austerity measures aimed at cushioning the impact of the drop in oil prices on the economy in a bid to generate additional revenues to fund the 2015 budget.The Minister of Finance, Dr. Ngozi Okonjo-Iweala, made the announcement during a public presentation of the 2015 budget held at the headquarters of the Ministry of Finance in Abuja.
She explained that the measures would be implemented from the beginning of the second quarter of 2015 and would considerably boost the ratio of non-oil revenues to oil revenues.
Giving details of the measures and how much they would contribute to the treasury, she explained that the government would generate more revenue through the strengthening of tax administration.
This, she said, would be achieved if the affluent in the society contributed a bit more towards easing the pains being felt from the economic crunch.
As a short term measure, she said a 10 per cent import surcharge would be imposed on new private jets. This is estimated to yield about N3.7bn revenue in 2015.
Similarly, the minister explained that a 39 per cent import surcharge would be imposed on luxury yachts, which potentially will contribute N1.6bn in 2015; while another five per cent import surcharge would be placed on luxury cars, which is estimated to yield about N2.6bn in additional revenues.
In the same vein, Okonjo-Iweala said a surcharge on business and first class tickets would be imposed on air travellers. She, however, did not stipulate the rate to be applied for the levy and how much it would generate for the government.
Others are the imposition of three per cent luxury surcharge on champagnes, wines and spirits, expected to generate about N2.3bn next year; and a one per cent mansion tax on residential properties within the Federal Capital Territory, with value of N300 million and above.
The tax for luxury buildings within the FCT, according to the minister, is estimated to yield additional N360m to the coffers of the government.
All the surcharges, she noted, would yield about N10.56bn in 2015.
She said, "We should see these challenging times as times of opportunities to further move this economy on the right path. Luckily, this administration has taken to diversification seriously and began to make inroads prior to this time.
"The non-oil sector, whose growth has averaged about eight per cent in the last few years, is the primary driver of growth in the economy unlike the oil sector, which is actually contracting.
"In the short term, we are determined to improve tax revenues, not by increasing tax rates as many have advised, but rather as a pro-people administration, by strengthening our tax administration."
In the area of tax waivers and exemptions, the minister lamented that analyses had shown that about 30 per cent of those that received tax waivers from the government, especially under the Pioneer Status Scheme, were now abusing the system.
As a short-term measure to address this anomaly, she explained that the government had commenced a review of the implementation of the pioneer status exemptions for some oil companies.
This, she noted, could unlock up to N36bn of additional tax revenues next year.
Okonjo-Iweala also gave an indication that the current framework for Value Added Tax revenue might be adjusted to enable the states and local governments get more revenue.
Under the current framework for allocation of VAT revenue, the Federal Government gets 15 per cent; states, 50 per cent; while the local governments are given 35 per cent.
She said, in the medium term, it would be important to focus on tax policy to see where opportunities lie in order to streamline and rationalise certain taxes and levies, while looking to boost others.
For example, she said, "Nigeria has one of the lowest VAT rates in the world and medium term efforts must involve the legislature to see what opportunities exist with VAT, which largely benefits the states.
"Whilst the state governments get 85 per cent of VAT, the Federal Government gets just 15 per cent. A five per cent increase in VAT rate, for instance, will yield N614bn, most of which will go to the states and local governments.
"I believe that the discipline these new measures impose will go a long way to support the economy and provide Nigeria a responsible pathway to overcoming the limitations of falling oil revenues without disproportionately affecting the poor-to-middle class."
In the 2015 fiscal period, the minister also said the government would be ramping up the tax initiative with McKinsey to contribute extra N160bn in tax receipts and aggregate of about N460bn over and above the 2014 levels in the 2015-2017 period.
In the area of Independent Government Revenue, Okonjo-Iweala said actual receipts had continued to grow from about N182bn in 2011 to N274bn in 2013 and N328bn as of October 2014.
While she said this was encouraging, the minister noted that there were still leakages and incidences of non-remittance of requisite funds to the treasury by some agencies.
She said, "Mr. President recently summoned a meeting of the revenue generating agencies to address this issue and subsequently issued an unequivocal directive to all revenue agencies to ensure remittance of their obligations to the treasury.
"With this strong support, we are working with the banks to ensure strict compliance, and so we have projected IGR receipts of N450bn for 2015."
On the expenditure side, Okonjo-Iweala unveiled a number of specific measures aimed at reducing spending and their savings to the nation's treasury.
She said the government in the short-term would be instituting measures aimed at improving spending.
This exercise, she noted, would save a total of N82.5bn and would include cuts to international travels and training by 50 per cent for all Ministries, Departments and Agencies of the government.
This cut, she noted, would enable the government to save about N14bn.
According to her, other provisions for overhead expenditure have been dropped completely, thus saving about N4bn for the country.
She said, "Administrative expenditure for buildings equipment and supplies as well as MDAs' provisions for the procurement of administrative supplies and equipment will be cut, saving about N5bn.
"Procurement and upgrade of buildings were similarly curtailed, saving about N44bn, while another N76bn is proposed for reallocation to more impactful programmes of government in the security, health and education sectors.
"We have also commenced partial implementation of the government's Whitepaper on the rationalisation of agencies based on the Oronsaye report. We have built in savings of about N6.5bn in the 2015 budget from the rationalisation of some agencies, committees and commissions.
"Nevertheless, medium term measures require greater efforts to cut the cost of governance across all tiers and branches of government.
"This requires support from the legislature to amend laws underpinning certain agencies. A list of such laws will be submitted to the National Assembly for consideration by the second quarter of 2015."
