With
the recent revelation by the Fiscal
Responsibility Commission (FRC) that government Ministries, Departments and
Agencies (MDAs) defrauded the country of over N1 trillion in the last seven
years, it is not surprising that the Federal Ministry of Finance is looking
more closely at their operations to increase their contributions to the public
purse. One of the ways the government has decided to do this is to ensure that
the contractors who work for them pay due taxes on the payments made to
them.
Specifically,
the Minister of Finance, Mrs. Kemi
Adeosun, last week ordered the contractors to henceforth display their Tax
Identification Numbers (TINs) on their invoices, before they are paid. The
minister’s directive, which was issued through the Accountant General of the
Federation, Mr. Ahmed Idris, followed the reported discovery of N100bn tax
revenue shortfalls by contractors between 2012 and 2017. The order, beyond
boosting government revenue, will help enforce compliance with our tax laws. It
will also ensure that appropriate tax is paid by the service providers.
The
Finance Minister had, in the memo to the Accountant General of the Federation
entitled “Compliance with Tax Payments by Federal Government Vendors,”
disclosed that the constant leakages in tax remittances by contractors had been
uncovered by a government system-wide revenue intelligence data-warehouse known
as ‘Project Lighthouse.’ The leakages, the minister stated, were made easier by
the lack of TIN, particularly on Value Added Tax (VAT), Withholding Tax (WHT)
and other related inflows into government’s treasury.
To
check these lapses which have often hampered the effective implementation of
the budget, government says submission of invoices must be enforced before
payments are made. The directive is also in compliance with the provisions of
both the Federal Inland Revenue Service (FIRS) Act and Procurement Act 2007.
Also, there will be on the spot checks on the MDAs to ensure compliance with
the directive.
It is
disheartening that some contractors of MDAs which make much money from the
contracts they get do not always pay their taxes as due. The MDAs also do not meet their revenue
targets. Statistics from the Ministry of Finance show that MDAs generated only
N120 billion out of their N807bn revenue target. Instead of helping to boost
government revenue, the MDAs are said to be increasing their operational costs.
The report of the FRC seems to have validated this accusation.
Going
forward, the government should institute processes that are capable of blocking
these loopholes and increasing their remittances. Over the years, the MDAs appear to have
either ignored or willfully flouted the provisions guiding the remittance of
the revenue they generated.
The
FRC Act stipulates that any government agency that generates revenue must remit
80 percent of its operating surplus to the Consolidated Revenue Fund Account.
Sections 21 & 22 of the Act specifically state that government corporations
and agencies shall, not later than six months from the commencement of the Act,
and every three financial years thereafter and not later than the end of the
second quarter (Q2), cause to be prepared and submitted to the Finance
Minister, the schedule of their estimated revenue and expenditure for the next
three financial years. The MDAs are
said to be in breach of these provisions.
It
will be recalled that in 2016, the Federal Government sought the prosecution of
33 of its agencies over non-remittance of N450 billion reportedly generated
between 2010 and 2015. The recovery committee chaired by the Accountant General
of the Federation was said to have recovered a sizeable part of the amount. As
a result, the Office of the Accountant General of the Federation (OAGF) gave
all MDAs which are yet to start remitting their revenues to the Treasury Single
Account (TSA) domiciled at the Central Bank of Nigeria (CBN) an order to do so
forthwith. They were also ordered to close their accounts with Money Deposit
Banks and transfer same to the TSA. It is not certain if all the MDAs have
complied with these directives.
Plugging
all revenue leakages will help the effective implementation of the 2018 Budget
now before the National Assembly. It will boost the revenue accruing to the
federal treasury as well as reduce the bloated operational costs of the MDAs.
The N100bn unpaid taxes by the contractors might even be a conservative
estimate of their tax shortfall in the seven years covered by the government’s
intelligence data warehouse. Every effort should be made to recover this
shortfall. (SUN)
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