The CBN’s latest monthly report for November tells us that federally-collected revenue still runs well behind budget. For the 13 months through to November, total non-oil collections (gross) did not once reach the pro rata budget figure of N467bn: the closest they came was N434bn in July, when receipts from companies’ income tax (CIT) tend to peak. The take from CIT hit the target twice in the period, and from customs and excise five times. After statutory deductions, these revenues are transferred to the federation account for distribution to the three tiers.
Figures cited by Zainab Ahmed, the federal finance minister, at a function in late January are instructive. The gross oil revenue/oil GDP ratio stood at 39.0%, whereas the comparable figure for the non-oil economy was just 4.2%. The FGN’s position on VAT rates we have often mentioned but the minister also cited a customs and excise revenue/GDP ratio of 4.1%, which she compared with 15.0% in Ghana and 19.5% in Kenya.
The distance still to cover is clearly large, and caution is required on the journey to follow the right signposts. We learn that a national database has captured more than 33 million taxpayers but probably more relevant is that only about 10 million have been registered in a labour force of 77 million according to a report from the IMF.
A note by Andersen Tax suggests how the government can start to collect tax from the SMEs that dominate the labour force. The idea is that, rather than demand documents that are often not available, the authorities could levy a presumptive tax based upon business permits or trading license fees. This has been the successful practice in Kenya and Tanzania.
Federally-collected non-oil revenues (gross; N bn)
Sources: CBN; FBNQuest Capital Research
There has been progress in tax collection, albeit from a low base at a slow pace. Ahmed told the gathering that the tax revenue/GDP has risen from 6% to 7%.