Digitalizing rates and tax payment systems has proven to be an efficient method of improving the state’s revenue. This process has proven most efficient in Kaduna state, whose Internally Generated Revenue (IGR) increased steadily over the last five years.
Moreso, the exploits recorded by Lagos state and Rivers state in IGR generation is also attributable to the returns of digitalization. These states have been at the forefront of IGR generation in the last decade. In fact, the IGR of Lagos state has increased steadily over the last two decades save for the decline in 2000, 2010, and 2015.
Kaduna state IGR increased from N11.54 billion in 2015 to N50.77 billion in 2020. This shows that the state’s IGR increased by 340.06% over the last five years. Digitalization of tax systems in Kaduna state has seen the state multiply its IGR four times over in five years.
Data on revenue generation from the National Bureau of Statistics (NBS) shows that before 2015, the state’s highest IGR was N12.78 billion in 2014. Though the state’s IGR suffered a dip in 2015 to N11.54 billion, it has, however, increased steadily from 2016 through to 2020.
Before 2016, the state had never attained an IGR pool of N13 billion, between 2010 and 2014, the highest IGR was N12.78 billion in 2014.
Dr. Zaid Abubakar, the Executive Chairman of Kaduna State Internal Revenue Service (KADIRS), further explained that digitalization revolutionized its revenue system. It created room for effective tax administration. He said with the details of potential taxpayers captured, revenue generation became more robust with increasing returns.
The Executive Director further says it created more room for stakeholders’ engagement. This led to expanding the taxpayers’ base, and the taxpayers responded voluntarily.
How it Works
Mr. Yomi Olugbenro, West Africa Tax Leader at Deloitte described the digitalization of tax systems as a landlord with a detailed register of all his tenants across the city. These details include their names, income range and bracket, payment interval, and expected amount; making it easier to follow up on these tenants.
During his Budgit States of States 2021 address, he highlights digitalization as the way forward for a robust revenue generation for states. He stated the success recorded in states like Lagos and Kaduna as positive impacts of digitalization.
Leveraging on Existing Facilities
The digitalization of the tax system comes at a high cost, especially with the dirge of technological infrastructure in most states.
Already, state governors have accepted the need for a digital tax administration system to boost revenue generation. However, low technology integration into the tax system still exists, which continues to affect revenue generation.
However, states can leverage existing technology. These technologies such as those provided through electronic payment services can ease the process of revenue collection. The use of Point of Sales (PoS), electronic codes, and other services provided by financial institutions can enhance revenue generation by states.
Already, states such as Sokoto, Anambra, Abia, Ondo, and Kano have deployed an Automatic Electronic Motor Vehicle licensing and an Automated Land Registry system in collaboration with financial institutions to ease revenue collection. These same processes can be translated to support the digitalization of the state’s tax systems.