FG mulls new taxes to improve revenue generation

.Again, budgets N450bn for subsidy payment

.Budget cannot perform with 70% recurrent expenditure – Expert

The Federal Government has stated its commitment to boost the revenue base of the country by implementing new taxes to meet targeted revenue of 15% to Gross Domestic Product (GDP).

This was made known by the Minister of Finance, Budget and National Planning, Zainab Shamsuna Ahmed, during the presentation of the highlights/breakdown of the 2020 budget proposal to the public on Monday in Abuja tagged “Budget of Sustained Growth and Job Creation”.

The minister said Nigeria cannot dwell on the current revenue it generates as it will not match the recurrent expenditure targets of her workforce.

“On the emergency need to grow our revenues, the Ministry of Finance, Budget and National Planning designed and launched a Strategic Revenue Growth Initiatives (SRGI) which is focused on boosting revenue generation for the country to meet its revenue to GDP of 15% as set in the Economic Growth and Recovery Plan which is supposed to be attained by 2020.

“However, we are just at 8% and we need to do more on that which is why we have shifted the goal to 2023 and looking at what we must do to increase revenue.

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“The Initiative is planned in three thematic areas which is to achieve sustainability in revenue generation, identify new and enhanced revenue areas and which is why we’ll be looking at implementing new taxes in addition with the ones the Federal Inland Revenue Service collects so as to broaden the tax base and enhance growth, and finally implementing a model that advances collaboration with agencies, use of data, synergies that spur growth,” she explained.

She also maintained that there is a designed monitoring and evaluation process to ensure the targets are attained and appealed to investors and the organised private sector to key into Nigeria’s investments to solve revenue challenges.

Asked if the Federal Government still pays for subsidy, the minister affirmed that “N450bn has been budgeted for the under-recovery which is a fiscal framework for funding the operational cost of the Nigerian National Petroleum Corporation.”

According to her, the money was included in the proposed budget because it captures the cost incurred by the NNPC.

On the performance of the 2019 budget, Ahmed said revenue performance was at 55 per cent (Non-oil revenue at 76% while oil revenue at 77%) that was budgeted half year and would have been N4.58trn but the actual budget spent was 3.45trn which represents 76%.

On expenditure, she said expenditure performance is currently at 76% (Personnel cost at 99%, debt service at 98% and government spending at 58%).

The minister explained that there was no capital funding releases in the first half of the year under revenue due to non-availability of cabinet.

“Capital releases did not commence in the first year of 2019 budget because the budget was passed into law on the 27th of May. Also, there were no ministers so releases did not start until late July and as at the last week of September, we have scheduled releases that are up to N650bn and we have N900bn target by the end of November.

“Fiscal outcomes has GDP growth of 2.02 per cent, oil production is 1.86 million barrel per day, but it doesn’t include 100million barrels per day which Nigerian National Petroleum Corporation has been authorised to settle arrears for cash call obligations. Crude oil price is now $67.2 per barrel for the full years. Inflation is at 11.4%,” she said.

She further stated that Global economic outlook has been projected to be at 3.2% in 2020 while on the African outlook, growth is expected to rise to 3.6% in 2020.

The minister said the key assumptions of the 2020 budget is premised on careful planning and due consultations.

“The 2020 budget is set on the target of 2.18mbpd oil production, the crude oil is set at 67$ per barrel as approved by the National Assembly, and exchange rate remains at N305 per dollar and inflation rate of 10.8% and GDP growth of 2.93 respectively.

“The reason for the assumptions is that oil production volume is 2.18mbpd shows a decline from the 2.3mbpd in the 2019 budget because of tensions in Iran and uncertainties around Brexit. The federal government has a recurrent expenditure of N10.33trn which includes recurrent non-debt spending of 4.88trn which shows increases in salaries and pensions, provisions for the implementation of the new minimum wage, capital expenditure of N2.14trn, N2.45trn of debt services 23% of total expenditure.

“There is also provision for maturing bonds, oil revenue N2.64trn and a budget deficit 2.17trn and represents 1.5% of the GDP, stipulated at 3% to GDP and it is to be financed by borrowing of N1.69trn from domestic and foreign sources, domestic borrowing is 744.99bn while foreign borrowing is N850bn.

“The top 10 allocations of ministries with highest recurrent budget has the Ministry of Defence with N778.95bn, Education with N490bn, Police Affairs is N395.83bn, Health has N336.32bn, Ministry of Interior N219bn, Youths and Sports development with N168bn.

“For highest capital expenditure allocations, largest allocation is for the Ministry of Works and Housing with N259.2bn, Education has N162bn including Universal Basic Education Commission transfers, Power ministry which includes transfer to NBET has N127.67bn, Transportation has N123.07bn, Defence has N99.87bn, health was allocated 90.9bn, Agriculture has N79.79bn and N75.8bn was allocated to the ministry of water resources while N41bn and N37.55bn was allocated to the ministry for Industry, Trade and Investment and science and technology, respectively,” she said as she further broke the budget down.

Meanwhile, a financial expert and Deputy Vice President of the Chattered Institute of Taxation of Nigeria (CITN), Samuel Olushola Agbeluyi, says the budget cannot be sustained with a very high percentage of recurrent.

Agbeluyi said this while reacting to the 2020 budget breakdown and presentation by the Minister of Finance, Budget and National Planning.

“We can’t grow with a budget that has recurrent expenditure of 70% and capital expenditure of 30% as it is not possible for us to witness any tangible budget performance.

“It is capital expenditure that grows any economy, we must consult to change the narrative where capital expenditure will be 75% while recurrent will be 25% as evident in developed countries.

“The budget of $33bn dollars is small and we need to improve, the FIRS cannot tax any economy beyond its potential. Therefore, if you have targeted 15% revenue to GDP, it has to be gradual, as such the Federal Government cannot be building airports and other infrastructures and fund these projects with the budget.

“The airport, railways and the roads should be concessioned for a better budget performance,” he explained.