OMOIGUI-OKAURU AND THE TAX REVOLUTION
By Sajo Maikasuwa
A quiet revolution is taking place at the Federal Inland Revenue Service (FIRS) under the able leadership of Ifueko Omoigui-Okauru. Since taking over the tax agency in 2004, she has improved tremendously its performance, its public image and the standard of service delivery. The fundamental reforms and re-engineering efforts that were initiated and implemented by her and her team have continued to yield huge tax revenue for the three tiers of government.
She has, in the last five years of unblemished stewardship and focussed and visionary leadership, tripled the total tax revenue accruable to the federal, state and local governments, consistently exceeding revenue targets set by the Federal Ministry of Finance and beating her own records every year. From a total tax revenue of N697.7 billion in 2003 and N1 trillion in 2004, the Omoigui-Okauru-led FIRS raked in N1.8 trillion in 2005, N2 trillion in 2006 and N1.840 trillion in 2007. Records released by the Central Bank of Nigeria for the first nine months of 2008, show a phenomenal increase in tax revenue with a total of N2.3 trillion already in the federation account. What is even more remarkable about Omoigui-Okauru’s achievements is that she and her team have recorded unprecedented increases in both oil and non-oil taxes. Her goal is to diversify the revenue base from petroleum related taxes, which constitutes more than sixty percent of the total tax revenue at the moment, to non-oil taxes. Never in the history of the revenue agency has so much been done within so short a time.
Despite the consistently impressive performance of the FIRS in the last five years, the tax agency’s boss has continued to challenge her staff to do more to generate sufficient revenue for national development.
Omoigui-Okauru’s achievements at FIRS have been anchored on the basic principles that Nigeria’s tax system has to be simple, fair, flexible, less burdensome, economically efficient, politically acceptable and must be such that encourages voluntary compliance. It is only a tax administration committed to these principles that can realize the core objectives of taxation, which include generating revenue, stimulating economic growth, stabilizing the economy and redistributing income.
Of course it takes more than just a commitment to some broad principles to change the notoriously corrupt and inefficient old FIRS. It takes a sound vision, the courage of one’s conviction and personal integrity. The FIRS boss has long built a reputation for herself as a smart, no-nonsense and incorruptible leader. A frequently heard criticism of Omoigui-Okauru – which she should take as a compliment – is that she is infuriatingly unwilling to play ball or as they put it in pidgin English, she no chop and she no go allow others chop. Her success is proof that it is possible to hold public office in Nigeria without abandoning one’s core values.
In spite of the pervasive rot in the Nigerian public service, there are many people like Omoigui-Okauru who are working quietly to change their own little corners of Nigeria, reformers whose revolutions are never televised because they don’t hug the limelight. Omoigui-Okauru has decided to let her work speak for her. While such a low profile style may be a virtue, it has robbed the Nigerian public of a full appreciation of what is being done on their behalf at FIRS. This is why some of us have decided to blow her trumpet for her. Nigerians should know and appreciate the giant strides at FIRS. They have to realize that their country is not as hopeless and irredeemable as they like to think, that there are unsung heroes across the length and breadth of this potentially great nation who offer hope of a brighter future.
In the five years of her stewardship at FIRS, tax collection has been fully automated, thousands of staff trained and retrained, hundreds of fraudulent staff have been flushed out of the system, a major part of the tax administration process has been computerized, tax offices are being modernized and equipped to create a healthy working environment, staff salaries and remunerations have been reviewed upward to encourage workers to give their best to the organization, and a system of reward and punishment has been instituted to encourage good conduct and discourage criminality. There is now a better coordination between revenue authorities in the state and local governments and their counterparts at FIRS through the joint tax board which meets regularly to harmonize policies and to find solutions to common challenges.
One of the major planks of the recent tax reform is to have a simple tax system with low tax burden. Rather than have a multiplicity of taxes, the reform calls for a few broad, clear and well-defined taxes so that tax payment can be made simpler while achieving desired results. Omoigui-Okauru and her colleagues in the joint tax board have waged a serious campaign against multiple taxation, arguing that it is unconstitutional and that it constitutes a disincentive to investments. She has also reoriented her staff to treat the tax payer as king. Not only should the taxpayer be treated well, she has also made a case for the tax administrator to be treated fairly by the various governments. The various tiers of governments, she has argued, should invest adequately in its revenue collection systems. She has called for good governance, greater transparency and accountability in the use of taxpayers’ money by the governments so as to encourage people to pay taxes voluntarily.
Expectedly, one of her most controversial policies so far has been the decision to abolish tax consultants in tax administration, particularly where such consultants take over the work of the tax officials. Tax consultants and other agencies/ministries should not be used to collect taxes, she has insisted. The State Board of Internal Revenue is well equipped to collect taxes in all the states. The use of tax consultants, she has explained at various forums, has contributed greatly to the rising cost of tax collection in Nigeria. Cost of collection is estimated to be between 25% and 35% of internally generated revenue, whereas in advanced countries and even in some African countries, the cost of tax collection ranges between 3% - 5%.
For daring to challenge the relevance of the tax consultants and to advocate the strengthening of the state tax authorities to be able to perform their statutory roles, tax consultants selfishly mounted a campaign of calumny against Omoigui-Okauru. Having failed to stop her re-appointment to a fresh term of office last year, they have now resorted to a smear campaign, using professional petition writers and conmen to besmirch her good name. They peddle blatant falsehood to ignorant members of the public. For instance, most people do not realize that FIRS staff have no access to taxes collected as they are all paid directly to the relevant Federation and other Revenue accounts at the Central Bank of Nigeria. Even funds earmarked for the running of the agency (four percent of the total non oil taxes collected by the agency in a year) cannot be used other than for what has been budgeted for. The FIRS allocation is audited annually as required by the law. The agency must fully account to Government and the Public the manner in which these funds have been utilized while all un-utilized funds have to be returned to the Federation Account and the Revenue Funds from which they are derived.
The FIRS boss has remained undaunted, carrying on with her revolutionary changes in tax administration. Under her leadership, four of the eight bills submitted to the National Assembly were passed and signed into law in April 2007. They are the FIRS Establishment Act, VAT Amendment Act, National Automotive Council Act, and the Companies Income Tax Act. The passage of the four laws represents the first comprehensive amendment to tax laws in two decades and it is expected to further enhance efficiency and effectiveness of tax administration. The FIRS Act in particular is expected to have a fundamental impact on tax administration in Nigeria since it will ensure that the agency is effectively funded and that its ability is greatly enhanced to collect more revenue, recruit and pay for the appropriate complement of staff as well as provide the right working environment for staff.
For the first time in the history of tax administration in Nigeria, an automated and fully integrated system that has ensured that taxes collected daily by the FIRS from all parts of the country are swept automatically, electronically, into the Central Bank of Nigeria (CBN) through the collection banks. This has largely addressed the issue of trapped funds in banks and reduced fraud in the collection system. Automation gives the Federal Government real time, almost minute by minute report on taxes collected by the FIRS. Cases of trapped or unremitted funds, running into about N12 billion were rampant when the FIRS operated the manual system.
Recognizing that real time data and information are the live wire of any tax agency, the new FIRS has developed a robust tax payer database and registration process to support effective taxpayer assessment. The agency has also come out with the unique Taxpayer Identification Numbers (TIN) for every tax payer. A tax card scheme that will provide a one-stop access to taxpayer records and with which taxpayers could pay taxes has also be developed. The objective is to provide a clear idea of how many registered companies and individuals pay tax which will then enable effective strategies to be developed to close all identified tax gaps.
Large tax payers especially those in the Oil and Gas and other large sectors are being audited just like other agencies of government charged with the responsibility of collecting taxes on behalf of the FIRS. These steps have yielded about N40 billion in tax arrears to the Federation Account for appropriation.
With the promulgation of the Federal Inland Revenue Establishment Act 2007, Tax Appeal Tribunals have been established to provide for a robust and efficient dispute resolution for all taxes. The tribunals provide tax payers with the opportunity for redress if dissatisfied with their assessments. Beyond this, taxpayers can also appeal the decisions of the tax authorities at the Federal High Court, Appeal and Supreme Courts. In response to several complaints by tax payers, the FIRS now has provision for refund to taxpayers within 90 days. Efforts are also being made to educate the taxpayers on these changes and on their duties and obligations.
A clear, well articulated national tax policy encapsulating the principles guiding taxation in the country has been developed. The new national tax policy is aimed at better planning and consistency.
The reorganization of the operations of the FIRS has led to the merger of offices and creation of one-stop-shops for improved service delivery to the tax payer. This has lessened the burden of taxpayers who can now transact their tax business at a single point instead of going to different tax offices for different services. The merger of offices has also provided improved career opportunities to FIRS staff to be more rounded tax professionals.
The reorganization of FIRS has created jobs and career opportunities of over 2,000 in specific skill driven areas. Omoigui-Okauru has said repeatedly that the focus of the tax agency is to grow job opportunities as required to improve service delivery. Staff without the required skills are being encouraged to acquire the necessary skills through both institutional support for training as well as counselling of the need for staff to recognize the need for them to personally improve their competence levels. She has said that the challenge of the FIRS and indeed all revenue authorities is to get more of the skilled staff required to drive improved performance. With the requisite complement of staff, properly aligned to their areas of strength and interests, the performance of the FIRS and state internal revenue boards would be significantly boosted.
About 4,400 management, senior and junior staff (out of the current 5,600 staff in place), have enjoyed specialized and industry/issue specific training and study tours, within and outside the country in the past five years. In the past, most staff did not receive training for over ten years. In addition to training, there has been considerable improvement in staff remuneration through the new salary scheme approved by the National Salaries and Wages Commission in April 2007. The improved welfare package is to motivate FIRS staff to higher performance.
These are just some of the fundamental changes taking place at the Federal Inland Revenue Service. Omoigui-Okauru needs our support and appreciation to successfully conclude the good job she is doing as the nation’s chief taxman.
* Mallam Maikasuwa is an Abuja based policy analyst