Internally Generated Revenue (IGR) & Digitization

With very high deficits in budgets, most states will be unable to finance capital projects due to the current economic condition.Indeed, 2015 has been a most difficult year for state governments.This underscores the need for prudent financial counsel in the areas of cutting expenditure and increasing revenue.

Historically, state governments depended on the federal government allocation to pay salaries and finance about 80 percent of capital projects.However, with the recent decline in oil revenues, most states may have to increase their internally generated revenue or face bankruptcy.

Revenue generation and collection is a very crucial function of government. IGR (Internally Generated Revenue) is important For State Governments to be able to provide basic amenities for its citizens without being overly dependent on aid and loans.With dwindling federal allocation,the obvious solution may be to increase taxes.However, prevailing economic conditions suggest this will not feasible.A better option is to improve the efficiency and effectives of the tax collection process.

Taxation is the principal means by which governments generate income to meet their responsibility of providing basic public services to all its citizen.Paying tax is a patriotic responsibility of the citizen.It is an affirmation of the belief in sovereignty of the state.

The tax administration systems in most Nigerian states is archaic and very inefficient.As a result,significant amounts of tax revenue is lost, right from generation.The lack of transparency and accountability around collection of tax revenue in Nigeria is a major cause of concern. It is important for the government to put in place a robust and efficient system of evaluation and collection of taxes to prevent revenue leakages.Increased tax revenue will provide more funds for provision of public services.It is the responsibility of government to ensure that there is proper resource allocation and utilization in spending.

Revenue collection administration involves a number of processes that include assessment of taxes and fees, collection and deposit of revenues,auditing of taxpayers,taking up litigation arising from non payment, accounting and information management.

Revenue collection is an important function of government at any level.The advantages of an efficient revenue collection system include:

  • An increased capital base
  • Accurate financial forecasting
  • Higher interest earnings on investments
  • Ability to complete capital projects as planned
  • Improved liquidity and credit worthiness
  • widens the number of taxable individuals and organizations.

A poor revenue collection model is distraught with a number of problems that include;

  • Slow processing of financial receipts
  • Inability to pursue collections
  • Weak enforcement of tax laws
  • Inaccurate Assessment
  • Poor records management

In the past,governments have resorted to using a local law firm to manage the collection of revenue.This method of collection of revenue lacks the necessary structure to efficiently collect, document and process receipts in real time.Ideally,law firms should only be involved in the litigation aspect of revenue collection.

The best solution to solving the problem of revenue collection is Tax Digitization.It is the use of modern technology in the process of Tax collection.Tax digitization provides advanced analytic tools that can be used for forecasting and planning.It simplifies and automates tax collection in an efficient manner, encouraging voluntary participation. It also allows the government to know how much revenue it has, as well as how much is owed in real time.Tax payer Information is stored in a database and can be retrieved easily.With advance analytics, tax payers can be segmented based on attributes such as age, sector, and past behavior can help tax authorities quickly perform a risk analysis.

Tax digitization simplifies tax collection by introducing electronic channels such as Internet portals, mobile payment options,POS and ATMs.It optimizes the collection process and encourages voluntary compliance.Indeed the use of digitization in tax and revenue collection is a must for any serious minded government.

Tax digitization can also be used to check tax evasion and enforce strict compliance.Strict compliance can be achieved by requiring tax check before granting services such as import license or contract bids.This process saves the government the time and resources that come with litigation.

Tax digitization is very efficient and allows governments to plan for the future based on accurate data collection.It is therefore important for every government to embrace technology in collection of revenue in order to meet their obligations to provide essential public services.