- 30 Marks
PSAF – Nov 2014 – L2 – Q1 – Government Revenue
Calculation and distribution of revenue collected by Olakoma Federation across federal, state, and local levels.
Question
Eboda State is one of the 30 states in the Olakoma Federation. The Federation has a population of 120 million people with 700 local government councils and a land mass of 300,000 sq kilometers.
Eboda State has a population of 12 million, 25 local government councils, and a land mass of 30,000 sq kilometers.
The following transactions took place in the Office of the Accountant-General of Olakoma Federation during the year ended December 31, 2013:
| Revenue Source | Amount (N’ Million) |
|---|---|
| Crude oil sale | 350,000 |
| Domestic oil receipts | 445,000 |
| Miscellaneous oil receipts | 105,000 |
| Royalty on crude oil | 101,000 |
| Royalty on gas | 95,000 |
| Rentals on oil field | 87,000 |
| Gas flared penalty | 77,000 |
| Petroleum profit tax | 650,000 |
| Companies income tax | 500,000 |
| Other non-oil taxes | 225,000 |
| Import duties | 255,000 |
| Export duties | 125,000 |
| Excise duties | 320,000 |
| Custom penalty charge | 115,000 |
| Custom fees account | 120,000 |
| Common external tariff levy | 100,000 |
| Court fees | 30,000 |
| PAYE of armed forces | 55,000 |
| 7% Port levy | 25,000 |
| Value Added Tax (VAT) | 700,000 |
Additional Information:
- The Olakoma Customs Service is entitled to 7% cost of collection on all revenues collected, while the Federal Inland Revenue Service is entitled to 4% of non-oil revenue.
- The sharing formula for the Federation Account and VAT is as follows:
Category Federation Account VAT Federal Government 52.68% 15% State Governments 26.72% 50% Local Governments 20.60% 35% - A 13% derivation is paid to oil-producing states, based on oil and gas-related income.
- The sharing ratio in (ii) above is based on the following criteria:
Category State Local Government Equity 40% 40% Population 30% 30% Land Mass 20% 20% Internally Generated Revenue Effort 10% 10% - The total internally generated revenue effort of the 30 states and 700 local government councils amounted to N500 billion and N300 billion, respectively.
- The total internally generated revenue effort of Eboda State and its 25 local governments amounted to N50 billion and N20 billion, respectively. Eboda State is not one of the oil-producing states.
- All revenues due to all local governments in each state are paid to the State Joint Local Government Account. This account is entitled to 10% of the Internally Generated Revenue (IGR) of the state.
Required:
a. State the differences between the Federation Account and the Consolidated Revenue Account. (4 Marks)
b. Calculate:
- i. Olakoma Custom Service’s cost of collection. (3 Marks)
- ii. Federal Inland Revenue Service’s cost of collection. (2 Marks)
- iii. The 13% derivation paid to oil-producing states. (3 Marks)
c. Calculate the amount to be credited to:
- i. Consolidated Revenue Fund of Olakoma Federal Government. (6 Marks)
- ii. Eboda State Consolidated Revenue Fund Account. (6 Marks)
- iii. State Joint Local Government Account. (6 Marks)
(Show workings)
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