THE AFRICA REPORT
The idea behind the move, according to the authorities, is to reduce tax collection cost, fight corruption and boost transparency.
The president plans to strip all 63 agencies to create a single agency that will effectively be in charge of collecting all funds on behalf of the government to ensure better transparency in Nigeria’s tax system.
The proposed single agency known as the Nigerian Revenue Service (NRS) is expected to possess more powers than any other Nigerian government agency in history. The Federal Inland Revenue Service (FIRS) which is currently in charge of collecting Value Added Tax, company income tax, withholding tax and other national taxes will be scrapped and transmuted into the NRS.
Currently, the customs are in charge of the collection of duties on imported goods while the Nigerian Communications Commission regulates the telecommunications sector, imposing and collecting fines as well as issuing licences. However, the NRS will now be in charge of the collection of these funds.
The prized oil sector is also not left out. The all-powerful Nigerian Upstream Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) will no longer be able to impose fees and levies anymore.
Instead, the laws imposing collection of taxes, fees and levies collected by other government entities, including signature bonuses, pipeline fees, penalties for gas flared, depot levies and licences, fees for Oil Exploration Licence (OEL), Oil Mining Licence (OML), Oil Production Licence (OPL), royalties, rents (productive and non-productive), fees for licences to operate drilling rigs, fees for oil pipeline licences, haulage fees and all such fees prevalent in the oil industry will now be collected by the NRS.
Cutting waste
The Nigerian government says the idea behind the initiative is to reduce the cost of tax collection, reduce corruption and boost transparency.
“If you are customs, focus on trade facilitation, and border protection and if you are the communications commission just regulate telecommunications. You are not set up to collect revenue,” says Taiwo Oyedele, who heads the president’s tax advisory committee.
At least 63 agencies collect revenues on behalf of the government and are often given revenue targets each year. Most of them deduct a collection fee before remitting it to the common government pool. The heads of the 63 government agencies are considered some of the most powerful officials in the country because of the volume of funds they handle.
One of them is the Nigeria Customs Service, seen as a cash cow because of the excise and duties it collects on behalf of the government. With Nigeria being an import-dependent nation – coupled with the devaluation of the local currency – the agency has seen its collection of duty rise so much that by November, it had already exceeded its revenue target for the year 2024.
The head of customs is one of the country’s most powerful government positions and is often lobbied by lawmakers and other top officials, especially for import waivers which are sometimes granted at his discretion.
“We are not happy about this new plan. It will fail because our job goes beyond the collection of duties,” said a senior customs official.
The official who wished to remain anonymous for fear of retribution said customs officials currently do not handle funds but only evaluate the duties to be paid by importers based on a harmonised system code and then ask the importers to pay duty into a government account domiciled in the central bank.
“Will the new NRS agency do the valuation? What is their expertise? Will they be visiting every revenue agency to take over the functions of evaluators?” he said.
Some Nigerians welcome the development due to the bad reputation of customs. A former customs boss was accused by authorities of diverting over $200m, with houses and luxury vehicles seized from him before his death from cancer.
The government argues the proposed law aligns with global best practices and has been successful in countries like the US, where the Internal Revenue Service collects revenue. However, Fisayo Soyombo of the Foundation for Investigative Journalism contends that stripping customs of its revenue collection powers would only deepen corruption.
“Customs officers would simply increase their aiding and abetting of smuggling to compensate for the shortfall that will occur after the agency loses its authority to collect excise and duty,” says Soyombo, who has written extensively on corruption within the agency.
Superman
According to the bill which is before the National Assembly, Zacch Adedeji, the current head of the FIRS, will be the pioneer chairman of the NRS. He is already considered one of the most powerful government officials in Abuja because of the huge sums of money at his disposal and his importance to the Tinubu administration.
With Nigeria’s oil revenue in constant decline in recent years, the government has had to rely on tax revenue. He also doubles as the president’s adviser on fiscal matters.
Adedeji, who was finance commissioner in Oyo State before becoming the CEO of the National Sugar Development Council, is one of the closest appointees to the president. Government sources say he is part of a tiny cabal in Tinubu’s government which not only has unfettered access to the president but has powers beyond the scope of his job description.
With this new agency being created, Adedeji is expected to see his powers increase mainly because of the volume of the funds he will be controlling.
Another controversy is the use of consultants in tracking revenue and auditing private accounts. Such firms are usually paid a commission on how much the government eventually recovers from tax evaders.
With the NRS now collecting all government revenue, it implies more jobs for consultants. This has drawn criticism from a section of Nigerians who believe the reforms are just another avenue to enrich Alpha Beta, a Lagos-based tax consulting firm that has for years been linked to Tinubu.
“I only see corruption being transferred from one agency to the other,” Soyombo says, adding, “the only way to kill corruption is to remove human interaction…
