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Expanding Nigeria’s Tax Base

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The President Muhammadu Buhari administration’s efforts on widening the tax net has recorded some remarkable improvement as the nation’s tax base surged by 36 per cent in the past two years.

Minister of Finance, Mrs Kemi Adeosun, told a delegation of World Bank Mission of 10 Executive Directors led by Mr Patrizio Pagano in Abuja, recently that the federal government has been able to grow the tax payers’ base to 19 million in two years from the 65 million economically active people who are not tax compliant.

However, Nigeria, with an estimated population of about 189 million people, almost half of whom are aged 15 to 64, according to World Bank data, still has one of the world’s lowest tax ratios to Gross Domestic Product (GDP) of six per cent, the lowest among the sub-Saharan countries the International Monetary Fund (IMF), an arm of World Bank, has measured. South Africa has 24.7 per cent.

Nigeria is ranked 124 out of the 138 countries on World Economic Forum’s Global Competitiveness Index. According to a recent report, only about one in four working-age people in Nigeria is registered. This means that there are so many eligible tax payers in the country that are yet to be dragged into the tax net. The second tier of government, the states, are the worse hit as their revenue sources shrink in response to poor internally generated revenue. Save for monthly allocation they receive from the federation account, some of the states would hardly survive on their own.

The International Monetary Fund (IMF) has been consistent with its call on Nigeria to broaden its tax base. Last week, the Fund repeated the need for Nigeria to widen her tax revenue base. It noted in its recommendation that Nigeria should widen its tax revenue base to finance growth and upgrade the nation’s infrastructure and social programmes. While Nigeria’s tax authorities may have increased the base in the last two years, we urge them to deploy technology to keep track of more individuals and establishments with the aim of bringing them to the tax base.

While we commend the FIRS for leveraging on technology to facilitate easier filing of returns in its operations, we are of the opinion that a lot more can be done to capture eligible tax payers. The agency has improved the ability to upload returns and assessment notices together with assessment calculations to the tune of 97 per cent completion nationwide. These services include e-registration, e-filling, e-taxation, e-stamp duty, e-WHT credit notes, e-receipts and e-TCC.”

However, there is a need to improve tax administration, both at the federal and state levels. The tax authorities need enough staff strength that can effectively capture more taxable Nigerians in addition to deploying technology. For instance, the United Kingdom (UK) tax authorities at a time had 365,000 staffers, while Nigeria’s FIRS had just 14,000. More can be achieved with the right personnel.

We also believe that the move to expand the tax base should be accompanied by liberalising initiatives to stimulate the economy through private sector-led investment, attracting foreign investment and privatising state-endowed commercial assets.

The current effort to widen the tax net for increased revenue generation must go together with improving the ease of doing business. While paying tax is a necessity, Nigerians are worried that they do not see its impact on the provision of social infrastructure such as good roads, efficient healthcare system, stable electricity supply and others. Government at all levels should let the people see what they are doing with tax revenue. That will make the expansion of the tax base worthwhile. Looting public funds by government officials, including tax proceeds, make compliance a difficult habit to cultivate by most Nigerians. Cases of tax diversion by public officers also abound.

Nigeria needs to build her economy on speedy implementation of tax policy. For instance, the Nigeria Tax Policy (NTP) Implementation Committee has recommended two Executive Orders and five Amending Bills, which among others include Value Added Tax Act (Modification) Order; and Value Added Tax Act (Amendment) Bill, which are expected to simplify paying taxes and doing business, promote Micro, Small and Medium Enterprises, among others.



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