Kaduna Internal Revenue Service and the benefits of reforms

BY EMMANUEL ADO

Until 2015, the defunct Kaduna State Internal Revenue Board, was clearly an obvious impediment to the aspiration and capacity of previous administrations of the state to deliver on its social contract with the citizens of Kaduna State, as contained in Section 16 of the 1999 Constitution of Federal Republic of Nigeria as amended, due to its abysmal performance in revenue collection. The failure of the revenue agency can only be appreciated, against the Economic Objectives and Directive of State Principles, under which the various governments are obliged to ensure the maximum welfare, freedom and happiness of every citizen on the basis of social justice and equality of status and opportunity. To further buttress the seriousness attached to the attainment of the objective, Section 14(2b) explicitly states that the security and welfare of the citizens shall be the primary purpose of the government.

The Kaduna State Board of Internal Revenue before the reforms and its eventual transformation to Kaduna State Internal Revenue Service(KADIRS), was a typical example of all that is fundamentally wrong with most government agencies,it lacked accountability and focus,what Steve Dobberowsky described as “organizational hesitancy”, which more or less limited its capacity to achieve set targets. The Board willfully refused to collect the taxes and levies that it was mandated to collect, and when it did manage to, more than 80% of the revenue collection ended up in private pockets,thus denying government the revenue to deliver on its lofty objectives. The Board notoriously got away being a significant obstacle to the attainment of government objectives, fundamentally because the former administrations lacked the political will to reform the board, the obligations were not actionable or they were simply contented paying the salaries of the public service.

Nasir El- Rufai, on assumption of office in 2015 inherited not just a revenue agency that was dysfunctional, but a Public Service that was equally unproductive,because of an aging workforce that lacked the capacity to deliver service. Like El – Rufai has severally argued, “No Nation develops beyond the capacity of its Public Service”. His utter disdain for the service,and public institutions generally is because they have greatly contributed to the underdevelopment of Nigeria. It’s consequently not surprising that the very first executive decision of El-Rufai was the urgent reform of the Kaduna State Revenue Board and the Kaduna State Public Service Revitalization and Renewal Programme, so as to improve the capacity and efficiency of both to deliver effective service. Thankfully the reforms have largely resolved the critical issues that had hitherto impeded their efficiency, especially low revenue collection, productivity, redundancy, duplication of roles, high proportion of aged workers, and unskilled staff.

When El-Rufai took over, he basically faced two clear choices; reform the public service or perish. Very predictably he chose an encompassing reform that would improve the internally generated revenue (IGR), which stood at an abysmal N800 million a month, an amount that was grossly inadequate to cover the overhead expenditure of the public service. Working with Ifueko Omoigui ,one time Chairman of the Federal Inland Revenue Service(FIRS), El-Rufai embarked on a surgical restructuring of the Kaduna State Revenue Board, into an efficient and effective Service capable of raising the much needed finances. To give legal backing to the reforms , The Kaduna State Tax (Codification & Consolidation) Law, 2016 was signed which has ushered in a new era in tax administration in Kaduna State was enacted. The key highlights of the law; includes making Kaduna State Internal Revenue Service the sole revenue collection agency, Harmonization and centralization of all revenue collection and the Prohibition of cash collection,which made cash collection a crime. The blockage of leakages was the killer punch and in no time the desired results started rolling in, such that by 2017 the IGR had increased from N11.8billion in 2015 to N26.53billion to N30billion by 2018 and by 2019 over N44 billion. A feat that has been achieved solely by efficient collection and without the introduction of new taxes.

By making cash collection illegal, the huge revenue resources that hitherto ended up in private pockets, started flowing into the coffers of the state government, for the execution of the myriads of projects El-Rufai had promised the people of Kaduna State. The reforms also frontally attacked leakages,and made the revenue service the sole collecting and accounting authority, though all taxes and fees continue to be assessed by the relevant ministries and agencies. Though the swift implementation of the Treasury Single Account (TSA) in 2015, brought in over N25 billion scattered in more than 470 bank accounts into its TSA account with the Central Bank of Nigeria,moving forward it was clear that this wasn’t enough to sustain government operations, that the key remained getting KADIRS to function optimally,especially with El- Rufai’s singular ambition is to generate a minimum of N70 billion,that would wean the state from its dependence on the “miserable” allocation from the Federation Account.

All indications point to the realization of the medium term objective of El-Rufai ,as the Kaduna State Internal Service (KADIRS) has within (4) years met the acceptable target of over N40billion. From a modest N2billion the service is consistently generating well over N3 billion monthly, which is a far cry from the paltry N800 million that was the standard collection during the Peoples Democratic Party(PDP) era. Though the key to the successes recorded in increasing the IGR,are clearly the reforms,but the game changer is the competent team that was hired to drive the reforms. Though Mukhtar Ahmed, the pioneer chairman laid a solid foundation,there is no doubt that his lack of tax background limited his achievement, an advantage Zaid Abubakar, the man El-Rufai has entrusted with the herculean task of taking the service to the next level has. Abubakar comes to the job with several advantages, chief being his background as a core “tax man” and the fact that he is coming from the FIRS, where as a tax auditor he had the duty of ensuring compliance by taxpayers. In tax collection,compliance is critical,it makes a whole of difference.

Thankfully Abubakar, with his superlative performance hasn’t disappointed himself, nor El-Rufai who appointed him. By reorganizing and empowering the enforcement unit,creation of a tax intelligence and High net-worth unit,total automation of motor vehicle administration and improved staff welfare packages, has increased average monthly collection to a record N3billion monthly and in the process surpassed the target of N43billion set for the agency in 2019. It’s important to stress once more, that no new taxes have been introduced,rather the giant strides recorded are due to continued blockage of leakages and active enforcement of Pay As You Earn(PAYEE), which this year alone has led to the collection of over N9.4 billion in backlog from institutions like the Ahmadu Bello University,Zaria and Access Bank. El-Rufai,despite being an alumni of the Ahmadu Bello University,Zaria bluntly refused to intervene on behalf of the institution,thus sending a strong message that KADIRS would not in anyway be constrained by government from performing its legitimate functions.

The good people of kaduna State, and corporate bodies operating in the state are already on notice that Zacchaeus the tax collector has indeed come to judgement and that the era of ” shoddy deals”, that shortchanges the state are past and more critical is the insistence by KADIRS in the correct application of the tax table, the misapplication of which previous administrations had exploited to their personal benefits. Abubakar, by words and actions has shown that he breathes tax compliance, which is a critical element in tax collection. The new tax payer friendly KADIRS website,which will enable taxpayers file tax returns, register for PAYEE, file complaints and the quarterly engagement with tax payers, has proven useful in widening the tax net to over 300,000 tax payers,a figure that is expected to increase with the capture of petty traders under the Presumptive Tax,which explains the confidence of the Service that in the next year the tax payer base will hopefully hit a million. And storing it in the Digital Tax Payers Register for intelligence purposes,means no escape.

The KADIRS team led by Abubakar deserves all the accolades for surpassing the N43 billion target by over N1billion, but most especially for confirming by its performance that government institutions can perform if properly positioned and given the necessary support, like El-Rufai has done. Abubakar, also made an emphatic statement that youths can deliver if given the opportunity. There is absolutely no doubt that El-Rufai deserves huge commendation for his courageous decision to entrust the KADIRS to Abubakar,based on his experience and formidable credentials and for not allowing his age be a hindrance. And thankfully Abubakar,has proven beyond doubt that he has the Midas touch of Ifueko Omoigui and that like her, he would change for better the fortunes of KADIRS and make it a reference point of what a focused team can achieve.

It’s good to know that Abubakar understands, that like a football coach he is only as good as his last result ,so the over N44 billion that he generated in 2019 is taken for granted and he can be rest assured that any future collection below that figure will trigger an inquest. Evidence that the Service is bubbling with confidence is the fact that has increased the target of N45 billion set by the government for the 2020 financial year to N60 billion, a clear indication of a man that knows his onions, that is equally determined and committed to continually improve the fortunes of KADIRS. With hard work the N60 billion is definitely realizable,but if it doesn’t,it will not be for the lack of ambition.