The NCS receives seven per cent of customs levies and duties while FIRS gets four per cent of non-oil taxes. NUPRC also receives four per cent of royalties, signature bonus, fines and other oil and gas revenues.
The three agencies jointly received a total of N924.73 billion as cost of revenue collection between January and November 2024.
Analysis of the monthly Federation Account Allocation Committee (FAAC) disbursements during the period showed that N924.73 billion was disbursed to the agencies in the period. The amount represents 2.51 per cent of the total of N36.952 trillion collected by the agencies as at November 2024.
In 2023, the three agencies collectively generated a total of N22.344 trillion and received N472.13 billion or 2.11 per cent as cost of collection.
The analysis further shows that in 2020, the three agencies jointly received N269.02 billion as cost of collection; the figure increased to N598.99 billion in 2021, dropped to N406.18 in 2022 and went up again in 2023 to N472.13 billion before hitting N924.73 in 11 months of last year, translating to 96 per cent increase.
Although the large amount the agencies received as collection could be attributed to the increased revenue generation, it has raised questions on why the amount kept going up in spite of the use of modern technology.
Over time, the three agencies collectively invested billions of naira to automate their operations making it easier and cheaper for them to collect revenues, but with no visible improvement in cost efficiency.
In 2024, for instance, FIRS budgeted N112.46 billion as capital expenditure, which includes initiatives like tax automation projects that are crucial for tax collection and administration. The service has also been investing in digital transformation to enhance its operational efficiency and revenue collection capabilities.
The NCS also budgeted N706.43 billion as capital expenditure in 2024 with a large chunk of it devoted to technology upgrades.
The question many have asked is with the investments in technology which has simplified revenue collection, why are should the agencies continue to keep a huge chunk of the revenue for themselves as a cost of collection?
Experts are also worried that allowing the agencies to keep getting a large portion of what they collect has distracted them from their core functions as they channel their energies and resources to revenue mobilisation to increase their share.
Even the Presidential Fiscal Policy and Tax Reform Committee had hinted at the idea of reducing the number of agencies collecting revenue for the Federation to one and slashing the cost of collection to one per cent or less.
Another issue of concern is that the cost of collection is affecting the revenue available to states and local government.
A recent report by Agora Policy, a think tank group, raised the alarm that the agencies are collecting more money than most states in the country.
According to the report, the cost of collection last year’s January shows that the FIRS retained N43.35 billion; Customs got N16.27 billion and the NUPRC, N18.68 billion.
Agora said no state government received a gross allocation as much as what FIRS got as cost of collection for the month.
According to the report by Agora Policy, the total cost of collection received by FIRS, NUPRC and NCS in January 2024 was N78.3 billion while the allocations to the geopolitical zones were South-East (N47.75 billion), North-Central N55.58 billion, North-East (N56.6 billion), North-West (N76.09 billion), South-West (N86.6 billion) and South-South (N141.85 billion).
It noted that giving agencies a portion of the revenue that passes through them has created a perverse incentive where they prioritise revenue collection and de-emphasise the other parts of their work even if at a cost to the larger economy.
The NCS regularly measures its performance by the amount of money it generates and rarely talks about its important mandate on trade facilitation.
Experts believe that the quantum of money available to the agencies exposes them to extravagance, opacity and graft.
“That is why these agencies vote huge sums for things like new office buildings, cars, training and travels and staff welfare,” said a former chairman of the FCT chapter of the Chartered Institute of Taxation of Nigeria (CITN), Benjamin Ogbeide.
Ogbeide suggested that rather than giving the agencies money for the cost of collection, the federal government could give them performance bonus to incentivise them when they surpass pre-agreed revenue targets.
It is also believed that if the agencies leverage technologies available to them, governments can reduce the cost of revenue collection, improve the efficiency and effectiveness of tax administration and increase tax compliance and revenue collection.
