Anambra State and the IGR challenge ~ by Ifeanyi Afuba
This is not a time to envy leadership in Nigeria’s 36 States. After twenty years of fourth republic democracy, the country still operates a military era revenue formula that allocates a hefty fifty two percent of national earnings to the federal government and pittance of twenty six percent to States, the centres of development. Still riding on this skewed framework, a State Governor is expected to tar federal roads in his State, with or without reimbursement by the central authority. State Governments have an unwritten responsibility to fund the operations of federal security agencies and other establishments domiciled in their territories. And now, by some strange twist of fate, clamour for democracy benefits has been rising in the States as the petro – dollars diminishes. Can the States pull through the bind from internally generated revenue? Governor Willie Obiano’s Anambra State presents an interesting study.
In 2013, a year before the advent of the present administration, Anambra’s locally sourced revenue stood at N8.7b. The figures did not change significantly in the intervening years until 2018 when N17b was recorded. 2019 saw the internally generated receipt rise to N26b. According to Dr Dave Nzekwu, Chairman of the State’s Internal Revenue Service, the 2020 earning is projected at N30b, notwithstanding the Covid 19 pandemic.
Realising the 2020 target would be a notable improvement but nonetheless underperformance in the context of Anambra State’s potentials. In 2019, the commercial power of the southeast came second behind Enugu State in highest revenue earning.
Nzekwu, Anambra’s revenue czar, identifies income and property taxes as the two major sources of State earning, explaining that while Enugu State presently has an edge from its age – long status as capital of the Eastern region, Anambra State was on the way to take the lead through competitiveness.
The National Bureau of Statistics estimates that of Anambra’s 4.5m population, 1.2m are into one form of trading or the other. However, data from the State Revenue Service shows that outside those on PAYE, only 2,148 paid income tax in 2018. Using the NBS figures, it’s contended that Anambra State could generate N120b annually in income tax returns alone.
Dr Dave Nzekwu traces the staggering gap between the State’s IGR potential and performance to two factors.
“For a very long time, the data of people doing business in the State was not kept. Along the line it became difficult to access the many markets in the State and to even know the number of shops in the markets”.
The second issue, arising from the lack of statistics was abuse of the collecting process. Whether the job was in the hands of market associations or consultants, remittance to Government was low; as low as N240m annual average.
The situation seems set to change. Following a reorganisation of the revenue generation machinery, the right strategies have been set running.
There is now a register of business premises and their owners. As at September 2020, 40, 000 business entries had been made in the register. This was partly achieved through community revenue officers deployed across the State for enumeration of businesses.
Earlier in 2018, the Anambra State Social Identification Number became operational. The scheme which enrols individuals in the State database is a requirement for various transactions with the State Government. This has made analysis of citizen records easier for the Revenue Service.
Gradually, more tax bills are being issued. Nzekwu gives a size of the picture this year. “We’ve generated N15b bill for income tax and N6b for sanitation levy. Before now, we were getting N94m on sanitation.”
Progress has also been recorded on bank withholding tax. By insisting on the right of the State to receive the direct tax of their employees working in the State as against the practice of remitting to the State of headquarters domicile, Anambra now gets about N150m from this source in a year.
But the Government has met a brick wall on house rent withheld tax. Most citizens are not even aware that ten percent of their house rent should be deducted and paid to Government. Those who know either laugh it off or consider it a crazy legislation. At any event, zero compliance is the case on this all over the country.
Another area of improvement is with regard to stamp duty. Anambra is reckoned as the first State to exploit the opportunity created by Section 115 of the Stamp Duty Act. “That gives us N2m monthly,” the State revenue boss discloses.
There is no debating that Anambra State needs all the additional revenue it can muster. Governor Willie Obiano with a reputation for landmark projects, presently has his hands full with ongoing capital intensive works. They include a number of housing estates, Awka international conference centre, the Aguleri Otu longest bridge in the southeast, Umueri International cargo airport, Awka modern stadium among others.
Yet, it is a testament to the humanity of his government that in spite of the acute need for funds, Governor Obiano recently approved refund of ten percent of taxes paid by traders in 2019 as Covid 19 palliative. He also waived the N5b of interest and penalties arising from N40b audited tax debt owed the Government to the defaulters. It is hoped that the respite would enable the affected strengthen their businesses.