Renowned Professor of Finance and Capital Market, Uche Uwaleke, has told state governments to create Special Investment Fund (SIF) with the additional revenue disbursements from the Federation Account Allocation Committee (FAAC).
He advised them to invest part of the funds in public, private partnership (PPP) projects in agriculture, and infrastructure financing (power, roads, housing), and by so doing enhance business activities.
The capital market expert volunteered the advice during a recent programme of the IGR Initiative, a programme instituted by Professor Martin IkeMunso, the Director General of NIRSD, and former Chief Executive of Value-Frontera.
Featuring as a guest during a virtual discourse on how states can improve internally generated revenue, Uwaleke advised state commissioners of finance to utilise the funds towards enhancing business activities.
He is of the view that when a state enhances business environment, it is invariably enhancing revenue generation because the businesses will make more revenue, and invariably pay more tax voluntarily.
“Commissioners of Finance in each state should determine additional revenue accruing to the state from FAAC allocation, and ring-fence the additional FAAC revenue in a special fund account for transparency and accountability.
“Use a part of the special fund for PPP arrangements in financing agriculture and infrastructure (power, roads, housing) to enhance business activities and revenue generation,” the Nasarawa State University don advised.
“By investing in power, infrastructure and agriculture you are also enhancing voluntary tax compliance. When people see that there are roads, there is power, and they can afford agriculture produce, they will be more willing to comply with tax payment.
But more importantly, the state is enhancing business activities because once there are infra – structures in place, business activities will improve. More business activities also mean more revenue to the state,” Uwaleke stated.
In addition, Uwaleke also told states to use part of the percentage of the special fund set aside for investment to recapitalize States’ Ministries of Finance Incorporated (MOFI) for the purposes of boosting IGR generation, pointing out that MOFIs are undercapitalised.
“In most states, the Ministry of Finance Incorporated (MOFI) is undercapitalized. This is an opportunity to recapitalize them,” said the Special Adviser to the House of Representatives Head of Capital Market Committee.
He advised that at the federal level, the Ministry of Finance Incorporated should be recapitalised and repositioned as a proper Assets Management Company, and urged state governments to borrow a leaf from the federal government.
Furthermore, he advised that all workers with headquarters outside their state of residence needed to be tracked to ensure that their Pay As You Earn (PAYE) tax comes to the state following increase in minimum wage.
“States should follow up to ensure that their PAYE is increased commensurately,” Uwaleke advised. To this end, he urged states to deploy data to track the staff of federal government Ministries, Departments and Agencies (MDAs) resident in their jurisdictions, as well as workers of banks, companies and other institutions residing in their jurisdictions to ensure that they pay tax in the state where they are resident.
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