Of Taxation, FIRS, Fowler and Other Matters By Reuben Abati – TheNigerialawyer

When, in October, President Muhammadu Buhari presented to the
National Assembly the Appropriation Bill for 2020, he submitted
along with the budget proposal as it is known, a Fiscal Strategy or
Finance Bill, 2019. The Minister of Finance, Budget and National
Planning has since then spoken about the importance of the Finance
Bill, to the growth of the Nigerian economy. The stated objective
is to promote fiscal equity, address problems with the prevailing
taxation order, and reform existing taxation laws in line with
global best practices.

The Bill contains changes to the Companies and Income Tax Act,
Value Added Tax Act (which has been quite controversial), Personal
Income Tax Act, Capital Gains Tax Act (CGTA), Customs and Excise
Tariff (Consolidation) Act, Stamp Duties Act and Petroleum Profits
Tax Act (PPTA). Overall, the Bill seeks to expand the government’s
revenue base, strengthen the extant regulatory framework (??) and
also provide incentives for small and medium scale enterprises as
engines of economic growth and development. The Minister is pleased
that the Bill has already passed the second reading stage in the
National Assembly. No one should be surprised about that. The
present National Assembly will pass anything presented to it by the
Executive with unprecedented enthusiasm.

It should be noted, however, that despite all efforts that have
been made to reform taxation in Nigeria and turn taxation into a
strong vehicle for effective governance, Nigeria’s tax receipts
have remained relatively low. The country’s tax-to GDP ratio is one
of the lowest in the world. It is far below the average in
sub-Saharan Africa. The Economic Recovery and Growth Plan (ERGP)
targets a tax-to-GDP ratio of 15% by 2020. Current efforts by the
Nigerian government to focus on tax reform is in part a response to
arguments by both home-based and foreign analysts that Nigeria
needs to diversify its revenue base, and expand government revenue
if it hopes to meet its targets of double-digit economic growth,
wealth creation and sustainable development through foreign direct
investment and local entrepreneurship, and of course a tax-to-GDP
ratio of 15% by 2020, which is certainly, ambitious because the
real problem is productivity and earnings.

There are specific challenges that stand in the way of these
targets: (a) Nigeria’s over-dependence on extractives, particular
crude oil, which accounts for 80% of the country’s forex receipts,
and a casual attitude to revenue collection and taxation – for 20
years, for example, nobody deemed it necessary to protect Nigeria’s
interest under Section 16 of the Production Sharing Contracts
Agreements Act with international oil companies – resulting in a
calculated loss of between $28 – $62 billion dollars for the
country; (b) the weakness of tax laws, institutions and policies in
the country, the effect of which is a low quality tax system; (c)
the negative attitude of the Nigerian tax payer towards taxation.
The average Nigerian tax payer does not trust the tax authorities
and (d) there are also issues of transparency, accountability –
(that is lack of accountability for collected revenues) and good
governance which accounts for the poor administration of the
country’s tax system.

It must be admitted nonetheless that there is some merit to the
cumulative efforts that have been made over the years, to transform
the tax regime in the country, or to be more specific, to encourage
non-oil revenues, and mobilise non-compliant taxpayers to see the
need for tax payment as a civic responsibility. After independence,
an Income Tax Management Act (ITMA) was enacted in 1961. There was
also the Companies Income Tax Act No 22 of 1961 (CITA) which placed
corporate taxation under the control of the Federal Board of Inland
Revenue (FBIR). In 1979, CITA, 1961 was replaced with the CITA
Decree No. 28 of 1979. The FBIR was responsible for the
operationalization of the Act. In 1991, the Federal Government set
up a study group on Nigeria’s tax system, whose recommendation led
to the Finance Decree of 1993 and the establishment of the Federal
Inland Revenue Service (FIRS), State Boards of Internal Revenue and
Local Government Revenue Committees. There were other efforts at
tax reform in 1992 (led by Dr. Sylvester Ugoh), in 2002 (led by
Professor Dotun Phillips), in 2004 (led by Seyi Bickersteth) and in
2012 (led by Mckinsey and Co). The turning point at the Federal
level was in 2004.

At the state level, Lagos State took the lead in this regard as
far back as 1999 and by 2007, the state was already directly
reminding Lagos residents of how tax payer’s money was working for
them thus linking taxation to good governance and accountability.
Many Nigerians are not motivated to pay tax though, because they do
not trust the political elite or tax administrators and they hardly
ever see why they should pay tax when everyone else is enjoying oil
money. Tax evasion is therefore common and this is even facilitated
by tax officials who take a cut of the reviewed rates and help to
doctor the papers. In truth, tax payers do not also see why they
should pay any tax when paid taxes are likely to be mismanaged to
fund the wasteful official and private lives of elected or
appointed officials. Given new realities however, that is: the
volatility of oil prices, the pro-climate change, anti-hydrocarbon
lobby, increase in the production of Shale oil, increased
inventories in non-OPEC countries, high budget deficit, mounting
debt, a weak national currency, shifts in geo-politics beyond local
control, slow domestic economic growth, Nigeria has every need to
adopt new, workable and sustainable strategies.

Institutionalizing a strong tax governance regime is only one of
many options, but beyond all the problems already identified, the
biggest challenge is the needless politicization of tax
administration in Nigeria.
This is precisely what the Minister of Finance, Budget and National
Planning and the President should worry about if Nigeria must
achieve its stated objectives and targets with regard to revenue
mobilisation and an efficient tax system. How can we insulate
Nigeria’s tax system from politics and the greed of politicians?
How do we ensure that an engine of growth and development does not
become a play-field for political conflicts? I raise this point
because this is what has been happening in the FIRS, and even at
the state levels in recent times. Politicians want to get hold of
the tax office. It is the favorite posting for anybody that a
Godfather wants to help. Every jobless man wants his first job to
be in the tax office or Customs or any department of government
that is considered “juicy”. The juiciness or non-juiciness of an
appointment must be a uniquely African and Nigerian invention.

The way it works out is that whoever is appointed to a position
that is considered “juicy” or influential is considered a target
for attack and blackmail. Everybody wants the position. And the
detractors would go to any length to pull the person occupying the
attractive office down. We have seen traces of that in every
administration and also in this administration. Public service is
an arena where you cannot trust anybody. You have to constantly
look behind your shoulders. There are civil servants who tell you:
“Yes sir, Yes sir” every other minute but they are busy compiling
evidence against you to be used the day the Devil seizes control of
their souls. There are politicians who believe that the office you
occupy belongs to them because their kinsman is the President.

Nigeria wants to diversify its revenue base and strengthen its
revenue collection system. How do we do this without the threat of
primitive politics? With regard to revenue collection, two
departments of government at the Federal level are of primary
importance: the Federal Inland Revenue Service and the Department
of Customs and Excise. If President Buhari’s advisers would tell
him the truth, he should know that both departments are in the eye
of the storm. Some people and stakeholders want the leaders of both
departments of government changed. In fact, with immediate effect
if possible. I have nothing against Col. Hameed Ali. He can be
there indeed for as long as the President needs his services in
line with the Enabling Act but he needs to tone down his
military-style tactics.

The Customs under his watch has been more military than
para-military. Locking down people’s shops, harassing car dealers
and seizing cellophane bags of rice, turning the Customs into a
military unit create the wrong impression, but no one can doubt the
fact, however, that Hammed Ali loves his job and that he means well
for Nigeria. With a little change of style and tactics, he is
probably the Customs Manager that Nigeria needs. Those who are
insisting that he should not be re-appointed should check his
records of performance and state in clear terms their objections to
his methods.

Like Hameed Ali, Babatunde Fowler who heads the Federal Inland
Revenue Service, the operational department for internal revenue is
similarly embattled. There have been complaints and petitions
against him purportedly signed by faceless and nameless staff who
accuse him of all kinds of infractions including the engagement of
consultants and using FIRS money to attend parties every weekend.
Fowler denied all the allegations. His cowardly detractors have not
provided any concrete evidence. When the blackmail failed, one Mr.
Okwara, an Abuja-based lawyer went to court in Kano to ask
Babatunde Fowler to vacate his office, on the grounds that his
tenure expired in August 2019, having been appointed on August 20,
2015. The plaintiff alleged that Fowler’s continued stay in office
is illegal unless he is re-appointed by President Muhammadu Buhari.
Counsel for Fowler raised issues of locus standi and jurisdiction.
The Court eventually threw out the case, noting that whereas Fowler
was appointed in acting capacity in August 2015, the effective date
of his appointment was December 15, 2015, the very day the Senate
conveyed its approval of his appointment.

In August 2019, Fowler further received a query from the office
of the Chief of Staff on the failure of the FIRS to meet revenue
projections. He was required to explain “significant variances
between the budgeted collections and actual collections for the
period 2015 to 2018.” Mischief-makers seized upon this to allege
that they had been been vindicated. Fowler responded to the query,
and the Presidency issued a statement to say that the FIRS boss was
not being probed by the Presidency. Given the fact that the FIRS
and Customs and other revenue collection agencies of government are
given set targets, and the history of abuse of the processing of
revenues, it should not come as a surprise if the Presidency
demands explanations.

But what is clear is that whenever a person’s tenure in
government is about to end, especially if the person is imagined,
thought, or considered, to be occupying a “juicy” position, and
such a person is eligible for re-appointment, other persons who are
interested in that position would embark on a campaign of blackmail
and calumny. Their goal is to influence the appointing authority to
get their quarry out of office in as vicious a manner as possible.
With regard to Nigeria’s fiscal strategy going forward, the
Nigerian government must separate politics from policy if it hopes
to make any difference. To avoid taking any rash decision, beyond
policy, the administration must ask critical questions and conduct
a proper audit of the revenue collection agencies, and their
leadership. Is Hameed Ali, a soldier in Customs, terrorizing
everybody as alleged? Even if he brings in high revenue? The people
who accuse Fowler in FIRS, do they mean well for Nigeria or they
are just resisting change? What is their motive? Do they just want
Fowler out because they think he is close to persons who may be
interested in the Presidential politics of 2023?

I understand Hameed Ali has nothing to fear. But Fowler?
Appointed in August 2015 in an acting capacity, and subsequently as
Chairman of the FIRS in December 2015, Babatunde Fowler’s first
tenure appointment expires on December 15, 2019. He can only remain
in that position if he is re-appointed by the President. Fowler, a
former banker, was the pioneer Chair of the Lagos State Inland
Revenue Service (LIRS). When he assumed office at the Federal level
in 2015, FIRS revenue stood at N3.2 trillion. The figure at the end
of 2018 was N5.3 trillion, this increase came at a time the economy
suffered recession and oil prices crashed. Fowler’s FIRS recorded
non-oil tax revenue of N2.85 trillion in 2018 alone, representing
more than half of the total revenue for the year. He encouraged
innovation and automation. In 2016, he was elected
President/Chairman of the African tax body, the African Tax
Administration Forum (ATAF). In October 2018, he was re-elected for
another term of two years in that position. His term expires in
October 2020 as head of the African Tax Forum. In 2017, the UN
Secretary-General, Antonio Guterres further appointed Babatunde
Fowler as a member of the International Experts Committee on Tax
Matters.

As I write, Fowler is in Kampala, Uganda, as Nigeria’s
ambassador, providing leadership as Africa’s Tax Chief. The African
Tax Administration Forum (ATAF) is by the way, 10 years old today.
The 4th Conference of African Tax Administrators, international
organizations, civil society groups, academics and policy makers is
also being held today in Kampala, Uganda, the same city where the
inaugural meeting of the Forum was held in 2009. The Forum’s theme
for this year is “Innovation: Digitalization and Harnessing
Technology ICT to improve tax systems”. Nigeria’s Babatunde Fowler
is leading that entire process. Back home, he is being derided by
some faceless characters. Those who should be proud of him are
trying to pull him down. We must not reduce tax administration in
Nigeria to petty politics. In the long run, tax management must be
linked to per capita income and productivity within the economy,
merit and achievement, not personalities.

Our educated concern is to draw President Buhari and the
public’s attention to these issues and the need to be fully
apprised of the growing politicization of revenue collection
agencies beyond whatever obvious limitations that may exist. Mr.
President is hereby invited to consider the foregoing submissions
and act with utmost discretion pursuant to Sections 5(1), 130, 147,
171 of the 1999 Constitution of the Federal Republic of
Nigeria.