Accounting Functions
• Strong Headquarters setting direction and policy
  for field offices
• Strengthened field offices replicating head
  office functions
• Functional reporting lines for technical issues
  between the head office and the field offices
• Introduction of provisions for
• Dispute Resolution
• Arrears and Collection Enforcement
• Preparation for Massive Reform

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Work Done to Date (3)

• Database of staff records are currently being
  verified
• About 3,500 staff to date (out of 7200) have
  being identified with one major HR issue to
  address
• Ongoing review of the Bank Collection system
  Project FACT is due to be completed by March 31st
  2005
• Capacity building efforts have commenced
• Baseline training in the Oil Gas sector
• Preliminary Inspectors Training

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Work Done to Date (4)

• Additional Funding Support has been secured
• FG has approved 4 of non oil taxes for funding
  of FIRS to be ratified by National Assembly
• WB has committed 8m to the reform efforts

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A lot of work still needs to be done

• Staff Education and Communication
• Detailed Organisational Diagnostics/Effective
  Organisation of the various functional areas
• Tax/Regional Sector Studies
• Enumeration of Tax Payers
• Capacity Building etc etc

• Automating Tax Administration
• Computer Skills/Change Management
• Tax Admin processes
• Tax Admin Software
• Complete overhaul of the whole HR function
• Process Reviews
• Automation
• Tax Payer Education

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But the journey has begun
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Public/Private Sector Partnership Going Forward

• Support for the Reforms
• Corporate Code of Ethics on Tax Compliance
• Report Deviations from established code of Ethics
• Pay Taxes fully and on time

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Do not Engage in /Support Unethical Practices

• Report all cases of corrupt practices within
  FIRS, or between FIRS Staff and Tax payers, to
  the
• Anti Corruption Transparency (Whistleblower)
  Unit through the telephone lines and email
  address below
• Telephone numbers -
• 08036314205
• 08045298917
• 08054046311
• 0802 7407548
• 096721530
• Email - whistleblower_firs_at_yahoo.com
• All serious information received will be
  investigated and treated with strict
  confidentiality

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Thank You for listening