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Economy Government

The Impact of Tax on Enugu State Internally Generated Revenue

According to Oxford Advanced Learners Dictionary, a compulsory contribution to state revenue is levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions.

Taxes generally contribute to the gross domestic product (GDP) of a country. Because of this contribution, taxes help spur economic growth which in turn has a ripple effect on the country’s economy; raising the standard of living, increasing job creation, etc.

The Government of Enugu State also uses taxes as a deterrent for undesirable activities such as the consumption of liquor, tobacco smoking, etc. To achieve this, governments impose high excise levies on these products and as a result, raise the cost of these products to discourage people from buying or selling them. 

In many countries, the three most important areas in tax collection play a major role includes:

Health

Without taxes, the enugu state government’s contributions to the health sector would be impossible. Taxes go to funding health services such as social healthcare, medical research, social security, and ensuring the upgrade of various health facilities across the country.

• Education

Education could be one of the most deserving recipients of tax money. The Enugu State government put a lot of importance on the development of human capital and education is central to this development. Money from taxes is channeled to funding, furnishing, and maintaining the public education system. Since money from these schools is barely substantial, some of these taxes are needed for the everyday running of the institutions.

• Governance

Governance is a crucial component in the smooth running of any affair. Poor governance would have far-reaching ramifications on the entire country with a heavy toll on its economic growth. Good governance, especially in the Coal City State, ensures that the money collected is utilized in a manner that benefits the citizens of the country. The gburugburu-led administration ensures that this money also goes to pay public servants, police officers, members of parliaments, the postal system, and others. Indeed, with a proper and functioning form of government, there will be no effective protection of public interest.

Efforts to improve revenue generation  

According to the chairman, of the Enugu State Board of internal revenue, revenue generated by taxes is limited by laws that define tax jurisdiction for each of the three tiers of government. The federal government spelled out the classes of taxes to be collected by each tier of government that is, federal, state, and local government. The state board of internal revenue is left with the option of perfecting the performance of the existing sources. However, the following measures are being embarked upon by both the state board of internal revenue and the state government. 

  1. Information processing centers have also been opened to process and issue new national driving license.
  2. The state government has opened up new motor licensing offices in each of the 17 (seventeen) local government areas of the state.
  3. The radio jingles of Enugu state radio broadcasting services each time they are about reading the news calling on people to be patriotic, pay their taxes, and join hands in building the state.

4. Tax offices have been opened up in each of the 17 local government areas of the state as well as sub-tax offices. This brings the tax officials close to the taxpayers for an increased revenues generation.

5. Government participation as the major collector of his revenue rather than using contractors has helped in attracting revenue to the government through which tax could be raised by stamp duty and withholding tax.

6. The status of Enugu as a state capital has always attracted a lot of businesses and the environmental friendliness of the state has also attracted multinational companies like Nigeria Breweries which built an ultra-modern brewery of close to 44 billion naira.

7up has also completed its plant and went into production in August 2003. The Guinness Brewery has fenced the large expense of land, an indication that they are getting ready to stake off if not completed by now.

Also in the polo park between IMT and popularly known Celebrity restaurant is a multi million Word Trade Center (Shoprite, and other bigger establishments in it).

  • Pool Betting and Gaining Casino are also contributing to the revenue generation of the state.
  • The popular okada (cyclist) has been scrapped following the introduction of the cool city taxi scheme and Keke Napep to minimize the rate of crimes committed through the use of okada and to generate greater revenue in the state.

9. The government of recent has been encouraging revenue generation by releasing the needed fund for the procurement of the working material.

And with time, revenue yield will increase as we put finishing touches on the system, the chairman of the Board of Internal Revenue Mr. F.O.C. Chime retorted.

 Reports of revenue yield

The Enugu State Government has recorded N7.1 billion as Internally Generated Revenue (IGR) in the first quarter of 2021, a report by the State Ministry of Budget and Planning has stated.

According to the Budget Performance Report obtained on Monday by the News Agency of Nigeria (NAN) in Enugu, the figure represents 24.4 percent of the N29.2 billion targeted for the year.

The report stated that revenues from Federal Account and Value Added Tax (VAT) amounted to N13 billion, representing 19.7 percent against the N65.7 billion projection for the 2021 fiscal year.

The revenues show inflows of N20.1 billion within the first quarter of 2021 as the figure represents a 13 percent performance of the 2021 budgeted inflows of N154.8 billion.

It also stated that the aggregate recurrent expenditure within the same time stood at N11.6 billion, representing 16.9 percent performance against the projected recurrent expenditure of N68.7 billion.

“The sum of N9.1 billion was the actual expenditure for personnel. This signifies 23. 9 percent performance when compared to an approved budget of N38.1 billion. “The sum of N1.9 billion was actual overhead spent in the Q1 2021 representing 7.7 percent performance against a budgeted overhead of N25 billion,” it stated.

The report stated that the state government spent N547.8 million in debt servicing and similar transactions.

“This translates to 9.8 percent performance when compared to the budgetary projection of N5.6 billion for the fiscal year,” it stated.

It stated that N3.3 billion, representing 3.3 percent capital expenditure performance was utilized in the first quarter.

According to the News Agency of Nigeria (NAN), in addition to all of these, the first quarter of 2021 had witnessed constant payment of staff salaries and allowances as well as regular payment of the overhead cost to Ministries, Departments, and Agencies.

“The period equally witnessed capital investments which are rationalized within the scope of fund availability.

“The government hopes that there will be a remarkable departure from the first quarter performances in the coming quarters of 2021,” the board stated.

Also, The Enugu State Government recorded N7.1 billion as Internally Generated Revenue (IGR) in the first quarter of 2021, a report by the State Ministry of Budget and Planning has stated.

According to the Budget Performance Report obtained on Monday by the News Agency of Nigeria (NAN) in Enugu, the figure represents 24.4 percent of the N29.2 billion targeted for the year.

The report stated that revenues from Federal Account and Value Added Tax (VAT) amounted to N13 billion, representing 19.7 percent against the N65.7 billion projection for the 2021 fiscal year.

The revenues show inflows of N20.1 billion within the first quarter of 2021 as the figure represents a 13 percent performance of the 2021 budgeted inflows of N154.8 billion.

It also stated that the aggregate recurrent expenditure within the same time stood at N11.6 billion, representing 16.9 percent performance against the projected recurrent expenditure of N68.7 billion.

“The sum of N9.1 billion was the actual expenditure for personnel. This signifies 23. 9 percent performance when compared to an approved budget of N38.1 billion. “The sum of N1.9 billion was actual overhead spent in the Q1 2021 representing 7.7 percent performance against a budgeted overhead of N25 billion,” it stated.

The report stated that the state government spent N547.8 million in debt servicing and similar transactions.

“This translates to 9.8 percent performance when compared to the budgetary projection of N5.6 billion for the fiscal year,” it stated.

It stated that N3.3 billion, representing 3.3 percent capital expenditure performance was utilized in the first quarter.

Conclusion

Taxes help raise the standard of living in a country. The higher the standard, the more relevant tax returns are. According to the Vanguard, only 40 million out of the 200 million Nigerians living in the state pay taxes. And this is an anomaly. Consistent tax returns will help the Enugu State government runs its affairs which will ultimately cater to the needs of its tax-paying citizenry. This is because the state government would ensure amenities, quality service delivery, and supply of amenities for the members of the state.

Written by Sedo Elijah Ebinne

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