Between 2020 and this year, a total of N16.4 trillion has been lost as a result of tax waivers and exemptions handed by the Federal Government.
A Non- Governmental Organisation (NGO), Centre for Social Justice, made this known in its report entitled: ‘Frivolous, Inappropriate, Unclear and Wasteful estimates in the 2023 Federal appropriation bill’.
Eze Onyekpere, Lead Director, Centre for Social Justice in the report submitted to the Fiscal Responsibility Commission (FRC), said “from 2020 to 2022, a total of N16.4trillion revenue was foregone as tax expenditure while FGN and the states continued to pile up debts”.
Foregone revenue refers to tax waivers, concessions and money which should have accrued to Federal Government of Nigeria (FGN) or the Federation Account which was waived and will no longer be collected.
Onyekpere told The Nation that “foregone revenue are meant to encourage investors to start businesses in Nigeria in favoured sectors, create jobs, create goods and services for export to earn foreign exchange etc”.
According to the report, in 2020, N5.664 trillion was “foregone” as tax waivers and exemptions; N5.476.10 trillion in 2021; and so far in 2022, N5,304.55 trillion.
Onyekpere noted that “the proposal in 2023 to give away N5.204trillion against a projected revenue of N9,725,863,745,173, while incurring N10,782,078,435,531 deficit is difficult to reconcile under fiscal responsibility rules”.
Section 29 (1) of the Fiscal Responsibility Act (FRA) titled restriction on the grant of tax relief, states that: any proposed tax expenditure shall be accompanied by an evaluation of its budgetary and financial implications in the year it becomes effective and in the three subsequent years, and shall only be approved by the Minister, if it does not adversely impair the revenue estimates in the annual budget or if it is accompanied by countervailing measures during the period mentioned in this subsection through revenue increasing measures such as tax rate raises and expansion of the tax base.
Onyekpere in his report stated that “there is no documentation showing evidence of compliance with the provisions of the FRA on these tax expenditures. There is no evidence of an evaluation of their budgetary and financial implications in the years they were granted and in the three subsequent years.
“These expenditures adversely impaired the revenue estimates and there were no countervailing measures through revenue increases, etc” he said.
Onyekpere called on the legislature to “cap tax expenditures to not more than 10 percent of projected revenue every year or within the medium term”.
The government lost tax revenue from Companies Income Tax, Value Added Tax (VAT); Custom Duties; and Petroleum Profits Tax (PPT).
On Value Added Tax (VAT), which is shared between the Federal (15 percent), State (50 percent) and Local Governments (35 percent), FGN’ share in 2023 is projected at N83,092,534,670.
“The current practice of allowing VAT collecting agents to collect and later remit to the treasury facilitates leakages and shortchanges the treasury” Onyekpere said.
He recommended that “the Federal Inland Revenue Service (FIRS) should introduce technology to automate VAT collection so that once the payee pays VAT, it is automatically deducted by FIRS”.
Onyekpere called for the amendment of a provision of the FRA in the Finance Act 2022 “to remove the power to grant tax expenditures from the Minister or the Executive and only place a duty on the Executive to document the recommendations, proposals and justification for tax expenditure subject to the approval of the legislature”.
The report took a swipe at the 12 River Basin Development Authorities (RBDA) which he said “sits on thousands of acres of public land and over the years, get allocations for tractors, farm equipment, implements, fish and livestock replenishment, seeds, processing machinery and implements, etc.
“They should be revenue centres that remit billions of Naira to FGN instead of the current approach where they gulp money without any meaningful contribution to the revenue”.
He went to state that “the land, machinery and other infrastructure could be capitalized for collaborations with the private sector for commercial farming that will generate revenue for government.
“At a minimum, RBDAs should be compelled to fund their personnel and recurrent expenditure pending when they are fully weaned of public funding”.
Reviewing the 2023 budget as a whole, Onyekpere said, “the 2023 Budget Proposal is suffused with frivolous, inappropriate, wasteful, expenditures to the tune of N610,758,793,547.30”.
Some of the projects he disclosed “have no locations; some are a play on words; others duplicate already provided projects while some have no deliverables and can be seen as an attempt to draw money from treasury without due process”.
The National Assembly (NASS) has a bulk sum of N169billion. According to Onyekpere, “the elected representatives of the people should feel the pain, hunger, frustration, hardship, misery, etc., experienced by the people and show empathy, love and a sense of fellow feeling. 50 percent of this sum (N84,500,000,000) is reasonable in the circumstances”.
In 2023, N132,303,624 is planned to be spent on renovation work on 8 No. blocks of 16 No. 2 bed room flats at state house security quarters. In Onyekpere’s estimation, “this is an annual ritual to get money out of the treasury. In 2022, the sum of N52,303,624 was provided for this”.
With regards to N7,200,045,297 for annual routine maintenance of mechanical/electrical installations of the villa, the budget analyst said “there is nothing to maintain. This is a conduit to get money out of the treasury on a yearly basis. In 2022, the sum of N5.176billion was voted for this”.
The Lead Director, Centre for Social Justice wants the government to save the N60,000,000 for planning and development of nuclear power plant infrastructure. “Nigeria is not in a position to build a nuclear plant. The political will and human resources are not available. This is coming at a time some nuclear powers are de-commissioning their nuclear power plants.
Federal Ministry of Finance in 2023, budgeted N1,491,946,500 for the “implementation of GRID3 project for 2022 and beyond. According to Onyekpere, “what is the treasury paying for beyond the technical jargon. NASS should verify before approval”.
On the N326,677,500,000 multilateral/bilateral Nigeria- covid-19 action recovery and economic stimulus programme (N-Cares) of the World Bank, Onyekpere said, “these are loans procured by the Federal Government which must be paid back. Where is the detail of projects for which this appropriation is requested? The projects for the utilization of these huge sums of money should be in the public domain”.
Savings identified in frivolous, inappropriate and wasteful expenditure line items should be re-channeled to capital expenditure.
With regards to the Service Wide Votes (SWV) of N3,006,583,068,440 which constitutes 14.66 percent of the total expenditure, Onyekpere argued that “this is not a fit and good practice because the bulk of the SWVs could be better programmed and managed”.
“Centralizing votes and managing them outside the traditional MDAs with little or no accountability is not in line with best practices” he said.
He added that the Stephen Oronsaye Committee on reforming the cost of governance had commented on the widely held view of the abuse of the utilization of Service Wide Votes.
“It was the view of the Committee that budget heads currently captured under that vote could actually be captured either under specific MDAs or the Contingency Vote. Considering the constitutional provision for the Contingency Vote, it is believed that the Service Wide Vote is not only an aberration, but also an avoidable duplication”.
The Committee therefore recommended that “Service Wide Votes should be abolished and items currently captured under it transferred to the Contingency Vote or to the appropriate MDAs.