Federation Account to experience revenue drop over PIA – RMAFC

The Revenue Mobilisation Allocation and Fiscal Commission (RMFAC) says revenue accruable to the Federal Account will drop due to the implementation of the Petroleum Industry Act 2021.

This was contained in a report RMAFC presented to oil and financial stakeholders at a retreat in Uyo, Akwa Ibom State on Wednesday.

“The Petroleum Industry Act 2021 is a bold attempt to address regulatory and governance issues that have impacted negatively on the growth of the Nigerian petroleum industry in the last three decades.

“It is also presumed that the PIA will promote efficiency and make the industry more competitive,” the RMAFC said.

“Regrettably, the promoters of the PIA may not have thought through the immediate impact on revenue accruals to the Federation Account and as such, the PIA has effectively and substantially reduced revenue that ordinarily should have accrued into the Federation Account.

“The creation of multiple funds, funded directly or indirectly from the Federation Account is a major issue. The adoption of the dual tax regime in the Petroleum industry (Hydrocarbon Tax and Company Income Tax) as opposed to single tax regime (Petroleum Profit Tax) has its own advantages and disadvantage.”

“The effective tax rate in the PIA is significantly lower than pre-PIA. In conclusion it can be argued that the PIA has systematically and substantially reduced the revenue accruable to the Federation Account.”

The PIA 2021 was passed into law by the President, Major General Mohammadu Buhari (retd.), in August last year after the bill had dragged at the National Assembly for more than two decades.

Outline some of its envisaged challenges to the bill, RMAFC stated that the law was silent on the definition of “frontier basin” and host community.