Taxation as a tool for Stimulating Revenue Generation in public sector organisations

1. TAXATION AS A TOOL FOR STIMULATING REVENUE
GENERATION IN PUBLIC SECTOR ORGANISATIONS
Godwin Emmanuel, Oyedokun
HND (Acct.), BSc. (Acct. Ed), BSc (Acc & Fin), MBA (Acct. & Fin.), MSc. (Acct.), MSc. (Bus & Econs.),
MTP (SA), PhD (Fin), ACA, FCTI, ACIB, MNIM, CNA, FCFIP, FCE, FERP, CICA, CFA, CFE, CIPFA, CPFA,
ABR, CertIFR, FFAR
godwinoye@yahoo.com
+2348033737184, +2348055863944 & 08095491026
CITN Council Member/Chairman Education Committee
&
Chief Technical Consultant/President
OGE Professional Services Group
Being a lecture delivered at the ANAN KEFFI BRANCH 2ND LECTURE SERIES
held at Federal Medical Center, Keffi On Wednesday,30th October 2019

2. CONTENTS
 This presentation will cover the followings among other related concepts in
taxation
1. General Introduction
2. Effectiveness and Efficiency in Tax Collection System
3. Options for Enhancing Tax Revenue (i.e. Increase Tax Rates, Widening Tax
Base, Introduction of New Taxes)
4. The Efficacy of Tax Incentives as a Tool for Economic Development.
5. Impact of Tax Incentives on Revenue Generation/Productivity
6. Prospects of Strengthening Collaboration Between FIRS, States’ Internal
Revenue Services and other Stakeholders
7. Effects of Improving Transparency in Tax Administration
8. Benefits of Strengthening Compliance

3. OBJECTIVES
 At the end of this presentation, Participants should be able to:
1. Examine the Impact of Fiscal Policy on the Economy
2. Assess the Role of Taxation as an Alternative to Oil Revenue in
Nigeria
3. Examine the Effectiveness of the Institutional Framework for the
Collection and Enforcement of Taxes

4. INTRODUCTION
 Over dependence on oil revenue has affected some developing
Countries in terms of revenue generation in which Nigeria is not left
out. Cobb (2016) opined that as oil hovers around $50 per barrel,
investors continue to inject additional funds into shale drilling,
predominantly the Permian Basin in Texas.
 There may indeed be wells there that will be profitable at this level,
but not an unlimited number.
 Other shale areas such as North Dakota have seen drilling activity
slow to crawl.
 According to Smith (2016) in the U.S., crude production retreated by
220,000 barrels a day to 8.9 million a day in April, the most recent
month for which comprehensive data is available, the biggest drop
since 2008 as the two-year price slump depressed investment and
drilling activity, the IEA said.
 Output from all countries outside OPEC will tumble by 900,000
barrels a day this year, the biggest drop since 1992, before
recovering by 200,000 barrels a day in 2017, the agency predicted
(Smith, 2016).

5. INTRODUCTION
 Nigeria’s crude oil – Bonny Light, which traded at $110.2 per
barrel in January, 2015, hitting $114.6 per barrel by June same
year (2015), this was also traded below $35 per barrel as at May
2016.
 Similarly, as at December 16, 2016, the price increased to $54.71
per barrel. However as at March 8, 2017, the crude oil further
dropped to $53.14.
 Crude oil prices are anticipated to moderate in coming years.
Also, the threat by the US to reduce oil imports constitutes a
downside risk on crude receipts of members Organisation of
Petroleum Exporting Countries (OPEC).
 Sales of Crude Oil is a major sources of government revenue in
Nigeria, and because of the huge amount that do accrued to the
government over time, it has relaxed in exploring other veritable
sources of revenue which include taxation.


6. REMINDERS- TAX & TAXATION
 Tax is:
 any compulsory payment to government imposed by
law without direct benefit or return of value or a service
whether it is called a tax or not (NTP, 2017)
 a burden which every citizen must bear to sustain his
or her government for the benefits of those it governs
(Afuberoh & Okoye, 2014)
 sources of income for government, such income is
used to finance or run public utilities and perform other
social responsibilities (Farayola, 1987)

7. REMINDERS- PUBLIC SECTOR
 Public Sector is:
 any sector of economy other than Private and NGO
 Managed and operated by Government
 For all of us
 Not mainly for profit
 Etc
 Add yours!

8. REMINDERS- TAX & TAXATION
 Tax is:
 any compulsory payment to government imposed by
law levy imposed by the government against the
income, profit or wealth of the individuals and
corporate organizations (Ochiogu, 1994)

 most important source of revenue for modern
governments, typically accounting for ninety percent or
more of their income (Adams, 2001)
 compulsory levy by the government through its
agencies on the income, consumption and capital of its
subjects (Aguolu, 2004).

9. REMINDERS- TAX & TAXATION
However, according to Ojo (2008),
taxation is a concept and the science of
imposing tax on citizens.

10. REMINDERS- PRINCIPLES OF TAXATION
Equity/Equality of Sacrifices
Certainty
Convenience
Economy

11. REMINDERS- OBJECTIVES OF TAXATION
 Rising of Revenue
 Wealth Redistribution
 Economic Price Stability
 Economic Growth and Development
 Provision of Merit Goods
 Provision of Public Goods
 Harmonization of Economic Objective

12. 1
2
EFFECTIVENESS AND EFFICIENCY IN TAX COLLECTION SYSTEM
 We cannot say all is well with our tax collection system in Nigeria. Tax
collection system is a sub-system in Nigeria system!!!!
 Some of the major challenges facing Tax System, in Nigeria are
highlighted below:
1. Non availability of Tax Statistics
2. Inability to Prioritize Tax Effort
3. Poor Tax Administration
4. Multiplicity of Tax
5. Regulatory Challenges
6. Structural Problems in the Economy
7. Underground Economy (green economy)
8. Corruption
9. Complexity of tax laws
 Not until all above are looked into and resolved, we may not wish to
rate our tax collection system high in Nigeria

13. 1
3
OPTIONS FOR ENHANCING TAX REVENUE
 Increase Tax Rates (Please be mindful of
recession)
 Widening Tax Base
 Introduction of New Taxes
 Grant Tax Incentives
 Conduct Tax Audit & Investigation
 Improve Tax Administration
 Promote Tax Justices
 Explore cooperative compliance

14. 1
4
EFFICACY OF TAX INCENTIVES AS A TOOL FOR ECONOMIC
DEVELOPMENT
We will discuss few of the incentives and their efficacies:
 Tax Holidays: Temporary exemption from taxes, particularly corporate
income tax, to specific companies or investments
 Reduced Rate on Corporate Income Tax: Reduction of corporate
income tax for specific sectors, activities, or companies
 Investment Allowance: Deduction of the taxable base of corporate
income tax of a fraction of the investment.
 The value of the benefit is, therefore, the product of the deduction by
the tax rate. The excess of the deduction on the tax to be paid can be
lost, used in the following tax periods (carry forward), or be
reimbursed, depending on the legislation.

15. 1
5
EFFICACY OF TAX INCENTIVES AS A TOOL FOR ECONOMIC
DEVELOPMENT
 Investment Tax Credit: Deduction of a fraction of the investment of
the tax debt of corporate income tax. The excess of the deduction on
the tax to be paid can be lost, used in the following tax periods (carry
forward) or be reimbursed, depending on the legislation.
Nevertheless, unlike the investment allowance, the investment tax
credit does not place a limit below the rate received by the investor.
 Accelerated Depreciation: The incentive consists of giving a
chronogram of faster depreciation for certain investments or sectors.
Put in another way, the rate of tax depreciation is higher than that of
economic depreciation, estimating which is no easy task. The nature
of the incentive is simply financial because in nominal terms the
income tax payable is the same but its net present value is lower

16. 1
6
IMPACT OF TAX INCENTIVES ON REVENUE
GENERATION/PRODUCTIVITY
 Measuring a tax benefit’s efficiency involves comparing its benefits with its costs.
 Once the benefits are established, the costs (direct and indirect) usually associated with tax
incentives are analyzed.
 Loss of revenue
 Estimating the loss of revenue associated with tax incentives is important. First, there is a
direct impact that should be measured as the difference between what the benefiting
companies would pay in the tax system and what they actually do pay as a result of the given
tax benefits.
 This estimate is correct if the investment would have been made even without the fiscal
incentives—in other words, if the benefit is irrelevant.
 Nevertheless, all or part of the investment could not have been made if there were no
incentives.
 If this were the case and the estimate of tax expenditure is done without considering how
companies react to the incentive, the tax expenditure will be overestimated.
 The lesser the irrelevance of the incentive, the greater the overestimation of the related tax
expenditure. But on the other hand, the tax expenditure will be underestimated if the indirect
effects on the revenue are not taken into account

17. 1
7
IMPACT OF TAX INCENTIVES ON REVENUE
GENERATION/PRODUCTIVITY
 Measuring a tax benefit’s efficiency involves comparing its benefits with its costs.
 Once the benefits are established, the costs (direct and indirect) usually associated with tax
incentives are analyzed.
 Loss of revenue
 Estimating the loss of revenue associated with tax incentives is important. First, there is a
direct impact that should be measured as the difference between what the benefiting
companies would pay in the tax system and what they actually do pay as a result of the given
tax benefits.
 This estimate is correct if the investment would have been made even without the fiscal
incentives—in other words, if the benefit is irrelevant.
 Nevertheless, all or part of the investment could not have been made if there were no
incentives.
 If this were the case and the estimate of tax expenditure is done without considering how
companies react to the incentive, the tax expenditure will be overestimated.
 The lesser the irrelevance of the incentive, the greater the overestimation of the related tax
expenditure. But on the other hand, the tax expenditure will be underestimated if the indirect
effects on the revenue are not taken into account

18. 1
8
IMPACT OF TAX INCENTIVES ON REVENUE
GENERATION/PRODUCTIVITY -CONT
 According to Bolnick (2004) and Medalla (2006) the following indirect effects can
be quoted:
 a) The proposed investment can have positive externalities, which will create new
jobs and new companies whose income will be taxed. This is the only positive
indirect effect.
 b) The proposed investment can lower the market share of companies already
established (crowding out) and, as a result, reduce the revenue coming from
these firms. Take note that the only way these indirect effects (i and ii) can be
accurately estimated is with general equilibrium models.
 c) Tax incentives can lead to opportunities for evasion, avoidance, rent seeking,
and even corruption in the tax authority.
 d) The administration of tax benefits can take up the time of much of the qualified
staff, which means that the tax authority, with limited resources in developing
countries, will be neglecting their control over the general tax system.

19. 1
9
IMPACT OF TAX INCENTIVES ON REVENUE
GENERATION/PRODUCTIVITY -CONT
 Administration costs –
 The more staff that are qualified and who have to be involved in
the planning and control of tax benefits, the less resources there
will be in the tax authorities of developing countries to manage
the general tax system, which will weaken tax collection (Zee et
al., 2002).
 One solution could be not to inspect the benefiting firms on the
basis that they are exempt anyway, so no revenue is expected
from them.
 However, this does not seem a valid solution considering, tax
benefits open up opportunities for evasion and avoidance, which
if not controlled adequately, could lead to further losses in
revenue, in addition to those of the tax cost.

20. 2
0
IMPACT OF TAX INCENTIVES ON REVENUE
GENERATION/PRODUCTIVITY -CONT
 Distortions in the allocation of resources
 Tax incentives have a deliberate objective to introduce a distortion in the
allocation of resources—that is how they work—, but this distortion will
be defended arguing that it is more than compensated by the positive
externalities (infant industry), if it attracts investments which would
otherwise not be made (tax competition) or if it is the way to compensate
investors for the adverse business climate of the country.

21. 2
1
IMPACT OF TAX INCENTIVES - GUIDELINES
 Tax incentives should play an active role in attracting
foreign direct investment, compensating for the extra
costs of doing business in the country, it is thought that
said incentives should be granted while respecting the
following guidelines:
 a) The incentives should be temporary and
decreasing.
 b) The “generosity” of the given incentives, should be
reasonable
 c) The incentives can be given on direct tax (income)
but not include indirect (duties, transfer taxes and
excises, except when refunded to the exporters).

22. 2
2
IMPACT OF TAX INCENTIVES - GUIDELINES
 d) It is essential to have a methodology for estimating
the tax expenditure which shows the incentives
granted and, to contribute transparency to it, include
such an estimate in the annual budget.
 e) It is advisable to undertake a study of the
socioeconomic impact of the activities which have
benefited (macro-control) and also implement a
microeconomic control; that is, the benefiting
companies should send in all their information to the
tax administrations, as if they were being taxed

23. 2
3
PROSPECTS OF STRENGTHENING COLLABORATION
BETWEEN FIRS, SIRS AND OTHER STAKEHOLDERS
Strengthening collaboration between FIRS, IRS and
other stakeholders will:
 promote tax education/awareness in Nigeria
 reduce tax administration cost
 help in achieving cooperative compliance
 voluntary compliance
 bring about tax justices
 reduce corruption in tax administration
 reduce/eliminate multiple taxation
 project the agenda of government in power
 Stimulate government tax revenue

24. STRATEGIES FOR IMPROVING TAX DEBT
RECOVERY
 In order to ensure maximum tax debt recovery regime,
tax authorities should:
1. deploy competent staff
2. use tax audit and investigation wisely
3. respect the right of tax payers
4. reduce bottleneck in tax administration
5. be sincere with tax waiver initiatives
6. engage with concerned tax payers
 use provisions of the relevant tax laws and take action

25. SUMMARY AND CONCLUSION
 From this presentation, it is very clear that tax is a
must, and is any compulsory payment to government
imposed by law without direct benefit or return of value
or a service whether it is called a tax or not.
 We can only stimulate tax revenue generation by doing
it right, removing impediments and broaden the tax net
rather than increasing the tax rate or adding new tax
type
 Tax administration must be in line with best practice
and government must embrace tax justice.
 No doubt, oil revenue is now failing us.

26. SUMMARY AND CONCLUSION
 In this presentation, we also agreed that in order to ensure
maximum tax debt recovery regime, tax authorities should: deploy
competent staff, use tax audit and investigation wisely, respect the
right of tax payers, reduce bottleneck in tax administration, be
sincere with tax waiver initiatives, engage with concerned tax
payers, use provisions of the relevant tax laws and take action
and techniques of forensic accounting.

27. THANK YOU FOR LISTENING
GODWIN EMMANUEL, OYEDOKUN
HND (ACCT.), BSC. (ACCT. ED), BSC (ACCT. & FIN.), MBA (ACCT. & FIN.), MSC. (ACCT.),
MSC. (BUS & ECONS), MSC (TAX), MTP (SA), PHD (ACCT), PHD (FIN), PHD (FA), ACA,
FCTI, ACIB, MNIM, CNA, FCFIP, FCE, FERP, CICA, CFA, CFE, CIPFA, CPFA, ACAMS,
ABR, CERTIFR, IPA, IFA, FFAR
GODWINOYE@YAHOO.COM
+2348033737184, +2348055863944 & +2348095419026

28. THE PRESENTER
 Godwin is a young but experienced multidisciplinary scholar-practitioner of good repute with over
25 years’ experience and over 27 Professional qualifications, from both Nigeria and international
professional bodies.
 He is the co-founder and the Chief Technical Consultant at OGE Professional Services Ltd and
President at OGE Business School.
 Godwin is a Professor of Forensic Accounting & Finance at Charisma University, Turks & Caicos
Island, West Indies, UK.
 He is a Professor of Forensic Accounting & Audit at Saint Monica University, Buea Cameroon.
 An Adjunct Professor at the Department of Accounting, Igbinedion University, Okada, Nigeria, a
Professor in the Department of Management & Accounting of Lead City University Ibadan
Nigeria,
 A Senior Lecturer in the Department of Accounting at Nasarawa State University Keffi, and he
was a one-time adjunct lecturer at Babcock University, a part-time Lecturer at South-Western
University and McPherson University, all in Nigeria to mention few. Godwin is currently a Faculty
member for the supervision of Postgraduate Students at the University of South Africa (UNISA).
 He worked with Ibraheem Jimoh & Co Chartered Accountants as a Partner, Audit and Forensic
Services, and as the Director- Tax, Forensic & Regulatory Services at Saffron Professional
Services.
 He was the Head of Education, Research & Technical and the Head – Finance & ICT Departments
of the Chartered Institute of Taxation of Nigeria (CITN). He was the Senior Analyst- Enterprise
Risk Management & Control at XL Management Services Ltd and the Accounts Manager (Head)
at Bond Group of Companies