Mr. Kingsley Igwe is a registered freight forwarder. He recently spoke with our correspondent on the planned stripping of revenue collecting agencies of that function and transferring it to a new agency to be known as the Nigeria Revenue Service. He x-rays the workability of the said plan, its merit and demerits and suggested way forward on this issue on debate. Excerpt:
What’s your take on the proposed move by the federal government to bar revenue collecting agencies including the Nigeria Customs Service from collecting revenue and set up the Nigeria Revenue Service to deal with all revenue collection in the country?
To air my candid opinion on this subject, the government has a reason for that. For me, yes! It’s a welcome development and here are my reasons. It’s a welcome development because when you continue to do something the same way and expect different result, often times, it fails. Sometimes, it’s better to try new things, explore new ways of doing things and expect a different result. I think that’s the direction that government tries to take at the moment.
With regards to customs, taking away revenue collection function from the Nigeria Customs Service will straighten a lot of things. I will borrow a leaf from how it’s done elsewhere in the world. Customs actually collect revenue, yes! In other places but it is not to say that it is a global practice like there’s rule of thumb. That falls under country specific, so based on that I think it can be shifted because since customs has been collecting revenue, what impact have we seen especially in the logistics industry?
I used to be an ardent critic of the manner in which the customs is being given target annually and based on that target, customs devices some tools for generating revenue rather than collecting revenue. Generating revenue in the sense that they want to meet up with the federal government target set for them which negates global practice and it is against the mandate of customs. Customs is not to generate revenue, customs is to collect revenue.
So, who actually generates the tools for collecting revenue? That’s where you talk about the Federal Ministry of Finance that designs the tools. For example, PAAR was given, in my opinion, is one of the things that I see and come to understand is a tool for revenue generation. Form M also collects data for import and all of that but you also look at the cost implications. It also looks as if it is a tool for generating revenue. Debit Note on defaulting declarant seems to be a tool because the way and manner it is being administered is also questionable and then, so many other penalties that comes abruptly which makes duty payment very high.
Putting all of this together, if the function is taken away from customs, I don’t think all of this will still apply. They will reduce significantly and that will enhance trade facilitation in the sense of reducing logistics costs over all because one thing that trade facilitation tends to achieve is to reduce costs of logistics and makes it even competitive with our neighbouring countries.
So, in that sense, yes, I agree with what government wants to do. But then, I will disagree if only after taking it away from the customs, the same thing continues, then, that means that the objective has failed. Why the government wants to take it away from all these agencies, I believe that the massive corrupt practices, the under table money that forms the huge chunk of revenue leakage would have been cut down. I think that is one of the things that the government wants to achieve. So, by so doing, it could reduce corrupt practices in the system.
Then, by extension, you also come to see that it will then allow these agencies to focus on their core mandates. Still talking about customs, customs function primarily is to enforce compliance especially on import and export goods in the sense that traders, logistics service providers and all the other players in this supply chain would comply to both local and international rules governing cross-border trade. So, now, we have , for example, bilateral trade, multilateral trade agreements and all that. What are the rules governing these trades?
Now, for either bilateral or multilateral, there’s always what they call rule of origin identifying the origin for preferential treatment and those rules, I have not seen it being maximized in Nigeria. Why? Because of this target that government tends to give to customs. So, they tend to play blind eyes in applying those rules because if you apply the rules, some preferential treatments will significantly reduce the amount of money you pay in tariff and things like that especially now that we have the Africa Continental Free Trade Area which government has just keyed into.
You will also find out that by focusing on the core mandates, customs will be more efficient in administering, besides enforcing compliance to trade rules, they also provide security around the border for what enters and what goes out. That’s where you hear of contraband, customs seizing goods and all of that. So, they will focus more on all of these and ensure that what passes through our borders are not goods that are being brought in for dumping purpose or for illegal business. They must follow normal cross-border procedures and ensure that the right duties are paid.
Fair enough, it will improve the economy of the nation technically because the cost of products in the markets now, somehow, also is being determined by the logistics costs significantly. Today, you hear customs increased exchange rate and whatever increment that is made to exchange rate to the dollar affects the cost of goods in the market. By the time customs will now focus more on compliance, and trade facilitation, whatever tools used for generating revenue would have been laid off except if the new agency will come up with something new. That we don’t know because sometimes, they also have revenue underneath, we don’t understand the next card they would want to play. So, we are watching but if it’s purely as standard as it should be, I don’t think freight forwarders and other logistics players in the industry will have problem with all of that.
So, I think reasonably, I see a situation where it will control cost, help the agencies to focus more on their core mandates, reduce the level of corrupt practices that is going on in the system and enhances trade facilitation across board, not only the customs but the rest of them including NAFDAC and SON. The money paid to these people, if and only if one agency can manage it, I think somehow, they will be able to be accountable to the government and the government will not suffer too much of revenue loss as it is at the moment.
If this agency comes to be, how would duty for imported cargoes and excise goods be valued and collected?
Basically, the system remains as it is, nothing changes. The agency, normally, either there’s a consulting firm that will be contracted to be doing the collection using technology applications and all of that or the agency collects directly by itself. So, these are the two possibilities that could happen but either way, the assessment on every consignment will always be raised, you go to the bank and pay and the bank remits to the appropriate agency. This has nothing to do with the customs, it has nothing to do with SON or whatever agency. So, you go the bank and pay or you pay using whatever payment platform that is provided and then, the rest of it is history.
And then, how sure are you that the things that are being complained about under customs regime would not be replicated by the new agency?
Yes, that’s why I actually emphasized that unless the problems we are facing now under these various agencies are repeated when this new agency comes up, then, the objective is defeated. No one can actually say for sure, it’s only when the new agency comes up and begins to operate, when we see the cards they put in the table, their policy direction, we can then be able to analyze the possibilities of what is now being feared to reoccur in its own regime.
However, the new agency should clean up the system rather than causing more harm to the system.
And if you are to advise the government on how to go about this, what would your advice be for us get a better result?
They don’t need new agency to handle this. What is FIRS doing? Simply make a unit under FIRS to solely man whatever collection that should be made by different government agencies that they are targeting, about sixty of them. One unit of FIRS can handle that while the rest can continue their regular tax administration and all other management. This is very simple, it’s not rocket science, FIRS already has a structure, they already has the personnel, you don’t need any new agency because any new agency that will come up now will involve new investment in training, personnel, establishment of the infrastructure and all of that. That’s not what Nigeria needs now. We actually have enough agencies that can be used, what they can now do is, people are unemployed, employ more people under that agency, train them further and those who are already there can provide the intellectual resources required to train them.
Photo: Mr. Kingsley Igwe, registered freight forwarder.
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