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Report shows that FIRS, Customs and NUPRC receive more allocations than states

The Agora Policy, a Nigerian think tank and non-profit organization, is uncomfortable that the collection costs by the Nigerian tax agencies are not only enormous, but also greater than what each state receives in federal allocation every month.

The group has pointedly named the Federal Inland Revenue Service (FIRS), the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigeria Customs Service (NCS) as special beneficiaries of what it describes as unsustainable collection costs in the country’s revenue. system.

The Agora Policy report follows recommendations from the Presidential Commission on Fiscal Policy and Tax Reforms (PCFPTR) to reducing the cost of revenue collection to one percent or less in the country.

As a think tank and non-profit organization, Agora Policy is committed to finding practical solutions to urgent national challenges.

According to Agora Policy, the FIRS receives four percent (4%) of non-oil revenues; the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) takes four percent (4%) of royalties, rentals and other revenues from the oil and gas sector with NCS) and takes home seven percent (7%) of customs duties and levies.

Providing a breakdown of the figures collected, the organization said the three agencies received a total of N78.30 billion as January 2024 collection costs.

But the gross allocations to the six geopolitical zones for the same month were as follows: N56.60 billion for the North East; N55.58 billion for North Central; N76.09 billion for the North West; N47.75 billion for the South East; N141.85 billion for South-South; and N86.60 billion for the South West.

This shows that the collection costs received by the three agencies (N78.30 billion) this month were higher than the gross FAAC allocations to each of the four geopolitical zones in the country: North East (N56.60 billion), North East ( N56.60 billion), -Central (55.58 billion), North West (N76.09 billion) and South East (N47.75 billion).

South South and South West got more than what the three agencies received only because of 13% diversion for the oil producing states and the allocation of N21.28 billion as net allocation to Lagos State for Value Added Tax (VAT). .

The report showed that FIRS received N43.35 billion as collection costs in January 2024. None of the 36 states of the Federation received this amount as Federation allocation.

The state with the highest gross allocation for the month, Delta State, got N39.59 billion, meaning that FIRS not only received an amount more than any of all the 36 states, but also got 109.49 percent of the state’s allocation with the highest gross allocation.

The report also noted that Customs received N16.27 billion, the lowest collection cost for the month. But what Customs got was higher than what each of the 31 states received in gross allocation for that month.

Further analysis of the report revealed a scenario where the agencies could argue that their improved receipts for collection costs are attributable to efforts to ensure continued increases in benefits flow into the Federation’s account.

But this argument is flawed, as evidenced by the Agora Policy report’s fully disaggregated data on FAAC disbursements over the past five years, running from February 2019 to January 2024.

Available data shows that within five years there will be significant changes in the Federation’s revenue structure, which will now give the agencies an edge over the three levels of government on whose behalf they collect revenue.

As of February 2019, the gross FAAC revenue was N619.86 billion and the total collection cost was N13.58 billion, representing 2.19 percent of the gross allocation.

Similarly, gross revenue stood at N2.07 trillion as of January 2024, with the three agencies receiving about N78.30 billion, representing 3.79 percent of the amount accrued.

At first glance, it appears that collection costs will only increase as a result of the increase in gross revenues. But far from the prospects, The report shows that while gross receipts increased by approximately 234 percent between February 2019 and January 2024, collection costs for the same period doubled that figure to more than 477 percent.

Overall, Agora Policy’s submissions showed that the increased revenues in terms of gross did not influence the higher collection costs in corresponding proportions.

Leading news recalls that while a deep reduction in revenue collection costs is recommended, Chairman of the Presidential Commission on Fiscal Policy and Tax Reforms (PCFPTR), Dr. Taiwo Oyedele, said the current figure between 4 and 35 percent is a situation that is “totally unacceptable”.

According to Oyedele, the global best practice cost of revenue collection was around one percent, and even South Africa, which collects the highest revenues in Sub-Saharan Africa, spends less than one percent to achieve such an impressive result.