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There seems to be a misunderstanding regarding tax returns, especially for people working in the formal sector. Does the deduction made from employees’ wages cover their tax liability?
No, it does not cover their tax obligations. This is mainly because the deduction made from their wages is only one part of their assessment or return. For example, as an employee working with the FCT IRS, we will make deductions on a monthly basis based on PAYE and remit them to the FCT IRS. The law says you have to file your tax return. So, as an individual, you should visit the tax authority such as the FCT IRS website. We encourage online rating where you can also rate yourself and send us your rating. It is important to note that if you have multiple sources of income, you are expected to declare your income and give a breakdown to ease everyone’s stress. Z
Usually at the start of each new year you have to disclose what you have generated, be it what you have earned from salary, dividend, rent etc. from the previous year. Once this is completed, you can apply for a tax exemption certificate. So, people mistake the fact that because they say you deduct at source, then that’s it; it is only one part and it is the responsibility of the deducting authority to remit after deduction. As an individual, you are responsible for submitting your tax return by submitting the so-called Form A; and in this form A you have to declare all income from all sources, this is very clear and the law is very clear. Also, it is an individual responsibility, not your office will do it for you, and if you don’t, the law is very clear about what the penalties are if you don’t. Section 26 of the Finance Act is very clear in terms of the penalties of what will happen if you don’t do that, and so we try to encourage people to do that. But unfortunately, 90 percent of the people who will be reading this document today are already in violation of this.
90 percent means a very big loss. Can this anomaly be fixed? If so, how?
As tax administrators we face a very big responsibility. The truth is that our mandate is not only limited to tax collection but also to educate and enlighten taxpayers about their obligations. I am proud to say that we are doing this through a series of sensitization campaigns, road shows, especially by the FCT IRS, as well as through our television programmes, newspaper advertisements and interviews. We do this frequently to continuously engage the general public. So both the administrator and the individual have a role to play in this regard. Of course we talked about this issue around filing and I said it’s a strict liability issue, the strict liability issue is scary, of course in some states and more personal income tax and direct assessment contribute more than all the other forms of taxation. It is the place of the citizens to contribute to enriching the coffers of the government management compared to other corporate taxes. Unfortunately, all this is different in Nigeria. Ultimately, if we can revive this culture of people paying income taxes as individuals, I bet the funds that will be remitted by all revenue generating agencies under the JTB platform will surely increase.
Your organization partners with The Financial Intelligence Unit of Nigeria recently. Will it help you access individuals’ financial data and further strengthen your task collection strategy?
With the support of the law, our relationship with the NFIU will automatically give us access to information because the law supports it. This is because it is one thing to have legal support and another to have the necessary information. So with agencies like the NFIU we have adequate access. As the FCT IRS, we have decided that since we now have unlimited access to information, we will interrogate an individual assessment. Now the focus of FCT-IRS is not the quantity of tax exemption certificates we issue but the quality. Individuals should note that when they come to file their returns at the FCT Inland Revenue, they must be honest because we now have the capacity to interrogate their submission and know all about their financial dealings, business and other sources of income that she may fail to declare. The NFIU connection like any other connection we have tried to create now gives us access to very important information.
Citizens, especially small business owners, complain about multiple taxation. We have heard of people paying signs, environmental bills/tax and so on. What are you doing about it?
Well, I think there are usually problems with multiple taxation. Just like you mentioned the signs, it’s not a tax for example. There are taxation issues, yes, but sometimes fees, charges and all that are often collected by local government bodies.
The truth is that constitutions actually stipulate what states will collect, what local governments will collect, and there is also an approved list of taxes and fees. So the fact that several people come dressed in different uniforms does not make them toll collectors. Last year FCT IRS organized a retreat for all the revenue generating agencies in Abuja plus the six area councils and the whole idea of the retreat was to see how we can harmonize our revenue, tax collection and all that. We are working to have only one dashboard that identifies what belongs to Mr, B and C. The FCT IRS has the capacity as it is today to bring all revenue generating agencies under one umbrella. We talked about the FCT IRS and what is the mandate of the FCT IRS in its creation act because it says the FCT IRS will collect all the revenue that accrues to the FCT. But you know the FCT IRS is young, it came at a time when other revenue generating agencies no longer existed. For now, our job is to gradually harmonize the collection system so that every form of collection to government falls under the FCT Inland Revenue platform. For example, if you are paying ground rent, you should get a receipt from the FCT Inland Revenue but it will be itemized ground rent. But any form of revenue that is supposed to go to the FCT must come under the platform and that is the spirit of the FCT Internal Revenue Act. On the issue of harmonization, you will see a lot of stories right now that of course Abuja is after Lagos, Lagos is number one and then Abuja is number two. Of course, 5 years ago we were five, we continued to build and now we are number two. So the whole idea right now if you get to the joint tax board or the statistics that are thrown out if you see the IGR in the FCT, the FCT IRS only collects taxes. We hope that when we harmonize each revenue will be well covered and you will see that when people come they will see that Lagos is collecting this amount but that something tangible is also happening in FCT because we have not consolidated and we are not only accounting the taxes. accounting for all revenue and IGR to those who use it for statistics or planning purposes. It will be recorded that the FCT is also a huge generator of IGR. Unfortunately, we currently only report taxes to the relevant authority. For example, the Joint Tax Board, probably the NBS. Although Abuja is second but in terms of numbers we can do much better than what is being reported. So hopefully after all this consolidation and harmonization you will see more IGR reporting from the FCT.
Speaking of collection, what has been the trend for the FCT IRS over the past few years?
The Federal Inland Revenue previously collected personal income taxes on behalf of the FCT but of course the FCT IRS Act was passed in 2015 and the FCT IRS did not come into force until January 1, 2018. So after when we took over from FIRS , we signed a memorandum of understanding and there was a huge advertisement in the paper ordering immediate payment to start immediately, FIRS was generating about 40 billion, 38, 40 a year around that for the FCT. To date, the FCT IRS generates about N120 billion annually. A very noticeable growth has been registered. We organically grow our collection at about 16 to 20 percent per year, but our goal is to maintain and maintain a minimum of 20 percent. So, the weather has been great in terms of collection, but we are certainly not living up to expectations, we can do a lot more. I said FCT IRS can easily do N500 billion annually, FCT can finance 100 percent of its budget through IGR. So, all the activities and all the engagements that we have now is what is driving this and I am sure that the next 2 years, 3 years, with the institutional framework that we have built now in the FCT IRS, you will comfortably see a very huge growth in the numbers ahead.
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