Lagos State Governor, Mr Babajide Sanwo-Olu, on Monday, said the inability of the state to maximize its tax potential is because the current tax revenue accruing to the State is a far cry from actual projection.
While affirming that the state is not lacking in the capacity to widen its tax base and enhance efficiency in collection mechanisms, the governor regretted that the state’s efforts had been slowed down because the administration framework of fiscal and tax policies was exclusively vested in the Federal Government.
Sanwo-Olu spoke on Monday when he received members of the Presidential Committee on Fiscal Policy and Tax Reforms at the State House, Marina.
Led by its chairman, Mr. Taiwo Oyedele, the committee was in Lagos as part of the extended consultations with sub-national stakeholders in the path of its commissioned duties of formulating a sustainable tax administration framework for the country.
The Governor said Lagos is carrying a governance burden that is not commensurate with its revenue earnings, stressing that the state required a yearly budget of over N7 trillion to adequately attend to its infrastructure needs.
He said the highest budget the State had was a little above N2 trillion due to constraints in national tax policies.
“For us in Lagos, we know too well that we can do a lot from the revenue generation standpoint; more importantly, from the effective generation and utilisation of the tax, ” stated the governor.
Continuing, he also said: “During our bilateral meetings in preparation to present next year’s budget, we pulled numbers up to N7 trillion based on our needs. But we are constricted by only the amount of revenue we can generate and pegged the value at N2.2 trillion.
The government noted that this helped the state’s capacity to develop its economy quicker and faster.
“We can no longer continue to complain. What are those things we can do to improve our revenue stream and our ability to be able to leapfrog and take governance in a more audacious way?
He added: “This engagement with your committee is critical at this time, as you are on the ground in the States to have feelings of what the bottlenecks are”. Adding that the committee’s objective is practically to identify tax issues facing sub-national governments and eliminate bottlenecks.
Charging the committee to come up with a quality intervention that would help states attain their full potential in revenue generation and fiscal sustainability, Sanwo-olu averred that the task requires collaborative effort.
“We all need to work collaboratively on this objective. If all constraints are attended to, we should begin to see monumental changes in our revenue projection. The potential is there and the numbers show the results we can achieve if fully explored, but we cannot sit back and think things will change overnight if we do not take the right approach to resolve the issues.
“We expect every member of this committee to put all your skills and mental resources into this task. I believe the committee will achieve the objectives for which Mr. President set it up.
“As a State, we are ready to give you all the support required. We will open our books and share data to learn where we also need to make changes for higher revenue performance.”
In his remarks, the Chairman of the Committee, Taiwo Oyedele said Lagos was the first port of call for the committee to visit in its nationwide consultation, noting that Lagos state has become a model state because other sub-nationals had adopted the commercial and economic nerve center of the country as a model due to its achievement in tax reform.
The committee chairman also said the country needed to address its revenue problems, which, he said, would involve creating a robust tax system and quality spending.
He said: “We are no longer at a point where we can continue to celebrate incremental progress in revenue generation; we need to accompany it with a transformational shift in the quality of spending of the generated revenue.
“Our spending on the ratio of GDP is the lowest in the world, we need to address this without taking attention away from the quality of spending.”
