27 November 2013, Abuja – The Federal Executive Council, FEC, on Wednesday approved the engagement of a consultant to provide technical support in the collection of taxes and revenues in the non-oil sector.
The Minister of Finance, Dr Ngozi Okonjo-Iweala, disclosed this after the FEC meeting presided over by President Goodluck Jonathan at the State House in Abuja.
Okonjo-Iweala said the consultant, Messrs Mckinsey and Company, would provide technical support and capacity building to the Federal Inland Revenue Services, FIRS, for non-oil revenue enhancement.
She explained that the approval was meant to engage in revenue drive outside the oil sector for the development of the country.
The minister said FIRS collected N1.8 trillion as non-oil revenue in 2012 while the target for 2014 is N2.2 trillion.
She added that with the services of the consultant, it was expected that the 2014 target would increase by N75 billion, bringing it to N2.95 trillion.
“We feel we have to do this because the administration aims to strengthen the base of economy through diversification to others sector which appear to be yielding fruits.
“There is the need to strengthen our tax system to be able to do better. Nigeria’s tax to GDP ratio is relatively low at 7 per cent compared to other countries.
“Our aim is to move it from 7 per cent to about 22 per cent over time in the medium term.
“We are hoping that over the period of five years, we will move gradually to this ratio.
“We want to do that through blocking all the loopholes and the leakages in our tax collection’’, she said.
The minister said the consultant was well known and had assisted South Africa and Angola in improving their tax revenue base.
She said the FIRS had earlier engaged the services of the company to diagnose the Nigerian tax system and came up with findings that led to the contract.
She said the consultant found out that about 65 per cent of registered tax payers had not filed returns in the past two years.
“Similarly, 75 per cent of medium and small businesses have not registered in the tax system. There are those that registered but are not paying tax.
“They found that about 30 per cent of the companies operating under pioneer status abuse those incentives and used that to evade tax.
“There are also considerable tax arrears and debts to collect on old taxes’’, she said.
Okonjo-Iweala said the consultant suggested certain steps the FIRS should take to improve revenue base.
The steps, according to the minister included; audit and tax filing enforcement, review of tax holidays and exemptions and tax arrears and debt enforcement.
Other steps included increased registration of companies, tax drive on evasive businesses and improved external communication so that people would know their obligations and civic responsibilities.
“On the basis of the diagnosis, they were invited to support the FIRS to see if we could get a target to increase the non-oil tax collection over the next 12 months, basically over 2014,” she said.
Okonjo-Iweala said “the contract sum due to the consultant is N1.4 billion inclusive of all taxes equivalent to 8.75 million dollars for twelve months.’’