Dr ZAID ABUBAKAR, the Executive Chairman of Kaduna Internal Revenue Service (KADIRS), is optimistic that in spite of the COVID-19 Pandemic, the service will still approximate its projected N50 billion revenue this fiscal year. In this interview, he explained how Kaduna State collected an unprecedented N44 billion last year, the 6th highest in the country.
Last week, the National Bureau of Statistics (NBS) ranked Kaduna state as the 6th in Internally Generated Revenue (IGR) in the country and the first in the north, beside Abuja, in 2019. How did you pull this feat which is unprecedented in the state?
It didn’t start with me, it started with His Excellency, the Executive Governor of Kaduna State, Malam Nasir El-Rufai. It dated back to 2015, when he initiated the revenue reform in the state. So, this reform has enabled the state to record increase in IGR, year in year out. And all we did when we came on board, was to leverage on that reform. So last year, we made sure that all the revenue lines performed well, close to 80% to 90%, that is what made us to pull that feat that you are talking about.
But some people might say that there were tax arrears. Tax arrears will always be there because in a tax environment, you cannot expect 100% compliance. So, for you to ensure compliance, you have to tax audit your tax payers; so, tax arrears is not an extraordinary item. Even this year, we expect to have huge amounts that will come from tax arrears. So, it is an ongoing issue; as tax payers remit their payments, we will also go back and see the level of compliance. In most cases, tax payers don’t pay 100% of what is expected from them. Each year, we have a budget of both tax audit and tax arrears and the rest. And we also have debt management which will manage all the debts that have accrued over the years. Other steps that we took which boosted our IGR include expansion in tax payers data base, compliance monitoring and intelligence gathering, enforcement activities, tax audit and High net worth individuals audit.
What extraordinary measures did you take to ensure compliance, which were not taken years back?
The only extraordinary measures that we took, especially towards the end of last year, was to engage with the tax payers. If you want to reduce the cost of compliance, you engage with the tax payer in a very friendly manner. So, last year, we had six legs of engagements with tax payers, across three zones in the state. We had two engagement meetings in Kaduna Central, to engage with tax payers on how to make payments and the benefits of paying their taxes. We did same engagements in zones two and three. So, these are levels that you have to follow in order to ensure compliance. Where that kind of friendly engagement fails, then you have to take drastic measures which may include sealing off business premises and even litigation.
Kaduna state has projected the sum of N50 billion as Internally Generated Revenue (IGR) this fiscal year. Given the COVID-19 pandemic with its attendant lockdown and shutting of government offices and businesses, is this projection feasible?
I believe the target is not 100% feasible but we were quite insightful from day one. What is actually keeping us tied during this period of COVID-19 and lockdown, is the automation that we did ab initio, in some of the collection platforms. Our tax payers actually go online and make payments. So, COVID-19 has actually affected revenue collection but not to the extent of zero collection. So far, we have been managing to see that the collection hovers around 50% to 60% of what it used to be. That is why I said initially that the collection may not be 100% but with the automation that we did, we believe that we are going to steer through the lockdown.
Are there plans to focus more on other revenue centres like Pay As You Earn (PAYE), in order to augment for the loss of other sources of revenue?
The lockdown has afforded us the opportunity to really look through the records and see what we have done so far in the last few years and see what we can do better post COVID-19. It has afforded us the opportunity to look at revenue lines that have not been performing very well. Prior to the lockdown, we were trying to go full into blown collection of stamp duty and capital gain tax. We believe that whether or not there is COVID-19, it is a revenue line that is supposed to give us may be 40% of our collections.
Thank God at the federal level, we are winning some of our battles, especially with the Federal Inland Revenue Service (FIIRS) coming into the picture. The states should have a share in the stamp duty that is collected in the financial sector. We will now make claim to whatever is due to Kaduna State. We will also reinforce that from the local collection. These are revenue lines that we have identified and have a lot of potentials but have not been performing very well. But after COVID-19, especially when the economy is opened, these are revenue lines that we are going to look at critically, together with PAYE. PAYE plays very vital roles in revenue collections not only in Kaduna State but the entire country. Other revenue lines we are looking at critically to raise funds include, land use charges and non-tax revenues from the health sector.
Has the tussle between NIPOST and FIIRS over stamp duty collection, been resolved in favour of the latter?
It has been resolved! It has now been domiciled with the Federal Inland Revenue Service. It has the legal mandated for the collection. Even though FIRS does the collection, its collections fall within the purview of companies to companies, or companies to individuals or individuals to companies. But when it comes to individual and individual, that one is for states. Over time, that collection has not been given to states and that is the area that we cleared with the Federal Inland Revenue Service. We made them understand that this is the collection that is supposed to come to the states. At the last meeting we had as Joint Tax Board members, this issue was discussed and the chairman is also of the opinion that states need to be given their fair share of that revenue. So, I believe that post COVID-19, this revenue line will see a lot of activity.
Kaduna State had plans to commence this before the coming of COVID-19, to go to the judiciary to ensure that all legal papers and instruments that are being signed, are actually ‘stamp dutied’. Not only the judiciary, even the land registry, even though we have presence there, especially Kaduna State Geographic Information Service (KADGIS), but we want to reinforce that. What we have been collecting over the years is nothing to write home about. And the law has been there and we have the mandate to do the collection.
So, you mean if someone does declaration of age in any court, he is supposed to be taxed?
Yes, the document is supposed to be ‘stamp dutied’, since you are going to present it for legally enforceable activity.
Some people are arguing that businesses should be given tax breaks, to enable them stand on their feet during this COVID-19 times. By so doing, jobs may be saved and this will halt the unemployment bulge. Do you share this view?
A lot of recommendations have been made as a result of this COVID-19. A lot of agencies, NGOs and civil society organisations have been recommending tax amnesty, to allow businesses to bounce back. Tax Amnesty is a programme that needs to be looked at critically in order not to send a wrong signal to the system. Even when the Service comes up with Tax Amnesty, it has to be presented to the State Executive Council for debate and ratification, to see whether it’s going to serve the purpose for which it is intended. You cannot give amnesty to someone who has not been paying tax. Ab initio, that kind of person has made up his or her mind not to pay taxes. So, the kind of amnesty that you are going to give that person is to force him to make payment (general laughter). So, companies that have been paying taxes and have been complying over the years, they are the ones that should benefit from tax amnesty, so that people can retain their jobs and continue with their livelihoods.
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