Babatunde Fowler, chairman of the Federal Inland Revenue Service, has blamed the drop in the price of crude oil and recession for the shortfall recorded in actual tax collections from 2015 to 2018.
The FIRS chairman gave the explanation in his response to a query issued to him by Abba Kyari,the chief of staff to president Muhammadu Buhari,
The presidency on Monday had said the FIRS boss was not under investigation but added that urgent action needed to be taken to avoid financial crisis.
Kyari had, in a letter dated August 8, 2019, which he personally signed, asked Fowler to explain reasons for ‘significant’ variances in budgeted collections and actual collections of tax in 2015, 2016, 2017 and 2018, when the actual amount collected as tax fell below the budgeted target.
The FIRS chairman was directed to submit a comprehensive variance analysis, which should also state the reasons for poor tax collections between 2015 and 2017, a period when the actual collections turned out to be ‘significantly worse’ than what was recorded from 2012 and 2014.
Fowler was given Monday, August 19, as deadline to respond to the query.
In a letter entitled ‘Re: Budgeted FIRS collections and actual collections’, which was dated Monday August 19, 2019, Fowler explained that the variance in the budgeted and actual revenue performance from 2016 to 2018 was due to fall in price of crude oil and reduction of crude oil production.
The FIRS chairman noted that within the period, the price of crude oil fell from an average of $113.72, $110.98 and $100.40 per barrel in 2012, 2013 and 2014 to $52.65, $43.80 and $54.08 per barrel in 2015, 2016 and 2017.
He also pointed to a reduction in crude oil production from 2.31mbpd, 2.18mbpd and 2.20mbpd in 2012, 2013 and 2014 to 2.12mbpd, 1.81mbpd and 1.88mbpd in 2015, 2016 and 2017.
“The Nigerian economy also went into recession in the second quarter of 2016 which slowed down general economic activities.
He added, “Tax revenue collection (CIT and VAT) being a function of economic activities was negatively affected but actual collection of CIT and VAT was still higher in 2016 to 2018 than in 2012 to 2014.”
According to him, in 2012, 2013 and 2014, GDP grew by 4.3 percent, 5.4 percent and 6.3 percent while in 2015, 2016 and 2017, there was a decline in growth to 2.7 percent, -1.6 percent and 1.9 percent respectively.
Noting that tax revenue grew as the economy recovered in the second quarter of 2017, Fowler said strategies and initiatives adopted in the collection of VAT from 2015 to 2017 led to approximately 40 per cent increase over 2012 to 2014 collections.
“In 2014, the VAT collected was N802bn compared to N1.1tn in 2018,” he said.