INTERVIEW: Why FIRS is realising more taxes despite economic headwinds – Nami

The Muhammad Nami-led Federal Inland Revenue Service (FIRS) raked in N5.5 trillion in the half-year period of January to June 2023. The amount – raised despite economic headwinds and disruptions during the period such as the naira redesign and the general elections – represents the highest tax revenue ever collected by the Service in the first half of a fiscal year.

The unprecedented collection was contained in the 2023-2024 tax revenue outlook presented to the National Economic Council at its meeting on 20 July at the Presidential Villa, Abuja. Since 2021, the FIRS has been surpassing its revenue target despite inclement national and global economic conditions such as the effects of the COVID-19 pandemic.

Buoyed by the appreciating tax haul in the last two years, the service has put in motion a plan to generate an ambitious N25 trillion in 2024. It also plans to generate N7.5 trillion in the second half of this year (2023).

Mr Nami, the chief tax collector of the federation, has been described by some industry observers as a proactive and result-oriented tax man. His leadership style is adjudged as the propeller of the recent string of successes at the FIRS. He has been described as a reformist whose eyes are riveted on modernisation and updating of techniques and strategies.

Still adrift of four years in the saddle at the FIRS, the reforms he has birthed in the Service have paved the way for the steady increase in revenue collection. Through the introduction of new technology and automation, Mr Nami has blocked leakages and wastes and brought about an increase in tax collection, especially in the last two years.

---

Before his appointment as the FIRS helmsman, Mr Nami had a meritorious spell at the PKF International where he rose to the position of senior consultant in charge of tax management and advisory services. He founded Manam Professional Services, a chartered tax practitioners and business advisers firm. His profile also includes serving as a member of the presidential audit committee on recoveries, recovering loot from looters across the country.

A fellow of the Chartered Institute of Taxation, the Chartered Institute of Forensic and Investigation Professionals in Nigeria, the Institute of Debt Recovery Practitioners of Nigeria, Mr Nami is also an associate member of the Nigerian Institute of Management (Chartered) and Association of National Accountants of Nigeria.

Recently, the FIRS chairman shared aspects of his experiences at the tax collection agency with PREMIUM TIMES. In the exclusive interview, the FIRS boss delved deeper into the factors behind the increased revenue. Mr Nami, who also spoke on general matters concerning tax collection in the country, listed the reasons for the Service’s successes as including structural re-organisation of the administrative frameworks of the FIRS, introduction of new technologies through automation, especially the TaxPro Max system which has not only facilitated voluntary tax compliance but also helped to block leakages in the system. He equally spoke on the decentralisation of the operational structure of the FIRS and other matters.

From a manual to a digital Service

Mr Nami’s starting block in making the FIRS into a more successful revenue generation agency was the change of the service from a manual to a digital organisation.

“When I assumed office here, I met a Service which ordinarily should be one of the top institutions of government but which was not taking its place when it comes to peer and rating of institutions, particularly revenue-generating units of the federation. I inherited a FIRS whose operations were largely manual. If you want to obtain a tax clearance certificate, you have to write a letter; you apply manually.

“The law provides that the TCC, which is the acronym of tax clearance certificate, should be processed and issued to you in two weeks. But we came across situations where you apply for tax clearance certificate, which is a certificate that clears you that in the last three years, you have been able to pay all your tax obligations so that government ministries, departments, parastatals and agencies should have confidence in dealing with you because you are a tax compliant institution. Having paid all those taxes, the FIRS should issue you a certificate within two weeks.

“But I can share a very sad and unpleasant story with you. As a consultant back then in March 2019, I applied for tax clearance certificates; to be specific about seven of them. I applied for them in the month of March 2019 in the first quarter of the year and they were issued a few days after I was announced as the Chairman of FIRS. These companies had paid their taxes but because the process was manual, complications and issues were created in the files that ordinarily shouldn’t be issues. The process took nine months to complete.

“So, if I give that as an example of the manual process I met on ground, the question now is what happens now if you apply for a tax clearance certificate? If you are a computer-literate person, all you need to do is go online and apply for your tax clearance certificate. If it takes you two hours to process and submit the application, that is what it requires because you have limited capacity or skill in using a computer. But if you are such a person that is proficient in computers and it takes you two or three minutes to type and submit, at the FIRS end it will take one minute to issue you the certificate. That is how a process that took nine months before is now being done in a few minutes.”

Blocking of leakages

Through automation, Mr Nami said the FIRS has created “a tax-friendly environment where the taxpayers can do business with us even without necessarily having physical contact with us.” The reduction of physical contacts helped in reducing corruption and blocking leakages thereby enhancing revenue generation. “We also inherited an FIRS with huge leakages that resulted from taxpayers taking advantage of lapses in the system, so that instead of paying ten naira, they paid two. We have sought the assistance of the National Assembly by suggesting amendments to some laws in order to block the loopholes that some lawyers were exploiting to help their clients not to pay taxes correctly,” Mr Nami told PREMIUM TIMES.

Restructuring

Restructuring of the FIRS through decentralisation is also a strategy adopted by the FIRS executive chairman to increase revenue output through operational efficiency. The FIRS boss recounted what he met on the ground upon assumption in December and how he went about changing the situation.

“When we came, we observed all these issues, from operations being centralised, from manual operations, from customers not being happy, some critical stakeholders not willing to work with us. So, I came up with my four-point agenda which we called four cardinal points at FIRS management.

“The first of them was restructuring. We had an institution whose structure was not working. Because if the structure was working, I couldn’t have applied for a clearance certificate and it took nine months before I got it. And I was lucky to have been appointed as FIRS Chairman, otherwise, those clients could probably not have gotten their tax clearance certificates at all.

“So, to find out what is wrong with the structure of the Service, we set up a team and charged it with taking us through the operations of the FIRS with a view to identifying the issues that were making the framework of the Service not to function appropriately. We said, what should we do to rebuild the institution? So, we set up a team and in virtually all the committees I was part of them. Even where I was not chairing, I still took active part in the discussions.

“And we identified gaps in the distribution of functions. And what we did was to restructure the operations. The first thing we did was to decentralise our operations. Before I came on board, if you needed pure water in Lagos, that request had to come to Abuja. So, until that request was centrally approved you would not get the pure water.

“There are certain tax clearance certificates that will surely come to the head office for management approval before the state offices can issue them. So, we decided to decentralize those critical functions. We created groups that were hitherto not there.

“We have about 30 directors in the FIRS, so we grouped those directors into seven groups and for each of the groups we have a coordinating director. Each coordinating director has a minimum of about five directors under him. And everybody, from directors, deputy directors down to officer one reports directly to him.

“So issues that were initially centralised and slowing down the process because the management was finding it difficult to handle them directly are now handled faster and better because we have delegated power to very competent persons within the system who are superintending those coordinating groups. Because we delegated powers to such competent officials within those groups, administrative hitches started disappearing.”

Mr Nami said the restructuring he introduced is intended to make the FIRS function better. The changes also entailed the merging or splitting of some departments and units for operational efficiency and increased revenue generation. He cited the example of a department called ‘Financials’ which was saddled with overseeing the financial institutions and telecommunication companies at the same time. He narrated how he split the Financials department by carving out a new Telecommunication department from it and maintained the existing revenue target for each of them.

“We had a department or a tax office called Financials. When we requested to know who and who were paying tax into that department, we discovered that all telecommunication companies in Nigeria were paying their taxes through that department. But telecommunication companies are not financial institutions; whereas we discovered that taxes paid by them made that department to be meeting its target and the workers there were not able to concentrate on the financial institutions themselves.

“So what we did was to remove telecommunication from that department and make it wholly financial without lowering or removing their target. The target that was given to two of them, we left with the Financials alone. At the same time, we created a new division, Telecommunications and gave it the same target. So we now have the target that was previously given to both of them now being met and even surpassed by each of them. It will interest you to know that every other person is now meeting and even surpassing their targets.

“You now know very well that there was a problem before the splitting was done. I am just giving you a practical example so that you will understand better. So, where, for instance, the two of them were collecting N50 billion, we now left that N50 billion for one of them to collect and set the same N50 billion as the target for the other. Yet everybody was able to live up to expectations. So with that one alone, our revenue increased to N100 billion. These are some of the changes that we carried out which cut across all sectors of the economy.

“Now that you are among the people collecting N50 billion and you have been split into two and still asked to collect N50 billion, the first thing you have to do is to ask yourself, ‘who are those people in this category that were not paying tax before so that you go after them and ensure that they begin to pay their taxes.’ Let’s assume that before they were split only two people were paying their taxes, so they now went back to ensure that more people are paying their taxes because that is the only way they could meet their target. With this, the number of taxpayers continues to grow.”

Automation

The FIRS chairman identified the automation of processes, which also involved greater capacity on how to use technology, as also contributing to the increase in revenue of the Service. With automation, he said, certain information that was not available before became available, adding that many schedules that were done manually in a cumbersome way are now being done with ease because of available technology.

“Before, if you want to do a tax schedule for all the field offices, you have to do a memo manually and people will begin to prepare schedules manually according to the groups that they manage. What used to happen in the past, they would say this group should cover all companies that their names start with the letter ‘A’ while another group covered the companies that their names start with ‘B’ and that is how it continued.

“So if there are 100 companies with you, you will bring them out and manually record their names before stating yes or no that VAT returns had been made or not. But with technology, through one single pressing of a button, we will know how many people filed VAT last month.”

Inter-agency collaboration

One more reason cited by Mr Nami as contributing to the rise in revenue collection by the FIRS is the Service’s collaboration with the Corporate Affairs Commission (CAC) and other sister agencies on awareness creation on tax compliance. He gave the example of the latest version of companies’ certificates of incorporation where in addition to the registration number, the tax identification number of each company is now printed on the certificates. He said the measure serves as a reminder of the tax obligation for companies, thereby helping to grow the number of taxpayers.

TaxPro Max system

The TaxPro Max platform which the FIRS unveiled in June 2021 is the anchorage of Mr Nami’s technology upscaling of the operations of the FIRS through automation of processes. Mr Nami said the TaxPro Max platform, amongst other things, enables seamless registration, filing and payment of taxes, including automatic credit of withholding taxes, value-added tax (VAT) and other credits to taxpayers’ accounts.

The TaxPro Max Portal can be accessed by taxpayers from anywhere, including the comfort of their homes and offices. It has been deployed in all FIRS offices nationwide, with the following functionalities – Registration, Filing, Assessment, Payment, Issuance of Tax Clearance Certificate and receipts for resident and non-resident taxpayers.

The TaxPro Max online platform is designed to ease tax compliance and modernise tax administration in the country. This is in compliance with the provisions of the Finance Act 2020 which empowers the FIRS to automate tax return filing and payment processes.

As expected, right from the very first year of its deployment, the TaxPro Max system turned out to be a game-changer helping the FIRS to far surpass its yearly targets in revenue collections in 2021, 2022 and the first half of 2023 already.

On why he introduced the TaxPro Max system, Mr Nami said: “We decided to automate the process when I came in and to automate the process we need in-house technology. We assembled a team of young men and women who are interested in serving Nigeria, who are knowledgeable in ICT in particular software development and they came up with that technology called TaxPro Max.”