2015 Budget: Govt lists new tax regime to raise cash
“We’ve tried to broaden the tax-base,” the minister told reporters shortly after laying the budget before the House of Representatives. She said the Federal Government had also “closed many loopholes and leakages”.
The Minister, who also laid the budget proposal before senators, added that the economy would be driven mainly by the non-oil sector, considering the global oil price slide.
“We’ve speeded up audit, we’ve closed some exemptions all of these will bring additional revenues into the coffers,” she said.
The 2015-2017 Medium Term Expenditure Framework (MTEF) presented to the National Assembly shows that Federal Government’s net revenue projection from non- oil sector is N2.075 trillion after costs and deductions for 2015. Net oil revenue was put at N3.955 trillion after costs, deductions and derivation.
The minister, who led six other ministers to the National Assembly, said in spite of the oil price slide, the Federal Government would ensure regular payment of pensions,
salaries and wages to its workers.
While giving an outlook on the 2015 budget proposal, she said: “I’ve laid the budget on behalf of His Excellency, Mr President. This budget is based on few indicators, the $65
a barrel benchmark and we are going to stick to it for now inspite of the declining prices because we feel the average price next year will be around $65 to $70. The production
level is 2.27 million barrel per day.
“The revised growth rate based on the new parameters for the country, down from 6.35 to 5.5 per cent next year, that is still one of the fastest growth rate we are experiencing in the world today. We have a budget expenditure of about N4.3 trillion, revenue of N3.6 trillion, we’ve tried to make up for the drop from $78 per barrel to $65 by raising non-oil revenues. This budget points to the fact that this country is a non-oil country and I think we want Nigerians to start to think of the country that way.
“So we have worked very hard to move on non-oil revenues, so we’ve closed many loopholes and leakages; we’ve tried to broaden the tax-base, we’ve speeded up audit; we’ve closed some exemptions; all of these will bring additional revenues into the coffers.
“We’ve also worked on the expenditures. On the expenditure side, in the short term, we are going to look at the administrative expenditure; equipment we will not be able to buy next year, travels and trainings will only be inside the country just on exceptional bases if someone is paying for you, you will be able to go out or if it is a critical
government directive to go out.
“It is not going to be easy on the short term to do so much because we want to make sure that people get their salaries and wages and pensions are paid. We don’t want to make any adjustments on the part of our pensioners and workers but in the longer term, we will now be able to look at how to restructure governance.”
Many lawmakers, including Minority Leader Femi Gbajabiamila, said the budget was only laid without details attached. According to Gbajabiamila, “no member of the National Assembly has a copy of the budget at the moment, so no one can say he or she is going to comment on it”.
Deputy Leader Leo Ogor said the most important issue was that the budget had been laid and all other things were in the hands of the National Assembly.
The Finance Minister later broke the budget down at another forum with Finance reporters.
On specific measures to increase non-oil revenues to boost the treasury, she said: “A 10 per cent import surcharge would be imposed on new private jets, which is estimated to yield about N3.7 billion in 2015; 39 per cent import surcharge on luxury yachts, which is estimated to potentially raise N1.6 billion in 2015; and 5 per cent import surcharge on luxury cars which is estimated to yield about N2.6 billion of additional revenues.”
Mrs. Okonjo-Iweala added: “There will be a surcharge on Business and First Class Tickets on Airlines. There will be no surcharge on economy tickets. There is also an
imposition of 3 per cent luxury surcharge on champagnes, wines and spirits to generate about N2.3 billion in 2015; and a 1 per cent FCT Mansion Tax on residential properties with value of N300 million and above which should yield additional N360 million.”
The budget has an aggregate revenue target of N3.602 trillion made up of: oil revenue of N1.918 trillion and non-oil revenues of N1.684 trillion (implying a ratio of 53 per cent oil revenues to 47 per cent non-oil) to fund an Aggregate Budget Expenditure of N4.358 trillion proposed for 2015 Budget, which is about 8 per cent less than the
2014 Appropriation.
This expenditure figure is made up of N412 billion for Statutory Transfers, N943 billion for Debt Service, N2,616 billion for Recurrent (Non-Debt) and N634 billion for
Capital Expenditure (inclusive of SURE-P).
Internally Generated Revenues (IGR), Mrs. Okonjo-Iweala said “actual receipts have continued to grow from about N182 billion in 2011 to N274 billion in 2013 and then,
N328 billion as of October 2014”.
The minister spoke of leakages and non-remittance of funds to the treasury by some agencies.
According to her, President Goodluck Jonathan has “subsequently issued an unequivocal directive to all revenue agencies to ensure remittance of their obligations to treasury and all relevant government bodies are now working with banks to ensure strict compliance, and so we have projected IGR receipts of N450 billion for 2015”.
“In 2015, the federal government will be ramping up the Federal Inland Revenue Service (FIRS)/McKinsey initiative to contribute an extra N160 billion in tax receipts and an
aggregate of about N460 billion over and above the 2014 levels in the 2015-2017 period,” Mrs. Okonjo-Iweala said.
There were no changes to the parameters of the proposed 2015 budget which still remains as oil production at 2.2782 million barrels per day; Benchmark oil price of
$65/barrel; GDP growth rate projected at 5.5 per cent; An exchange rate of N165 to the US dollar; non-oil revenue (including non-Federation account) of N1,684.63 billion; fiscal deficit of N755 billion (or 0.79 percent of GDP); and domestic borrowing of N570 billion, down from N571.9 billion in 2014.
Based on these parameters, the 2015 Budget envisages a net federally collectible revenue of N6.9 trillion. Of this, N3.6 trillion is envisaged to fund the Budget, representing about 3.4 per cent drop from N3.7 trillion for 2014 Budget.
This is with more emphasis on non-oil revenue sources to partly compensate for the shortfall in actual oil revenue.
In taxes, the minister hinted of a possible but gradual increase in Value Added Tax (VAT) but only as a long term measure, but in the medium term, focus will be on tax policy to see where opportunities lie to streamline and rationalize certain taxes and levies whilst looking to boost others.
The government is also contemplating short and medium- term measures in expenditure. In the short-term, government plans to institute measures aimed at improving spending. This exercise, Mrs. Okonjo-Iweala said, will save N82.5 billion. This will include the following:
• Overhead expenditures: We propose cuts to international travels and training by 50 per cent for all MDAs saving about N14 billion while other provisions for overhead expenditure have been dropped completely – saving about N4 billion.
• Administrative Expenditures for buildings, equipment, supplies, etc: MDAs’ provisions for the procurement of administrative supplies and equipment will be cut, saving about N5 billion; procurement and upgrade of buildings were similarly curtailed, saving about N44 billion. Another N76 billion is proposed for reallocation to more impactful programmes of government in the security, health, and education sectors.
Mrs. Okonjo-Iweala said the government had also begun partial implementation of the Whitepaper on the rationalization of agencies, based on the Oronsaye Report and have built in savings of about N6.5 billion in the Budget.
On workers’ agitation for higher salaries next year, Mrs. Okonjo-Iweala said: “Prices are not going up; all that talk was to scare people and make them feel that austerity measures, yeah, the government is trying to do something to you. It is not true! This government everyday tries to protect the average Nigerian. So if inflation is going down,
why would you now add it to a wage increase. It means that you should even have a wage reduction. So please, let us say things on facts not on sentiments.”
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