Special report; Rivers Revenue Board engagement series

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* Norteh thrills professional groups, makes tax talk ‘edible’

Rivers wants more IGR without bitterness, looks to informal sector for boost

– Hopes to double revenue with foray into uncharted territories

By Codratus Godson

The Rivers State Internal Revenue Sercice has kick-started a series of engagements with various groups aimed at selling its newest tax products, the informal sector tax drive. This is the dreaded but much-expected segment of tax netting which had always been suspended due to rough tax weather. Now, the engagements have started to prepare ground for actual rollout.

Details

The authorities at the Rivers State Internal Revenue Service (RIRS) said on Thursday in Port Harcourt completing the sanitization of the tax space in the state to make tax paying go with ease is the cardinal objective of the agency and the Nyesom Wike-led administration.

Rivers State has moved from N2.5Bn per month in internally generated revenue (IGR) in 2007 to N10Bn at the moment without any contribution from the larger segment of the populace, the informal sector. Many say before now, the bulk of the IGR comes from charted public and organized private sectors. Attempts to launch deep into the uncharted territories known as informal sector had been held back by uncertainty and tension that seem to grip the state from time to time.

Now, the Rivers State Internal Revenue Service, now under the executive chairman, Adoage Norteh, seems set to launch deep. The agency seems not eager to do so without first watering the ground through massive sensitization scheme.

The executive chairman has started bringing together segments and groups of stakeholders at strategic locations such as the Hotel Presidential on Aba Road for education that throws insight in tax administration mechanisms and how taxpayers need to lay in it.

Paying tax with ease

Apparently determined to double the IGR of the state, the RIRS launched a sensitization scheme for the much-expected informal sector tax drive.

The executive chairman who leads his team to various stakeholder groups across the state capital said the most important objective is to ensure that paying tax in Rivers State is done with ease and no much rancour.

On Thursday, Norteh and team met with professional groups in a stakeholders’ summit at the Port Harcourt Hall of the Hotel Presidential on Aba Road in the Garden City where he laid down the full plans for the drive.

Speaking, the executive chairman said the Rivers State government was set to unveil its informal sector tax drive and needed to engage the stakeholders starting with the professional groups down to the trade groups, artisans, associations and union. He said he had met with lawyers.

The Thursday group was made up mostly of chartered accountants who prepare accounts for companies, tax institutes, body of auditors, professional builders, surveyors, estate managers, and other groups. The executive chairman and his group were to proceed to other groups lined up to receive him same day, all in a bid to prepare the informal sector for the drive that is about to come.

Norteh admitted that tax drive in the informal sector is very difficult, adding that it was difficult to point at the dividing line between the professionals and informal sector operators for the main reason that the income of some professionals outside the public sector and organized private sector is not open to the tax masters for calculations and assessment.

Tax payers are no enemies

He tried to sooth the nerves of the stakeholders and taxpayers in Rivers State thus; “Taxpayers are no enemies but partners to the Rivers State Government on revenue generation. They are not seen as people planning to overthrow the government. Rather, tax is an important component of governance.”

He told the stakeholders that the Rivers State government under Gov Wike has determined that the tax space must be sanitized and that there would no longer be harassment on the streets on account of tax.

Challenges

He said apart from difficulty in knowing the income of the informal sector operators for accurate tax assessment, the other challenge is activities of touts who go to any length to cause problems by submitting demand notices and seeking cash payment. He advised the professionals to educate their clients never to pay cash. He said a tout needs cash or may create a bogus bank account where the money should be paid.

To counter them, he said, the taxpayer should insist on paying only into the Rivers State Government tax account available in almost all banks in the state. That way, he stated, the plot by the tout and the syndicates would collapse. “Giving cash to people would encourage touts to come again and again. The payers think the cash system is less and better but they end up paying all over again”.

Norteh said it was not difficult to reach him and clear matters (he gave out his contact details) but said the RIRS has competent managers that efficiently explain the procedures to make someone pay the right tax the right way.

Various sector groups presented their perspectives and raised questions which were treated by the executive chairman. The issue of collections by the Ministry of Commerce led to concerns. Others wanted to know why some officials of the Federal Inland Revenue Service (FIRS) usually insisted on collecting withholding tax from both limited liability companies and enterprises instead of allowing the state tax bodies to collect it from enterprises and individuals.

Pay tout, pay double

Giving cash to people will encourage touts to come again and again. Taxpayers think they stand to pay less by paying cash. That is why for instance most persons prefer to pay cash to the utility agency personnel at their doorsteps than paying into the back. This opens up the customer to fraud and double payment.

People come to the RIRS secretariat and still pay touts to help them procure tax clearance certificates and end up obtaining fake certificates.

Tax harassment versus touting: Government does not use vest-wearing people and ID Card-wielding people to collect taxes. If you think you have been over-assessed, come forward. The tax law encourages objection, but back it up with evidence to the contrary

Those who collect money from you with the promise to help you get to the chairman wont help. Nobody sees me for you. Come to the chairman yourself or address your papers to the chairman. It will get to me and I treat all papers, as they came. You can call me. I do not promise to take all the calls but text me with details but only on tax matters, Surely, I will reply you.

Tax rule:

The more you earn the more you pay. There is nothing like the economy is bad. Yes, it is bad but tax is not on state of health of your business but on income you certainly made.

Informal Tax: The headache of this aspect is huge. The headache also is because different tiers of government collect different taxes. That is where we are heading to in this state. There is inadequate information and ignorance.

Solution:

Ask questions. Do not be jittery. Demand for clarifications from those who served you the tax demand notice and get to the originating office to seek clarifications or seek help from experts.  To argue with a criminal is tough thing to do. Just buy time and make inquiries.

We want to run the informal sector with some ease, to help them make their contributions with ease. It is not about what government does with the tax but about ease of compliance. Those who quarrel with how tax is utilized may have a point but the RIRS is not focusing on that. I am a Nigerian, I know how people feel but the government does many things too. Your particular tax will not do what government is doing by any percentage. Your tax cannot tar the road. Tax is a requirement of the law and you must obey.

Prison loading

Nobody has been imprisoned so far in Rivers State for tax offences but we may get there soon. Tax is requirement from a citizen and the tax master like me is just acting on that responsibility for now. One day I will go and someone else will still have to press you for tax. My work is not a popular one. Nobody loves paying tax. Even relations and friends are not happy with me because of what they may be expecting that is not happening.

Chasing people is not my style, and the present administration says no to it. My charge is not to allow this happen.

I have thus engaged with all professional bodies including lawyers and accountants. There is even the issue of determining how much some professionals such as lawyers and accountants earn for the purpose of taxing them. But, we getting to that point when we can easily tell, as we improve our strategies and systems for compliance.

Lifestyle tax assessment approach is an issue. Some people declare small amounts as annual income but the lifestyles they live do not add up: their children’s school fees, property, cars, etc.

Tax offenders do not even know how to cheat

Tax avoidance is using the provisions of the law to avoid paying tax. Its different from dodging tax. If you must avoid tax, do it within the law, else, it becomes dodging tax. Tax avoidance requires creative accounting. It is highly technical.

Mitigating tax burden is not easy. False claims to gain benefit raise red flags. Your tax records talk to the tax master. For instance, there is a man in Port Harcourt that pays tax in Anambra. It did not take time and the bubble bust because of false claims.

Note that there is nothing like ‘director’s tax’. What we have s what a director earns as salary as indicated in the salary voucher.

Nobody is targeted

Nobody is targeted in tax matters in Rivers State. We do not know faces when handling tax matters.

The objective of this conversation is to create ease of paying taxes in Rivers State. We do not want to strangulate businesses. We want their own good.

Its cashless and Rivers has been mapped out

The RIRS has mapped out the state into zones. The exercise is going to be cashless. Cash demand is the easiest way to know touts. Paying into government account is the best. Even if you paid it wrongly, you have a way of recovering it.

Professional bodies have great role to play in driving the process. There strong controls in the process of transmitting taxes paid, such that even me the chairman cant tamper with it. Any control you created that can be tampered with by you is no control.

What unions want

Union dues are not taxes. There are unions that want to collect the taxes and also decide what to pay. It is not possible this time around.

Reactions:

Medical Investors:

We need to know the government agency that ought to collect rates for sign posts, fire service levies, effluent discharge levies; Are they from your office?

How do you calculate income tax when the director is on PAYEE? Health clinics are humanitarian centres especially now that government says we must save life fist before money. Are there any relief?

You expect increases every filing year, what about losses?

Response:

Tax must not be incremental. I mentioned the increases from what we see in your filings. We are only saying the percentage of increase looks too mechanical. It raises red flags. Companies may not increase salaries in a particular year.

What each tier of government collects is important to know: FIR collects company profit tax; states (RIRS) collect taxes on salaries. Withholding taxes: If you do not collect it from your customers, you are made to pay. Consultancy is charged 10 per cent while products are five per cent. Sign post and markets are collected by local councils but if the state puts its funds there, LGA keep clear. So, RISAA collects and they partner with LGAs. Naming of streets revenue belongs to the local councils but if state governments spend on streets, they collect such revenues.

Directors are already on PAYEE. It is not easy to cheat. The greatest thing that happened to accounting is credit/debit mechanism. When you think you have depressed your income by increasing your expenditure to pay less tax, you find that you open yourself up in another area to want red flags and investigations. You often end up shooting yourself in the foot.

Fire service levy and effluent discharge levies are real but they are collectable by Ministry of Environment. If you are faced with a demand notice, ask questions and when paying, pay into Government bank account only.

Quantity Surveyors

Rivers State does not patronize professionals but you want us to pay taxes?

It seems the state is increasing taxes?

Response:

It is not a matter of policy not to patronize professionals

We are not increasing taxes nor are we introducing more tax heads. The government has not even exploited or harnessed all its tax heads effectively. That is why I have continued to oppose suggestions of increasing VAT. Increasing it will have huge economic implications to the economy.

The issue is not about increasing tax heads but of harnessing the existing ones well first and using the proceeds well.

No matter what the tax master does, there are those who will not pay tax. Even in the advanced societies, we still see many persons and VIPs that escape tax.

Quantity Surveyors

Feedback is important so you can know why people do not want to pay taxes. People feel bad and you need to know. There is no development to encourage tax payers enough Lagos is far ahead and you can see the development
Response

There is some development in Rivers State in recent years that have touched lives. Trans-Amadi was very bad but its now very nice and smooth. Besides, the law says pay tax

Lagos deepened their IGR during the years they were starved of FAAC (to local councils). This seems to have turned to a blessing today.

Lagos also has huge population; they plan with 20m population, 9m that are taxable, 5m that actually pay taxes.

Their informal sector tax drive is also painful and the most problematic. That is a lesson to many other states.

Tax environment between Lagos and Port Harcourt are miles apart. Rivers State is very difficult environment. In Lagos, if they arrest you for traffic offence, you end up in the tax office. It can’t happen in Rivers State.

Institute of Architects

Our members are facing wrong assessment

Response

Provide evidence of wrong assessment and show what should be right. The problem is most people ignore the notice which lasts for 30 days only

Those who say they will talk to me on your behalf are fake. Nobody talks to me. I go from place to place explaining the tax situation.-          

Tax audit group

The Ministry of Commerce is asking people to pay for business premises registration and it is wrong. They claim they are doing it in conjunction with the RIRS.

Also, there are existing flyers on registration of business premises at N2,100, where N100 is development levy. Business people have been paying this and would find it strange if another demand comes.

Response

To say they had been paying N2,100 would be an unfair excuse. How much is N100? Would one say stamps were 2kobo some years ago and it must be same today when some people pay as high as N5,000 to move a letter.

Ministry of Commerce: A ministry collecting revenue should not hide under RIRS to do it.

Business Registration levy is ok, but ask for the account number to pay so you ensure you paid into the Government Account.

FIRS/CITN

We are interested in how the informal sector in the state can be captured into a data base. There is need to collaborate with the Ministry of Transport and FIRS to pursue this project. Try and do adverts on how the persons coming to collect taxes in the informal sector would look to avoid fakes.

Response

Informal tax is difficult to execute bust trust me to drive it. We are also doing heavy advertising in 13 radio stations. They also want commission from it

Unions want to collect and also fix rates. It is no longer possible. We have a statutory mandate to it.

ICAN team

The body of chartered accountants led by the state chairman of Port Harcourt District, Prince Elendu (PhD), and the chairperson of the women wing, Chinedu Nwachukwu (chairperson of SWAN) said the body had many more issues to raise thus requiring a full and separate meeting day with the RIRS team.

We are taxpayers too and consultants. You are working for the government and we work for the individuals. We need time to time. May be you come to our over 1500 practising accountants in the district; or we come to you. There is squabble between the FIRS and RIRS over withholding taxes. Before, it was no issue but now FIRS says they are to collect both from limited liability firms and mere enterprises.

Response

There can be no conflict whatsoever because it is clear in the constitution. FIRS collects from limited liability companies while states collect from enterprises and individuals.

There is nothing to argue there and this kind of case will not show up in the Joint Tax Board where both agencies belong to.

Institute of Surveyors

Withholding tax is a raging issue about who collects what; four of our members accounts have been blocked because of this.

Again, there is deduction by Ministry of Works but they will not issue you with the receipts but would ask you to go ask Ministry of Finance.

Response

Professionals are needed to help drive down the message of informal taxes

What I am doing is not a popular job. It may not be about righteousness but about uprightness

We are also learning, adjusting and improving lapses observed. These meetings would also help in this direction.

We hope to get to a time when people would walk to the tax office and simply pay up.

Conclusion: 

Norteh counseled them thus: “Nowhere in the world do all people pay tax. People do not like tax but it is a requirement of the law. Do not be caught in the web. There is a feeling of injustice in demanding for tax but not everyone can dodge tax and get away with it. We do not want to harass people but we will do that when it becomes absolutely necessary to do so”.

He said cooperating with the tax agency is the smartest thing to do.