PRESIDENT Bola Tinubu’s move to raise tax revenues is a long overdue national assignment. He recently established a committee to reform Nigeria’s tax administration with a target to double the collection rate within three years. Inaugurating the Presidential Committee on Fiscal Policy and Tax Reforms, Tinubu bemoaned the government’s loss of trillions annually to inefficiency, corruption, and evasion. He should muster the political will and rally all stakeholders to achieve the target of radically improving tax revenues.
The committee, headed by tax expert, Taiwo Oyedele, is saddled with a three-pronged inter-related mandate: fiscal governance, tax reforms and growth facilitation. The President said, “The committee, in the first instance, is expected to deliver a schedule of quick reforms that can be implemented within 30 days.” This is reassuring.
It is tasked to achieve a tax-to-GDP ratio of 18 per cent by 2026. Nigeria is far behind the continental and global ratios, and the government, which refuses all pressure to reduce the cost of governance, has resorted to borrowing. Nigeria’s debt profile was N46.25 trillion in 2022, the Debt Management Office said. Reforms will raise revenue and reduce borrowing. Debt servicing gulps 96 per cent of revenue.
Currently, Nigeria’s tax-to-GDP in 2020 is 5.5 per cent, says the World Bank. The National Bureau of Statistics however estimated it at 10.86 per cent in 2021. On either count, Nigeria ranks low. The OECD says the African average is 16 per cent; the World Bank lists South Africa’s at 25.9 per cent; Mozambique’s at 23.3 per cent; and Namibia’s at 28 per cent. The EU average was 34.1 per cent in 2021.
Too many Nigerians are not paying taxes, as all three tiers of government rely on oil and gas income for sustenance. In 2017, the then Finance Minister, Kemi Adeosun, expressed outrage that only 214 persons paid income tax of N20 million and above per annum. With so many billionaires in the country, this was scandalous. The Nigerian Economic Summit Group corroborated this in 2019, saying that 81 per cent of taxable adults and businesses in Nigeria do not pay taxes.
- Don’t dump El-Rufai, VON DG begs Tinubu
- Audu Ogbeh under fire for asking Tinubu to sack Akume
- My administration to make adequate provision for security — Tinubu
Meanwhile, experts say a country that depends on commodity revenue will constantly struggle due to the vagaries of the market. The World Bank recommends a minimum 15 per cent tax-to-GDP ratio for a country to grow.
Oyedele, poached from PwC, is aware of the pitfalls. He notes that too many MDAs – he identifies 63 in the 2023 budget – are collecting their own taxes. Instead, he suggests that MDAs should face their core mandates and allow the Federal Inland Revenue Service to collect taxes on their behalf. He calculates that Nigeria is losing N20 trillion annually to revenue leakages. Yet, Nigeria has one of the highest costs of collection in the world.
Oyedele’s summation rings familiar. A former Central Bank of Nigeria Governor, Chukwuma Soludo, said Nigeria would rake in N30 trillion annually if revenue loopholes are plugged. In 2020, Bode Agusto, a former Director-General of the Budget Office of the Federation, said if 200,000 wealthy Nigerians paid their taxes, the country would generate additional N14.4 trillion annually. The 2023 budget is N21.83 trillion.
Previous governments made sound bites and announced policies, but lacked the political will to enforce collection and widen the tax net. A plan by the FIRS to use the unique Bank Verification Number to trace tax evaders has not gained traction, but the government increased the VAT rate to 7.5 per cent from 5.0 per cent in 2020.
Tinubu should be different; his grand plan to replace borrowing with tax revenue will only succeed if he doggedly implements the recommendations of the presidential panel and prosecutes tax dodgers. Reforms should include an end to unnecessary multiple taxes on businesses, be technology-driven and embody harsh penalties against defaulters. ,
Fuel hike: NLC threatens fresh strike
How to convert your HND certificate to BSc through NBTE’s one-year programme
Ex-deputy governors visit Ganduje, decry exclusion from APC NEC meeting
Coup: Niger scraps jail sentence for head of group supporting junta
Why I paid surprise visits to Lagos Island hospitals – Sanwo-Olu
Ekpa warns oil companies against ignoring sit-at-home order
Niger: PDP, NLC, Bakare, Kaigama oppose military action
Attacks on Ganduje cost Kwankwaso ministerial slot, says APC spokesman