Abdullahi: Tax Clearance Certificate Now Compulsory for Building Permit in FCT

In a bid to shore up revenue and sanitise the system, the Federal Capital Territory Internal Revenue Service has initiated some measures. In this interview with Ndubuisi Francis, the Executive Chairman of the agency, Haruna Abdullahi, disclosed that with Sections 85 of the Personal Income Tax Act and 31 of the FCT-IRS Act fully activated by the FCT Minister  Nyesom Wike, providing Tax Clearance Certificates is now compulsory for residents to secure building permits and transact other businesses with the FCT Administration

How are you coping with the challenges that come with running an organisation that is saddled with the responsibility of going after taxes or revenue?

This is quite valid. Maybe, I will start with the second in terms of the challenges. I mean, running institutions like this, especially at the national level, because we are sub-national, but then we are in Abuja. So, you are seen more as a national body. Whatever we do, other agencies come to look at it. So, we have that as a notion, but there are significant challenges, and revenue issues are political issues. You need the political support; and the political will to overcome a lot of these challenges. And that’s why I mentioned the fact that the honourable minister now is supporting the service politically. And that has lessened the burden. The other ones are general operational issues, misunderstanding, and lack of information in terms of clarity of what happens and what’s supposed to happen. We face significant challenges from many stakeholders. The kind of letters we receive here, but we try to as much as possible to deal with them. But now with the minister who has come and now showing that revenue issues are at the forefront for him, I’m sure you’ve read that, we have been taken out of the TSA strictly for revenue issues. So, all stakeholders, I believe now in the city, see that the political will is there. And even internal stakeholders, our colleagues and all have seen that, look; this is the direction of the bureaucracy of the administration; and certainly you would not joke with it.

 It is believed that the collection of taxes is not an easy task. What are the challenges you are facing?

 Revenue issues are political issues because you need the required political will to overcome a lot of challenges. This is why I mentioned the fact that the minister has given us political support and that has lessened the burden. Other challenges are general operational issues and lack of information in terms of clarity of what happens and what is supposed to happen. We face significant challenges from many stakeholders when you consider the kind of letters we receive here. But we try as much as possible to deal with them. However, now that the minister has come to show that revenue issues are at the forefront for him, all stakeholders in the city now see that the political will is there and have seen the direction of the administration and will not joke with it.

 So, what are some of the measures you’ve adopted to drive revenue for the FCT?

 The minister (of FCT) recently approved some initiatives, which are huge and will certainly change the dynamics in terms of the bottom line. Also, just recently, we submitted a draft proposal to the minister for the FCT Property Tax regulation. The FCT-IRS Act empowers the minister to come up with a Property Tax regulation for the FCT. So, we had a long conversation and we suggested it to the minister, and he asked us to come up with a draft regulation, which we did, and he approved the initiative. So, we have an inter-agency collaboration whereby we review it because the draft was just done by the FCT-IRS, but that was not enough, you need other stakeholders. So, he approved the initiative to go ahead and review the draft and then come back. Subsequently, at the end of the day, he will sign the regulation and it will be gazetted and implemented. So, that alone should tell you that there is a huge positive impact on the bottom line of the Internally Generated Revenue in the city.

Also, we have inaugurated another committee, because we are now implementing the Capital Gains Tax law. Previously, people just went and paid voluntarily, so there is very little payment in terms of Capital Gains Tax. But now, we have briefed the minister and he has approved the inter-agency collaboration. We are going to begin to implement the Capital Gains Tax fully. So, you can imagine an FCT with a property tax, a fully implemented capital gains tax, and then about a month ago there was a circular where the minister approved the implementation of Section 85 of the Personal Income Tax Act and Section 31 of the FCT-IRS Act.

For me, when I came two years ago, in my first meeting, I told the staff that we cannot do much if we don’t implement Section 85. But it is a huge section that needs political support. And, of course, the minister came and he endorsed that. The impact of that is going to be huge. What that means is that all of us must have a Tax Clearance Certificate.

You must file your returns and then you get a tax clearance certificate. You cannot get a building permit without it. Before the development control unit can give you the permit to go ahead, you need to show that you are paying your tax and you have a TCC and it must be verifiable by the appropriate tax authority. So, these three major initiatives, the implementation of Section 85 of Personal Income Tax and 31 of FCT-IRS Act 2015, implementation of Capital Gains Tax and then now, the Property Tax regulation should take us to certainly above 50 to 60 per cent of what we are doing at the moment. And that is definitely going to have a huge positive impact on the bottom line. However, these are not things that you will see their major impacts in 2024. They are going concerns. Based on these fundamentals, we see the service taking its rightful place in terms of revenue generation in Nigeria.

You talked about verifying one’s TCC, please provide more clarity on this.

You cannot get a building permit (even if it is your wall that falls). Before the development control unit of the FCT can give you a permit to go ahead to fix it, you need to show that you pay your tax you have a TCC, and that TCC must be verifiable by the appropriate tax authority. If you are applying for land in the FCT, of course, you are supposed to attach a TCC that is verifiable.

If you followed our story, some years ago when we moved from manual TCC to electronic, we said that there were forgeries. People just go to computer centres and forge it. But now, in the application, your Tax Clearance Certificate must be verified by us, and the verification process is just one minute because there is a QR code on the TCC. We are now collaborating with various agencies, such that when your TCC is verified, you will receive an email from us telling you whether it is from us, valid, fake or has expired.

 In enforcing these taxes, what kind of mechanisms are you adopting to achieve your goal?

Sometimes you need to give people a reason to do something. Section 85 of the Personal Income Tax Act has been in existence for a long, but today when you go to register your vehicle, let’s say from January, they will ask you for your TCC. You may say you pay your tax as a civil servant and that it is being deducted, but you will be asked to get a TCC. So, you have a reason to come to the tax authorities to say you need a Tax Clearance Certificate.

For the Capital Gains Tax, I can just do a transaction with someone and it ends like this. But today, I’m saying that other things happen. The system is becoming more digitalised, you have to give reasons. I am sure you saw the issues around ground rents in Abuja recently. Part of what we are also saying is that you can’t transfer your title document without evidence of payment of CGT. Currently, people pay CGT, but it is voluntary. But now, we are taking it further to say that these are huge revenue areas in FCT. The FCT does not get much revenue apart from its IGR. So, what is the IGR here? It is the land and the property that are here. We have to make sure that everything is attached to that and we have to give reasons for people to do that. This is why a lot of things are now attached to the TCC.

 What was your revenue profile in the past and what is it currently?

 Previously, the Federal Inland Revenue Service was responsible for Personal Income Tax in the FCT. The FCT IRS Act was developed in 2015, but we did not start operations until January of 2018. As of 2017, what the FIRS used to collect was an average of N40 billion annually. But as of today, we have done N145 billion and that is without these tax types that are now enforced, which include Property Tax, Capital Gains Tax and now Personal Income Tax with Section 85. This will cause a huge leap for the service. At that time, the FCT IRS was about number six nationally, but today we are hovering between two and three depending on so many factors. However, I don’t like focusing on the numbers because you need to build an institution. You need an institutional framework for these numbers to grow and, especially in 2021, that was our focus. Building capacity was key for we had about just three offices then, but today we have about 16 offices in the city.

The priority is to build a sustainable institution and when you have a sustainable institution that is driven by technology, a lot of these things will just find a way of falling into place. We also realised that not many people knew the FCT-IRS. We needed people to know that this is an independent agency and, as of today, people can differentiate between the FCT-IRS and the FIRS. In my first year, I said let’s build an institutional framework that will sustain the service. Therefore, I think we have moved in terms of the numbers, our capacity, employees from 35 to about 600 or more and moved from one office to 16.  And hopefully, by the end of next year, we should have about 20 offices. This is because right now, we don’t have offices in Kwali and Abaji, and we intend to move there. We also want our presence in all the area councils to support what we do.

What should citizens of the FCT expect from both the service and the government when they comply with the payment of these taxes? 

 This is a very popular question and I think it is valid as well. If you’ve been following the story of the minister, you would have seen a lot of activities and heard a lot of statements talking about the fact that we need revenue. Now, if you look around the city, to be fair to the minister, you will see that things are happening. What is making them happen? They are related to taxes. However, there are bigger issues than that, such as security, social services, health and so many others. Today, you go to some areas and the people there are the ones building roads to their estates, we see all of these issues. I’ve always said that we have a huge basket and it is a responsibility issue. Throw into the basket first, we all have civic responsibility, but sometimes we don’t do anything or even make it worse. And then we go back to the government to say the government is not doing enough when we are the government.

Today, if you pay these obligations, it gives you that sense of purpose and then you can engage. Revenue generating agencies run away from this question and so probably, the role might be expanded by asking people to follow the money. The agencies should be able to say we raised N100 billion or whatever this year and we can say that this amount was used for this, that and those. So, your responsibility does not just end at providing an account of all collectible revenues, no! Take it a step further and have some kind of sustainability report to say this is what you did, and the citizens will see it. However, I’ve seen the impact of the government’s responsibility in the last three months since the new FCT minister has been in charge. We’ve seen where some of these monies are being invested. So, first of all, you should throw your tax into the basket and then you can hold the government accountable.