States get $750m World Bank facility for speedy economic recovery

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The 36 states of the federation are introducing tax relief programmes to mitigate the unending toll of the COVID-19 pandemic on businesses and individual taxpayers as part of ongoing efforts toward ensuring speedy recovery of state economies.

The relief programmes which were initiated in states across the board focus on five main tax activities, including the extension of filing and payment dates, tax moratoriums, waivers or reduction of penalties and interests over the extension period.

The resolution was reached at a virtual meeting held last Friday, under the States’ Fiscal Transparency, Accountability and Sustainability (SFTAS) Programme for Results, jointly organised by the World Bank and the Nigeria Governors’ Forum (NGF) at the instance of the ministry of finance, budget and national planning.

The virtual meeting was attended by 125 participants from the 36 States of the federation including state commissioners of finance and executive chairpersons of state internal revenue services.

While some states are also offering rebates or discounts on taxes paid within a specific period, others are allowing the payment of taxes, fees and levies among others in installments.

As part of the reform, states’ tax offices are now enabling filing and the issuance of tax clearance certificates electronically (online).

The SFTAS experts at the webinar concluded that such waivers for businesses are no longer optional, but have become an essential element of governments’ stimulus-targeted packages to facilitate recovery for businesses who face a liquidity crisis, and individuals whose livelihoods have been adversely impacted by the COVID-19 crisis.

At the sub-national level, all the 36 state governments are currently experiencing a liquidity crisis of their own; and with limited capacity to borrow, it has become imperative that they find a balance between granting tax reliefs and maintaining revenues at a sustainable level.

The extent to which government revenues will be impacted by these reliefs will depend on the type of relief that they grant and their ability to raise their tax efforts simultaneously, including offering incentives for greater tax compliance.

These efforts are being incentivised by a new Disbursement Linked Indicator (DLI) under the Federal Ministry of Finance Budget and National Planning (FMFBNP) World Bank $750 million States Fiscal Transparency, Accountability and Sustainability (SFTAS) Programme for results.

A statement by the NGF spokesman, Mr. Abdulrazaque Bello-Bakrindo, identified the various tax relief measures so far announced by states and said the “efforts are being incentivised by a new Disbursement Linked Indicator (DLI) under the FMFBNP – World Bank $750 million  SFTAS programme for results.

“Eligible states will be rewarded with USD2.5 million each in performance-based grants if they announce by 31st July 2020 and implement by ?30th September 2020 a tax compliance relief programme for individual taxpayers and businesses to mitigate the COVID-19 impact.

“However, there are criteria to be met if a state is to receive the $2.5 million. These are that, state announcements should be signed by the Commissioner of Finance or the Executive Chairman of the State Internal Revenue Service, and published on state websites and in national dailies to ensure widespread awareness amongst taxpayers.

“Furthermore, the state government should issue to their tax officials and collecting agents, guidelines for the implementation of the reliefs to ensure consistent execution by all and sundry,” said the NGF.

It noted that states are already introducing various forms of tax relief, which include extension of filing and payment dates, tax moratoriums, waivers or reduction of penalties and interests over the extension period.

Some states, the statement said had been offering rebate or discounts on taxes paid within a specific period, while others are allowing the payment of taxes, fees and levies among others in installments.

Besides, states’ tax offices now enable filing and the issuance of tax clearance certificates electronically (online).

According to the statement, SFTAS experts at the meeting “concluded that such waivers for businesses were no longer optional, but have become an essential element of governments’ stimulus-targeted packages to facilitate recovery for businesses facing liquidity crisis, and individuals whose livelihoods have been adversely impacted by the COVID-19 crisis.

It added: “State governments are themselves currently experiencing a liquidity crisis of their own; and with limited capacity to borrow, it has become imperative that they find a balance between granting tax reliefs and maintaining revenues at a sustainable level.

“The extent to which government revenues will be impacted by these reliefs will depend on the type of relief that they grant and their ability to raise their tax efforts simultaneously, including offering incentives for greater tax compliance.”

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