In spite of political turmoil that saw the exodus of companies from the oil city of Port Harcourt with attendant loss of jobs, Rivers State has recorded the fastest growth in Internally Generated Revenue (IGR), according to figures released late last year by the National Bureau of Statistics (NBS).
Rivers State IGR grew by 36.13 percent, beating Lagos which grew by 16.88 percent, an indication that the measures launched by the present management of Rivers State Internal Revenue Service (RIRS) led by Adoage Norteh may be yielding results.
According to the November 2018 NBS report, “Lagos, Rivers, Ogun, FCT and Delta were the best five performers during the period of January to June 2018 in terms of grossing thus: Lagos State generated N196.395bn, up by 16.88 percent from N168.025bn in the first half of 2017 to top the list. In second place is Rivers State with N60.906bn, an increase of 36.13 percent from the N44.742bn recorded last year.”
Rivers State was doing less than N6bn per month by the time the present RIRS boss came into office in 2017 with a mandate by the state governor, Nyesom Wike, to move the IGR first to N10bn per month.
What seems to baffle IGR watchers and analysts around the country is how Rivers State’s IGR has surged in the face of endless political tension and exodus of companies with loss of jobs that ought to boost Pay As You Earn (PAYE) takings by the RIRS. Many say if it was not for instability, the state’s IGR would have surged even higher towards the N15bn mark.
But Adoage Norteh, executive chairman of the Board of Internal Revenue Service, attributed the giant leap to the policy thrust of the Rivers State government to, through tax initiatives, make the state an economic destination of choice.
He explained that the Board has been able to roll out strong revenue strategies backed by a robust ICT system that puts most of its activities to digital operations and on the desk-view of the state’s tax boss.
Norteh said he asked himself important questions when he came on board as the chief executive of the state’s tax body and went about seeking answers to those questions, especially on how to boost the voluntary compliance level of taxpayers in the state.
“We have executed ICT rollout. We ask, is it possible for you to stay in your office and file your annual returns? Why is it impossible for you to make transfers to the Revenue Board the same way you transfer money for your other transactions? These questions drive us to the programmes we have created,” Norteh said.
The other important measure, according to him, is the filing of ‘Annual Reports’ whereby digitalisation has reduced the corruption and distortion in the system, thereby boosting the confidence of taxpayers and companies and ensuring that what is remitted gets to the coffers of the Rivers State government.
“This serves as voluntary compliance mechanism. This breeds healthier relationship between the tax authorities and taxpaying public,” he said.
Tax education, Norteh said, is the other very critical measure used by the RIRS since he took charge.
“We engaged in very robust taxpayer education because we realised that much of the problem in tax administration is linked to inadequate information on the part of taxpayers. This had led to confusion regarding the taxes to be paid and to which tax authority. Before now, this had resulted in multiple taxation and consequent hue and cry from taxpayers. We are happy that this is now a thing of the past in Rivers State,” he said.
Another measure involved strategic management of assessment mechanism to eliminate what most people call invasion, Norteh said. The tax audit appeared to create apprehension in the business community and looked like the state government was at war with companies operating in the state. By playing down on this and allowing red flags to point to where to go, tension reduced and more self-compliance emerged. The result was higher revenue despite dwindling economy and exodus of companies, he said.
“We have played down on tax audit visits; instead, we do it randomly and as investigation. We rather encourage companies to make filings and willingly report their operations. We now review their filings and see what they paid as taxes from the filings they made. Our audit team now acts on red flag and random sampling,” Norteh said.
“Red flags appear when your filing remains same, year in, year out. We begin to ask, does it mean this company does not increase staff, reduce personnel, promote, or what? Or when there are increases or decreases in taxes paid,” he said.
Despite the progress made, however, Norteh said more work needs to be done to complete the tax harmonisation policy of the government.
Investigation revealed that some companies present withholding tax receipts, but while they expect to use it to make claims, the RIRS uses it as red flag to know how much revenue they may have made. The Board would now want to know if the companies paid tax on that income that was used to finance the assets that brought about withholding taxes as indicated in annual returns of that year. This is because most companies make partial disclosures, it was gathered.
“I can look at your financial statement where you bought fixed assets worth an amount, but when I look at your cash flow, I cannot see where the money came in: is it loan, is it from business, a gift? If I cannot see it, it means you have simply depressed your profit for the purpose of income tax,” Norteh said.
“Company income tax is not in my area (RIRS), it is for the Federal Inland Revenue Service (FIRS), but you may have inflated salaries to depress income. I want to know if you paid appropriate tax on the salaries. This is what concerns me because you used inflated salaries to escape company income tax or you may have increased other costs of operation such as purchases to depress the outlook for company purposes and in that case, I want to know if the necessary withholding tax on such transactions has been paid to the relevant tax authorities,” he added.
He also said he would ascertain if withholding tax was remitted on the rent paid by the company and other purchases made.
“If the landlord is a corporate entity, the withholding tax goes to the FIRS, but if it is an individual, it goes to the RIRS,” he said.
By creating a stable friendly environment, Norteh said Rivers State has been able to survive the exodus of companies and the strains of instability that ceaselessly threaten to derail the state’s economy. He, however, appealed for stability in the interest of the economy because, as he put it, the state’s economy may not withstand a long hall of instability.
Major business groups in the state, such as the Port Harcourt Chamber of Commerce (PHCCIMA), Manufacturers Association of Nigeria (MAN) and the Rivers Entrepreneurs and Investors Forum (REIF), have admitted in several fora that though tax harmonisation is work in progress, there is calm and harmony between taxpayers in Rivers State and the Revenue Board in recent times.
Ignatius Chukwu
