Monday, 15 January 2018


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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