Chairman of the Federal Inland Revenue Service, Mr Babatunde Fowler, has blamed the drop in the price of crude oil and recession for the shortfall recorded in actual tax collections from 2015 to 2018.
The FIRS chairman gave the explanation in his response to a query issued to him by the Chief of Staff to President Muhammadu Buhari, Mr. Abba Kyari.
A copy of the response was obtained by NigerianEye
In a swift response, the Presidency on Monday said the FIRS boss was not under investigation but added that urgent action needed to be taken to avoid financial crisis.
Kyari had, in a letter dated August 8, 2019, which he personally signed, asked Fowler to explain reasons for ‘significant’ variances in budgeted collections and actual collections of tax in 2015, 2016, 2017 and 2018, when the actual amount collected as tax fell below the budgeted target.
The FIRS chairman was directed to submit a comprehensive variance analysis, which should also state the reasons for poor tax collections between 2015 and 2017, a period when the actual collections turned out to be ‘significantly worse’ than what was recorded from 2012 and 2014.
Fowler was given Monday, August 19, as deadline to respond to the query.
In a letter entitled ‘Re: Budgeted FIRS collections and actual collections’, which was dated Monday August 19, 2019, Fowler explained that the variance in the budgeted and actual revenue performance from 2016 to 2018 was due to fall in price of crude oil and reduction of crude oil production.
The FIRS chairman noted that within the period, the price of crude oil fell from an average of $113.72, $110.98 and $100.40 per barrel in 2012, 2013 and 2014 to $52.65, $43.80 and $54.08 per barrel in 2015, 2016 and 2017.
He also pointed to a reduction in crude oil production from 2.31mbpd, 2.18mbpd and 2.20mbpd in 2012, 2013 and 2014 to 2.12mbpd, 1.81mbpd and 1.88mbpd in 2015, 2016 and 2017.
“The Nigerian economy also went into recession in the second quarter of 2016 which slowed down general economic activities.
He added, “Tax revenue collection (CIT and VAT) being a function of economic activities was negatively affected but actual collection of CIT and VAT was still higher in 2016 to 2018 than in 2012 to 2014.”
According to him, in 2012, 2013 and 2014, GDP grew by 4.3 per cent, 5.4 per cent and 6.3 per cent while in 2015, 2016 and 2017, there was a decline in growth to 2.7 per cent, -1.6 per cent and 1.9 per cent respectively.
Noting that tax revenue grew as the economy recovered in the second quarter of 2017, Fowler said strategies and initiatives adopted in the collection of VAT from 2015 to 2017 led to approximately 40 per cent increase over 2012 to 2014 collections.
“In 2014, the VAT collected was N802bn compared to N1.1tn in 2018,” he said.
He listed some initiatives undertaken by the FIRS, such as ICT innovations, continuous taxpayer education and enlightenment as reasons for the increment.
He added that when he assumed the leadership of the FIRS in August 2015, the target for the two major non-oil taxes – VAT and CIT – was increased by 52 per cent and 42 per cent, respectively.
He said the FIRS had grown the non-oil tax collection by over N1.31tn (21 per cent) when the total non-oil tax collection for 2016 – 2018 is compared to 2012 – 2014.
Fowler further explained that the management of the FIRS had no control over oil revenue collection figures, which according to him, were subject to external forces.
“Your letter stated that actual collections for a three-year period were significantly worse than what was collected between 2012 and 2014.
“Total actual collection for that period was N14.53tn while total actual collection between 2016 and 2018 was N12.66tn.
“The highlight of these collection figures was that during the period 2012 to 2014, out of the N14.53tn, oil revenue accounted for N8.32tn or 57.28 per cent while non-oil accounted for N6.21tn or 42.72 per cent and during the later period of 2016 to 2018 out of the N12.66tn, oil revenue accounted for N5.15tn or 40.65 per cent and non-oil revenue accounted for N7.51tn or 59.35 per cent.”
He added that the total budget collection figure during 2012 to 2014 stood at N12.19tn compared to N16.77tn for the period 2016 to 2018, representing an increase of 37.58 per cent.
Fowler also pointed out that the various types of non-oil tax, including stamp duty, capital gains tax, personal income tax, education tax, NITDEF, VAT (non-import and import), gas income, and CIT had increased during his tenure.
The Presidency said the drop was in spite of records indicating that the number of taxable adults in the country had risen from 10million to 20million under the President Muhammadu Buhari administration, with more expected to be included.
In a statement by the Senior Special Assistant to the President on Media and Publicity, Mr Garba Shehu, the Presidency explained that the August 8 letter the Chief of Staff to the President, Mr Abba Kyari, sent to Fowler was to express concerns over the tax collection drop.
It added that already, the government was facing challenges in meeting recurrent spending budget items, though capital projects had yet to be factored into the equation.
The Presidency recalled that even the Vice-President, Prof Yemi Osinbajo, raised the same concerns at the opening of Monday’s retreat for ministers designate in Abuja.
The statement read further, “Following reports making the rounds in some media outlets, it is necessary to state categorically that the Chairman of the Federal Inland Revenue Service, Babatunde Fowler, is not under any investigation.
“The letter from the Chief of Staff to the President, Abba Kyari, on which the purported rumour of an investigation is based, merely raises concerns over the negative run of the tax revenue collection in recent times.
“It would appear that the country might be heading for a fiscal crisis if urgent steps are not taken to halt the negative trends in target setting and target realisation in tax revenue.
“Anyone conversant with Federal Executive Council deliberations would have observed that issues bordering on revenue form the number one concern of what Nigeria faces today, and therefore, often take a prime place in discussions of the body.
“It is noteworthy and highly commendable that under this administration, the number of taxable adults has increased from 10 million to 20 million with concerted efforts still on-going to bring a lot more into the tax net.”
In the letter to Fowler, Kyari had called to question the tax collection variations and remittances by the FIRS for the period covering 2015 to 2018.
The letter said there were variances between budgeted collections and the actual collections made by the agency during the period.
In another development, the FIRS has warned that it would go after officials of about 19,901 tax defaulters whose bank accounts had been placed under lien for tax irregularities.
The warning was contained in a public notice, which was sighted by our correspondent on Monday.
The notice entitled ‘FIRS final demand notice to companies whose accounts are under lien’, said the threat would be carried out if the defaulting companies failed to pay their outstanding taxes within 30 days.
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