The Presidential Fiscal Policy and Tax Reform Committee has proposed to transform the Federation Account Allocation Committee (FAAC) disbursement process.
The committee plans to shift from monthly to daily disbursements to the three tiers of government.
Chairman of the Presidential Fiscal Policy and Tax Reform Committee, Taiwo Oyedele, stated this in Abuja on Monday at a public consultation workshop for journalists and public analysts
Traditionally, FAAC meets monthly to allocate funds to Federal, State and local governments.But Oyedele explained this method is outdated, similar to practices in 1814.
“We believe the system can be configured to credit the accounts of local, state, and federal governments daily,” Oyedele stated, adding that this change has received support from key stakeholders, including the Accountant General of the Federation.”
The proposed daily disbursement system aims to make the monthly FAAC meetings more focused on national fiscal strategies rather than routine reconciliations, which can be handled by junior accountants.
This change is expected to streamline processes and reduce the impact of sudden changes in foreign exchange rates.
Oyedele highlighted the need to reduce the cost of revenue collection to 1 percent aligning with international best practices.
“Nigeria’s collection costs range from 4 percent to over 30 percent. “If an agency cannot collect revenue at 1 percent, it should not be collecting it at all,” Oyedele emphasised.
This reform aims to ensure government agencies focus on their primary functions rather than duplicating tax collection efforts.
According to Oyedele: “We are serious with the 1 percent and it should cut across everybody, if you cannot collect revenue with 1 percent then you should not be collecting it at all that’s why we were saying let government agencies focus on the primary reason they were set up for”.
“If they are not set up to collect tax they can’t be efficient and competent in doing it, things will work better if everybody plays to their strength there’s a reason why every country has their revenue collection agency and not to replicate that function and be expecting that everything will be fine. A countries like South Africa is under 1 percent.”
Addressing the issue of Value Added Tax (VAT) collection, Oyedele and the disputes between federal and state governments in the past, the committee is recommending placing VAT under the exclusive list for centralised collection with 90 percent of the revenue allocated to the States.
This proposal is seen as a political solution to a problem that has led to legal battles.
The committee also is also proposing a phased reduction of the Corporate Income Tax (CIT) rate from 30 percent to 25 percent by 2026.