Title: Tax reform in Nigeria: A revolution in government revenue management
Introduction :
In a ground-breaking move, the Nigerian government recently adopted a major tax reform aimed at improving government revenue management and increasing transparency and accountability. In a press release dated December 28, 2023, issued by the Ministry of Finance on January 2, 2024, it is announced that all ministries, departments and agencies (MDAs) will have to pay 100% of their income into a sub-recurring account, a sub-component of the Consolidated Revenue Fund (CRF).
A radical change for better revenue management
The move marks a radical departure from the previous approach and aims to strengthen revenue generation, fiscal discipline, accountability and transparency under President Tinubu’s administration. The statement clarified that fully funded MDAs, in accordance with the Fiscal Responsibility Act of 2007 and its subsequent additions by the Federal Ministry of Finance, will have to remit their entire internal revenue generated into the sub-recurring account.
A clear guideline for better financial integrity
The directive also specifies that agencies and departments partially funded by the federal government will have to contribute 50% of their gross revenues, while statutory revenues such as tender fees, registration of contractors, sale of government assets, etc., must be fully returned to the recurring account. Additionally, non-federally funded agencies are also required to contribute 50% of their revenue generated.
Implementation of the reform
To implement this new policy, the Office of the Accountant General of the Federation will open new Sub-Accounts under the Revenue Management System (TSA) for all Agencies/Parastatals of the Federal Government, with automatic deductions in compliance to the Finance Law of 2020 and the Finance Circular of 2021.
The press release underlines: “The Office of the Accountant General of the Federation (OAGF), depending on the categorization of agencies, will make the direct automatic deduction of 50% of the gross income of agencies/parastatals financed independently or partially, and 100 % for fully funded agencies/parastatals, as a provisional remission of the amount due to the Consolidated Revenue Fund.”
Conclusion :
This tax reform marks a significant turning point in the management of government revenues in Nigeria. By promoting transparency, accountability and fiscal discipline, the government hopes to improve public financial management and contribute to the country’s economic growth.. It remains to be seen how this reform will be implemented and what impact it will have on the Nigerian economy in the months and years to come.