Taiwo Oyedele, head, Tax and Regulatory Services, PricewaterhouseCoopers, PwC, Nigeria, in an interview with Anayo Ezugwu, staff writer, Realnews, x-rays the budget 2018 presented by President Muhammadu Buhari to the National Assembly on Tuesday, saying although good, there is nothing extraordinary in it.
Realnews: What do you make of the N8.612 trillion 2018 budget proposal presented by the president?
Oyedele: I think, generally, it was a good budget but nothing extraordinary in what was presented. It was pretty much more want we expected even though it was N8.612 trillion, which is the highest in our history. But if you look at it, it is 16 percent more than 2017 budget, which is about the rate of inflation. So in real terms it is about the same budget as 2017.
Some of the breakdown like the revenue from the non-oil from the 2017 budget has been disappointing and below expectation but I’m not clear whether indeed government is repeating the same mistake of being too realistic on non-oil revenue. Also in the 2018 proposal they have another estimate. The implication as we are seeing it now is that if you over expect revenue and when there is shortfall you have to increase your borrowing. And the debt servicing is equally going up because the borrowing is going up.
Overall, they have been able to reduce the debt deficit as a percentage of the GDP. The other highlight for me is that compared to 2017 budget, 2018 budget is better off in the sense that the capital expenditure amount of about N2.4 trillion is more than the borrowing. At least, we can say confidently that we are borrowing to do capital development. Unlike the 2017 budget where we borrow to take care of recurrent expenditure, which is not good at all.
Realnews: Looking at the expected revenue of about N6.6 trillion, is it achievable considering the implementation of 2017 budget?
Oyedele: Let me speak on the oil revenue first. The oil revenue proposed for 2018 is 15 percent more than the one proposed for 2017 even though the volume as of today is less than 2.2 million barrels per day and price more than the $45 per barrel the budget proposed. When you combine this fact it means that the oil revenue has met and perhaps even exceeded the target for 2017.
So I will say that with the projections we are getting from the World Bank and OPEC that oil is expected to be at the rate of $60 per barrel next year and the proposed budget is $45 per barrel. I will say that the proposed revenue from oil is not unrealistic. Where there will be a bit of concern is on the non-oil revenue. The non-oil revenue is 40 percent more than the 2017 budget bearing in mind that the 2017 budget is under achieved already. We are not going to meet the projected revenue from non-oil for 2017 and we are still increasing it by 40 percent. This means that if you compare the increase from the 2018 budget proposal to the actual 2017 budget it will be around 50 percent.
I think that is too ambitious because also if you look at the breakdown you will see all manners of analysis from company income tax, VAT and even an estimate of VAIDS. I will say that we need to thread more cautiously in terms of non-oil revenue because it is not something that happens overnight. Even as the economy starts recovering, it takes time for companies to start making profits and the losses they have made during recession they have to recover it. So the money will not start coming in immediately and the same thing for VAT. And the percentage that the federal government will share is very small, it is only 15 percent.
Realnews: The Federal government said the VAIDS has collected data of over five million Nigerians. Has the scheme actually met its target?
Oyedele: Well, I don’t think it has met the target. I’m not sure they have captured one million Nigerians. But the programme is up till next year.
Realnews: But they said some part of it will be over by the end of December 2017?
Oyedele: It is the interest that will be over by the end of December and you will only get waiver of penalty but will pay interest. You will get every other waiver like no persecution among others. I think the entire target for the programme is even less than five million. I think it is around four million additional tax payers are expected to be dragged into the tax net. This five million you are saying I don’t think it is correct.
Realnews: Considering the percentage of people paying tax in the country, what do you think the federal government should do attract more tax payers?
Oyedele: I think the most important thing is to try and do some quick win reforms. They are reforms that are required in the VAT laws. For example, if you look at it at the moment every single person that does any business needs to register for VAT even if you are a small company. In most countries what they do is that you have a threshold and what that does for you is that it allows you to focus on the people that should actually be paying rather than taking everybody that may not be able to pay.
If you look at customs and excise, they have some quick wins that can be made in terms of amending the VAT of some luxury items instead of doing luxury tax. If we do those quick wins and also compliment it with some reforms then I will say that this amount they budgeted for non-oil revenue will be closer to being realistic. But really the growth in tax revenue is something that happens overtime not immediately.
– Nov 10, 2017 @ 13:00 GMT |