NIGERIA: Upping the Ante of Internally-generated Revenue in Lagos

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Over the years, Lagos State has become less dependent on federal allocation as it has seen a significant increase in its internally generated revenue (IGR). Prior to 1999, the state’s IGR was a mere N600 million per month, compared to N7 billion realised monthly between 1999 and 2007.
Analysing the figures, it shows that the state recorded N185.9 billion in 2010, which increased to N202.76 billion in 2011 and rose further to N219.2 billion in 2012.
About N120.25 billion was realised from Pay as you Earn (PAYE) in 2011; N7.97 billion from direct assessment, and N74.54 billion from other sources, while N104.681 billion came from PAYE in 2010; N7.51 billion from direct sources, and N73.704 billion from other sources.
The IGR, is projected to increase to N400 billion by this year. Lagos realised the highest revenue of N172.44 billion through PAYE. A total of N4.36 billion came from road taxes, N1.89 billion from direct assessment of companies domiciled in the state, while N40.513 billion came from other revenue sources.
Lagos Inland Revenue Services’ success is a model with many states, including Edo, Osun, Oyo, Ekiti, Kano, Delta and Bayelsa substantially adopting the ‘LIRS manual’ for use.
Lagos State Governor, Babatunde Fashola, testified to these figures during the 2012 Annual Public Lecture of the Institute of Chartered Accountants of Nigeria (ICAN). And also, data from the National Bureau of Statistics, (NBS) and Joint Tax Board, (JTB), attest to the success of the tax administration revolution spearheaded by the LIRS. Released last December, the figures showed that Lagos State generated more revenue than any other state of the federation between 2010 and 2012.
As a result of this, the LIRS has put in place efforts to generate more revenue in the state being the agency charged with tax administration and revenue enhancement in the state.
The remodelling process began with the appointment of Babatunde Williams Fowler as pioneer permanent secretary/executive chairman of the Lagos State Board of Internal Revenue in 2005, which was made autonomous and self-accounting entity in 2006, following the passage into law of the Lagos State Revenue Administrative Law and it made the agency first of its kind to be autonomous in the country.
A US-trained economist and international business administrator, and a banker of vast experience. Fowler has helped to drive the vision of successive governments in the state to raise its IGR.
In his presentation made as a guest speaker at the WTS Adebiyi and Associates 2014-Annual Tax Seminar held recently in Lagos, themed: Tax Administration in Nigeria: Looking at the event of the last two years and a preview of the future, Fowler gave insights on what is expected of employers to ensure effective tax payments.
He said, (citing Section 3 of the Personal Income Tax (Amendment Act 2011) that the taxable income of an employee includes any salary, wage, fee, allowance or gains or profit from employment including compensation, bonuses, premiums, benefits or other perquisites allowed or given or granted by any person to any temporary or permanent employee, other than, so much of any sums as expenses incurred by him in the performance of his duties, from which it is not intended, that the employee should make any profit or gain.
“Employers’ duty to deduct taxes from their employees’ income is imposed by section 82 of PITA. It is the duty of the employer of a foreign national who holds a Nigerian employment to deduct appropriate taxes from such employee’s income and remit same to the relevant tax authority in Nigeria,” he said.
Compliance status is the primary responsibility of the management and not that of the consultants or auditors  he explained further, adding that taxes deducted must be remitted as and when due and necessary books of accounts and other documents must be made available for inspection whenever the need arises.
Fowler said the LIRS expected cordial and effective cooperation from employers with its field officers by providing needed information as may be required from time to time, adding that employers of labour should not hesitate to refer grey areas to the tax authorities for clarification and where they disagree should utilise dispute resolution procedures available in the tax laws.”
Noting that tax payment was obligatory with sanctions for non-compliance in line with statutory provisions, he said employers were expected to build and maintain international best practice in line with tax compliance.
He stated that challenges with employers included non-remittance, under remittance and late remittance of PAYE and other taxes.
“Deliberately under-taxing employees’ income through the design and implementation of various schemes aimed at tax evasion such as refund of tax paid – tax on tax, country-based – hazard index allowance, non-disclosure of offshore income arising from the Nigerian employment, house ownership/building loans with no repayment plan or clause, acquisition of fixed assets in the names of the employees and willful non-disclosure of employees’ total taxable income, allowances and other perquisites,” said Fowler.
He also noted that while there were still challenges, it there is no doubt that the agency has achieved a wider taxpayer base, increased rate of voluntary compliance, accurate and timely payment of taxes, and increase in IGR, which has made Lagos State less dependent on proceeds from federal allocation.
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