Maximising Revenue Generation In Rivers

The issue of tax collection and management has been a long drawn one. It has been a popular phenomenon principally among the states and at the federal level. In the early days of tax development in Nigeria, taxes were paid in kind by rendering services such as stone cutting, bush clearing, digging pit toilets or water wells for the benefit of community as a whole. Failure to render such services usually attracted the seizure of the offenders’ properties which then be redeemed by payment of money.
In those days, the Direct Taxation Ordinance No. 4 of 1940 Cap. 54 was promulgated to incorporate the various Native Revenue Ordinances within which framework, taxable income was determined by the warrant chiefs, elders and other persons of influence in each community or district. There were usually native authorities whose native law and custom were recognized and appointed by the governor as tax collectors. This responsibility of appointing tax collection authorities was later extended to the lieutenant governor who could appoint a Divisional or District Council as tax collection authority. This method became outdated invariably due to its low revenue yield, and the system of collection shifted from the village authorities to the Federal Inland Revenue Service (FIRS) which was established to collect taxes for the federal government.
In Rivers State, Internally Generated Revenue administration is undertaken mainly by the State’s Board of Internal Revenue Service (BIRS) established under section 1 (1) of the Board of Internal Revenue Law, Cap. 16, Laws of Rivers State, 1991. Section 1 (2) of the law also created the operational arm of the Board known as the Rivers State Internal Revenue Service (RIRS) in accordance with Section 18 of the law. The Board is accountable to the State Ministry of Finance. Its main functions include the administration of the Personal Income Tax Act, the finance law and any taxes or levies that are brought under the care of the Board; formulate policies that will increase internally generated revenue of the state; indentify sources of revenue available in the state; tax education and similar matters related to effectively generating revenue for government.
Other functions of the Board are to report to the commissioner for finance for policy and fiscal matters; optimum collection of all taxes; enforce penalties stipulated by law, account for such revenues as shall be prescribed by the finance commissioner and make recommendations to the Joint Tax Board (JTB) on tax policies, tax reform, tax legislation, tax treaties, tax exemptions, etc. The Board maintains friendly relationship with corporate bodies and individual tax payers while reminding companies, agencies and individuals that collect income taxes, withholding taxes etc that under the present tax regime they are agents of the board for the collection and remittances of such taxes to government through the board.
The board also reminds tax payers of the penalties consequent upon refusal to remit collected taxes at the expiration of ten days after end of the month.
A critical analysis of revenue profile in Rivers State today shows that the internally generated revenue position is grossly unfair and totally unacceptable to Rivers people.
The RIRS has embarked on restrategising its tax offices towards an efficient tax drive for the government. The service recently kick-started an informal tax drive with the constitution of a 9-member committee comprising representatives of MAN, PHCCIMA, Pillar of Associations, among others to harmonise tax payment and drive the informal sector towards improved tax collection in the state. All these are aimed to block revenue leakages in the system and guide officials of the various tax offices against fraudulent practices. It is also to make the general public be consistent in the payment of their taxes as it is their civic responsibility and not an act of punishment. It is as well a means of improving development in the state.
Of truth, one of the main sources of revenue generation of any country or state is through tax. With the dwindling economy in which the country depends on oil and gas, there is the need for states and the federal government to fashion out ways of diversifying their revenue sources. A member of the tax harmonizing committee, Clement Akininwo, during an interview blamed past governments of Rivers State for the poor tax administration, saying that the harmonization had been delayed. According to him, when the committee’s report is implemented, it will improve the tax system of the state.
The state government, on realizing the shortfall in its tax administration, has swung into action to broaden the revenue base which is seen to be recording impressive result. The state’s revenue standing was less impressive compared to the number of corporate companies in Trans-Amadi Industrial Layout in Port Harcourt, Eleme, Onne, Omoku and other parts of the state, in addition to the number of civil servants, lawyers, medical doctors, traders, businessmen/women and individuals who are taxable and were supposed to pay tax into the government coffers. Rivers State is meant to be buoyant.
It is important to further assert the need for government agencies to closely monitor the activities of tax collectors, consultants or agents and officials of the State Internal Revenue Board, including the designated or authorized banks and other collectors with a view to bringing culprits to book and thus sanitizing the sector.
According to the RIRS, government has banned direct tax collection by officials or agents, rather taxes are to be paid through approved banks. Tax collectors and agents over-inflate taxes and embezzle funds paid by the tax payers which are meant to go into government coffers for development purposes.
Many problems are associated with the operations of revenue generation visa-a-vis tax collection, management and administration. These problems are not only solvable but they run through a single cord or string as the application of one method in any one area produces positive effects on others. The RIRS has been holding series of meetings with different organizations and companies or stakeholders, all geared toward efficient tax collection and improved revenue generation in Rivers State.
The problems associated with the tax system include non-deductions. Some organizations pay their contractors or workers without deducting taxes while some agencies deduct but fail to remit such deductions but rather make use of the funds on the excuse that the relevant tax agencies or authorities have not asked for it.
Application of wrong rates is another problem of tax collection. Wrong rates or under-assessment is often applied, either out of ignorance or honest mistakes or in order to ‘help’ the tax payer whose money is being deducted.
Credit notes or evidence of payment not dispatched, the tax payer would insist that he has paid the tax, while the Board would insist on seeing the documentary evidence since the deduction may have been diverted or paid to the wrong tax authority or person. Incomplete information may lead to writing defective credit notes that may create problems when credit is to be given for the deducted.
In some circumstances, tax collectors are treated as unwelcome guests just as in some situations, several means are devised to evade tax. The tax collectors in other cases, are said to be cruel to the tax payers.
In the 1950s and 1960s, for example, in Nigeria, it was common for tax payers to create several exit routes in their homes as avenues for tax evasion. Today, such exits still exist, but in scientific forms. Government, therefore, must of necessity, block these scientific exists with the appropriate machinery.
Another notorious fact is that in most cases, the Board of Internal Revenue in Rivers State has little or no information on internal revenue pattern/operations and does not know when internally generated revenue is dropping or increasing, so the BIRS has a duty and lots of job to do as the actual number of companies operating in Rivers State is not known as well as other taxable persons. The Manufacturers Association of Nigeria has already indicated its readiness to carry out a registration of all taxable companies operating in the state. This will enable the Board to get the statistics of the companies, get the total outstanding liabilities and post-audit transactions to be able to impose due penalties on defaulting companies.
To maximize revenue generation in the state, tax payers must be made to comply with the law just as the designated or government-approved banks through whom the taxes are paid should be made to remit to the government as at when due.
There is the urgent need to automate the various tax management processes. There should be a data base on tax payers and a comprehensive list of properties for taxation anywhere as well as comprehensive information on companies and their employees. It is now time for the government to formulate appropriate and sustainable programme and policy to tackle the problems associated with tax collection and revenue generation in Rivers State. Government should work out best ways of achieving greater efficiency and effectiveness in its drive for maximum revenue generation, treasury management and control.
There should be a holistic approach to the process of governance to ensure that the ordinary citizens feel the impact of their taxes, while the people should support the government by paying their taxes as at when due. While government should be sincere in utilizing the tax payers’ money on development projects, all the technical staff of the Board of Internal Revenue must brace up for serious revenue administration drive and change their work ethic or culture for effective tax collection and revenue generation.
Okpara wrote in from Port Harcourt.

Shedie Okpara