By; YUSUF ISHAKU GOJE
While we are keeping one eye on the ongoing legislative oversight over loans’ utilization and other financial dealings of the last administration, the other eye is keenly fixated on the implementation of the Kaduna State 2024 approved budget. No doubt, a credible budget is the result of realistic revenue forecasts, which largely determine expenditure performance and public service delivery. Hence, the need to ask, how realistic are some of the revenue targets for this year’s budget? And to what extent are the revenue generating Ministries, Departments and Agencies (MDAs) institutionally empowered and the workforce incentivized to meet these targets?
Both questions have somewhat been answered repeatedly, at least in the last two published Kaduna State Auditor-General’s reports (2021 and 2022). It states, “Revenue forecast of the State appears to be exaggerated or too bogus to achieve. As most MDAs were unable to realize revenue targets.” In addition, the Auditor-General went on to opine, “So, I call on the Commission (Planning and Budget Commission) to put a lot of effort into producing a realizable forecast.” More importantly, he further stated, “I also wish to recommend that revenue collection agencies are fully motivated.”
Similarly, at different forums, civil society groups had also consistently questioned the credibility of the revenue forecasts and performances being reported. Especially, during budget tracking engagements, as evidence gathered show that some of the reported budget releases are usually not cash-backed. This has fed insinuations that figures are being padded to convince creditors of our fiscal sustainability – to allow for more loans draw-down. Pundits in different forums had alleged, even though without providing evidence, that the foreign exchange gains gotten at official rates were taken to the blackmarket to cover up for revenue shortfalls. Some even had questioned the addition of Tax Audit Arrears as tax revenue instead of grants.
Evidently, a look at the previous performances of the revenue generating MDAs says it all. In the 2023 budget performance report, 45 of these MDAs had less than 50% performance. This is no surprise, when the overheads of most of these MDAs, which are meant to enable efficiency and effectiveness in revenue collection, are not timely and adequately released. For instance, according to the 2023 full-year budget performance report, out of the overhead cost of N76.2 million meant for Kaduna Internal Revenue Service (KADIRS) only 24.6 million was released, a 32.3% performance. Commendably, even though the Service went on to generate above its target, with a 108.9% performance, the same cannot be said of the other MDAs.
Therefore, one wonders the justification for approving N120 billion (26.19% of total revenue and 45.83% of recurrent revenue) as the Internally Generated Revenue (IGR) target in the 2024 budget. This is a 110.7% increase compared to the proposed estimate in the indicative three-year fiscal framework (Table 11) of the Medium Term Expenditure Framework (MTEF, 2024-2026), which pegged the IGR for the base year 2024 at N56.8 billion. Come to think of it, it is mind boggling for a State that was unable to achieve 100% of its 2023 IGR target of N89.2 billion, with only N62.4 billion (69.9%) actual performance (Kdsg 2023 Q3 BPR), to now astronomically increase its target to N120 billion.
Kaduna State, over the past eight years, has no doubt carried out tax reforms largely towards meeting the Disbursement Linked Indicators (DLIs) of now ended World Bank’s Kaduna Economic Transformation Program for Results (P4R) and State Fiscal Transparency, Accountability and Sustainability (SFTAS) Program. The government had also propagated data to show the resultant improvement in IGR. However, have the tax reforms yielded enough results to achieve meteoric increase in one year – as being targeted in 2024?
Nonetheless, the bigger question is, has the State government provided the needed institutional and incentive support for the MDAs to meet the over ambitious target? For instance, this writer is aware of the request for vehicles under the Kaduna Economic Transformation Program for Results (P4R). Have all the vehicles been provided? Also, the last time this writer joined civil society partners to engage the KADIRS, under the Tax Justice Network, it was obvious that working tools such as computers were inadequate to meet up with the workload. Also, considering the tempting nature of the Service’s mandate, are the Staff adequately incentivized in terms of trainings, welfare and other bonuses?
More so, does the current administration have the political will to ensure the MDAs have the needed independence to recover tax audit arrears and enforce compliance from defaulters – especially from allies, families and friends with businesses in the State? The last administration had the advantage of a willing former Minister of Finance to ensure remittance of arrears by Federal government institutions in the State. Does the current administration have the same influence to ensure adequate remittance? Also, the State government is currently collecting revenue on behalf of the 23 LGAs – if it is to remit it 100%, will it be in a position to meet its obligation at the State level.
Is the current administration not shooting itself in the foot by raising IGR targets that seems ambitiously unrealistic? It is no longer news that a large chunk of the tax audit arrears have been recovered and most of the government houses have been sold by the last administration. Instructively, IGR should grow commensurate with economic growth. The question is, in one year, has the government been able to boost enough economic activities to enable both new and old as well as micro, small and large businesses to create the kind of employment and wealth that has expanded the tax net and increase the volume of tax to be generated? The performance and contribution trend of Direct Assessment Tax to total tax revenue over the years says it all.
Finally, while it is very unlikely for the 2024 IGR target to be realistically met, one remains optimistic that if the government ensures the needed institutional independence, budgetary cash-backed releases and availability of incentive support there can be marked improvement in IGR performance, close to last year’s target. The performance of the revenue generating MDAs should not be judged by this year’s target but improvements from last year’s actual performance. Going forward, we must strive to deliver realistic budgets to ensure that scarce resources are expended on strategic priorities.
Lets engage, ask the right questions and hold the government accountable.
Goje is an active citizen, civil society member and OGP enthusiast.
