STRONG opposition is coming from state governments and tax consultants against the call by the Joint Tax Board (JTB) on the governments to stop the use of tax consultants to generate internal revenues.
Indeed, the tax consulting firms, said to by aided by some of the governors, are already engaged in high level lobbying, including reaching out to the Presidency and the Senate, to frustrate the attempt to stop their tax collection contracts.
The fight-back is said to have jolted the leadership of the JTB, which at a recent meeting in Maiduguri, Borno State, had asked states to stop using consultants to assess and collect taxes, “as this is illegal.”
Citing relevant sections of the law, the JTB Chairman and head of the Federal Inland Revenue Service (FIRS), Ms Ifueko Omoigui, said the “menace” of the operations of the tax consultants was increasingly rendering government tax officers irrelevant and a disservice to the states, which, she said, were losing a sizeable part of the generated funds, running into billions of Naira, to the consultants.
“A brief survey has indicated that where these consultants exist, the state governments pay from 10 per cent to 40 per cent of the monies collected when such state governments cannot even give their revenue authorities five per cent of revenues collected to upgrade their facilities,” she said.
The tax consultants are, however not likely to roll over without a fight. The Guardian learnt that some of them are already engaged in high level lobbying to frustrate the attempt to stop their contracts in states.
Some of the steps being contemplated, sources say, are to problematise the pending clearance of Ms Omoigui by the Senate. President Musa Yar’Adua recently re-nominated her as FIRS chairman and she needs this clearance by the Senate for her to continue on the job.
Some National Assembly sources, however, said the lobbying to halt her nomination was not likely to work.
But a number of lawmakers are being urged, “in the name of fiscal federalism,” to support a likely motion at the National Assembly, to condemn Omoigui’s pronouncement on the illegality of the use of tax consultants.
The pronouncement of the National Assembly is crucial, because the Taxes and Levies Act 21 of 1998, which specifically empowers the state revenue authorities, and no other persons, to collect taxes, tends to support the FIRS chairman’s position.
Sources, however, said that the tax consultants’ lobby is counting on the support of a Minister from the Middle Belt and some governors of states where they have subsisting contracts to promote their cause.
A tax consultant, who spoke on condition of anonymity, explained why the battle against might be fierce.
Though the claim by the FIRS chairman, that tax consultants are taking up to 40 per cent of collectable revenue, appears far-fetched, findings indicate that many of the consultants are making huge income from their contracts.
In Enugu, for instance, the consultant pockets between 14 and 17 per cent of all Internally Generated Revenue (IGR) exceeding the benchmarks. In Kaduna, the consulting firm takes almost 13 per cent of collected taxes while the two firms working in Rivers State take about 10 per cent and 15 per cent of generated revenue.
The firm collecting tax revenues in Kogi State collects 20 per cent, while the same firm collects 15 per cent of generated income in Kano. The state generated a little over N2.1 billion as IGR in 2005.
Other States, which employ the services of tax consultants, include Imo, Katsina, Ondo and Lagos.
An official of the Lagos State government said the state values its tax-consulting firm because it has almost tripled the Lagos’ IGR.
Most state governors hold this view. At the JTB meeting in Maiduguri, the Borno State governor, Ali Modu Sheriff said the use of tax consultants arose from the inefficacy of the State Board of Internal Revenue.
“Let me assure you, the FIRS chairman, that state governors don’t like inviting tax consultants but they are being forced by the State Board of Internal Revenue (SBIR) to do so because people abdicate their responsibilities and come back to blame the government,” he said.
As if to show the irrelevance of its Board of Internal Revenue, the Lagos State government last week, according to a national daily, redeployed the senior officials to other ministries.
The deployment, which came through a circular signed by its Head of Service, Mr. Yakub Balogun, affected 129 senior staff members (Assistant Directors, Principal Tax Officials, Chief Inspector of Taxes, Principal Administrators, Senior Inspector of Taxes and Inspector of Taxes).
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