Revenue accrued to the federal government through Petroleum profit tax in 2022 may be dwindled due to the signing of the Petroleum Industry Bill, PIB into law, Federal Inland Revenue Service, FIRS, said on Wednesday, August 18, 2021, in Abuja.
The Service however said it will cause some investigations and extensive audits in 2022 to significantly raise the revenue projection by 2023.
Mohammed Nami, the chairman of the FIRS, made the disclosure at an interactive session on the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF& FSP) with the members of the House of Representatives.
According to him, the FIRS is projecting to remit into the Federations account, the sum of N10.104 in the 2022 fiscal year despite the impact of the new petroleum legislation.
Relying on a suggestion by a member of the Finance Committee of the House, Hon. Leke Abejide on the possibility of raising revenue from the digital economy, Nami also disclosed that FIRS is taking advantage digital economy in the country to raise the revenue generation.
He noted that Twitter and other social media platforms including Facebook were already registering with the service for the purpose of tax payment.
Recall that the microblogging platform was recently suspended by the federal government which maintained that it must register locally for its operations to be recognized in Nigeria.
Nami said: “We expect that with the new Petroleum Industry Act, there are some reconciliations that will be carried out that might affect the projections for 2022. We expect that there are new expenditures that will be rolled over to the new regime. So, what we are trying to do is to ensure that we adjust those expenses for the year 2022.
“We know that if we do that, it is going to affect our ability to collect more revenue in that area. There are currently some allowances they have been able to use, but they will use it because this will be a new regime. It is not going to be the one that has investment tax allowance any more. It is going to be based on actual performance.
“But we are going to recognize whatever they have now as a cost before you arrive at the actual profit they are going to generate. So, what we have planned to do is to aggressively conduct audit and investigations in the year 2022. So, we are projecting that by 2023, the result of that audit will begin to manifest. That is why we have projected 2023 to be N6.2 trillion.
“With the digitalization of the economy, we now sit in the comfort of our offices and homes to place order for the food that we eat. That became a big challenge to FIRS. With the digitalization of our tax administration, those taxes that were not visible to us are now becoming visible.
“On digital economy, your suggestion is well noted. We also have it as part of what we are doing. We already have a department called International Tax department which is handling such cases. Twitter and others are already registering with us. That is why in our revenue projections, we are raising it from N5 trillion in 2021 to N10 trillion in 2022. We expect the impact of those registration to take effect”.
The FIRS boss further explained that revenue from oil dipped from N971 billion at the end of June 2020 to N644 billion in the corresponding period of 2021 while non oil revenue increased from N1.5 trillion to N2.118 as at the June 2021.
“The decrease in oil and gas revenue collection this year is not unconnected with the problems we have been facing since last year, which is the issue of COVID-19. Between January and March last year, the entire economy of the world was still open as there was no lockdown and we were collecting tax revenue every month using the usual calculations used by the oil and gas players.
“But from April, the issue started degenerating to the extent that at a time, the oil and gas players produce their finished products and uptakers were not there to buy the finished products. The cost that they uncured especially in 2020 is the thing we are still adjusting to because if you incur cost or loss, you have to recoup it.
“So, if you recover loss, you will have to recover that loss before you remit the difference. So that has been the impact. We are aware that the situation has improved because prices has gone up. But the adjustments of the loss they uncured last year is what we are still suffering.
“The issue of surpassing our target is a possibility because we have gotten all the required support from the relevant quarters. The most important is that you have granted us power to automate our tax administration. That process has began, but developing technology is not a joke.
“We have invested heavily in the technology and the efficacy and efficiency of the system has been tested and found to be good. It is only in the month of June that we started using that technology for the purpose of generating taxes. So, because of the support we are getting and the technology we have put in place, we should be able to surpass our target by the end of this year”, he said.
Responding to a question from the Chairman of the House Committee on Finance Hon. James Faleke on how much the FIRS will be giving to the federal government in 2022, Nami projected N10.1trn.
“The total collection that we try to generate and remit to the Federations Account in 2022 is N10.1. However, for Federal government, we are going to remit personal income tax is N113 billion, education tax of N305 billion and NITDA of N21 billion.
“The total amount for the federal government will however be N2.053 trillion while the balance will be shared among states and local government. When you remove Education tax, Personal Income Tax, and NITDA, what you have left is about N9 trillion and we take 15 percent of that and added VAT to it, it will give you N2.053 trillion.”
A breakdown of the figure showed that about N7.010 trillion will be remitted into the Federations account, N2.441 trillion for the VAT account while N113.298 is expected to go into the consolidated account of the government.
Nami said FIRS made the projections on the template of 56 dollars per barrel of crude with an exchange rate of N410 to the dollar.
On a question that the price of vehicle number plates and licenses was recently increased by the Joint Tax Board, JTB, Nami it was a decision collectively taken by all the chairmen of internal revenue boards from the 36 states and the FCT due to high cost of production incurred by the producing companies.
Source: Vanguard
