Every year, Nigeria loses N580billion through unnecessary tax incentives, Oxford Committee for Famine Relief (OXFAM), an international non-government organisation, formed in Britain in 1995 has said.
It therefore advised the federal government to review its policy on tax incentives because such huge loss of revenue was detrimental to good governance.
At the public presentation of the “Fair Tax Monitor Index Report and the Commitment to Reducing Inequality Index Report” in Abuja, yesterday, OXFAM country director, Mr. Constant Tchonasaid various studies show that the fiscal incentives granted by the federal government to stimulate investments in the country did not yield the desired results because of bad governance and lack of transparency.
In the future, Tchona advised that to ensure fair taxation, the process for granting tax incentives should include the National Assembly’s “oversight, clear requirements for incentives and periodic review of expected results.”
He called for sanctions of banks and professionals who take part in such illegalities.
Tchona said: “The National Assembly should enact a law that will criminalise the actions of banks, auditors, accountants and lawyers that facilitates illicit financial flows.
“When such professionals act contrary to existing regulations, they should be held accountable in Nigeria. This can be enforced through strengthened professional association bodies. There is also need for the Nigerian government to fast-forward action on the new National Tax Policy and clamp down on corporate crimes. New legislations and rules to cope with current realities should be enacted along with the introduction to cutting-edge technology,” he added.
Tchona further advised the government to make tax laws gender-friendly and equitable to women because they are the drivers of micro and small businesses in Nigeria.
He also charged the federal authorities to make Value Added Tax (VAT) more progressive by increasing the rate for luxury goods than service items.
The OXFAM official said that this would reduce wealth inequality in Nigeria.
He said: “VAT exemption for building materials will have a direct positive bearing on middle and poor class segments of the population and make rent cheaper, thereby reducing housing deficit. “It is also important to increase the direct tax net rather than the increasing burden of indirect taxes like VAT. “Establishing a more progressive tax system will make it possible for the government to deliver on essential public services like education, health, and social protection, among others.”
Citing its 2015 study, OXFAM said that Nigeria, Ghana and Senegal had a combined loss of over $5.8 billion every year. The report further showed that tax incentives were not the priority for investors but infrastructure, education and the quality of the workforce.
A similar report by the Federal Inland Revenue Service (FIRS) had showed that about 30 per cent of companies in Nigeria were involved in tax evasion and 25 per cent of registered firms were evading tax.
Tchona made a strong appeal to the National Assembly to enact laws to criminalise the actions of banks, auditors, accountants and lawyers that facilitate illicit financial flow.
This is even as he suggested that facilitators of tax evasion should be made to pay fines of up to 100 per cent of tax evaded.
He lamented that multinational companies receive questionable tax waivers and tax holidays and utilise the loopholes in tax laws to shift huge profits generated in the country to low tax jurisdictions.
Tchona said that the analysis of national budgets between 2011 and 2017 revealed that education expenditure was at the average of 8.7 per cent of Nigeria’s total budget, which is far below the 10-25 per cent benchmark set by UNESCO for developing countries.
The country director, therefore, stressed the need for a holistic review of government’s spending on the education sector, adding that comparative analysis at the continental level showed that Nigeria ranked among the lowest countries in terms of spending on education.
Tchona noted that available data showed that Nigeria trailed at 3.06 per cent on education budget, far behind Lesotho with 11.36 per cent, Botswana with 9.3 per cent, Zimbabwe with 8.43 per cent, Senegal with 7.4 per cent, Niger with 6.71 per cent and Ghana with 6.18 per cent.
On his part, the country director of PLAN International, Dr. Husseini Abdul, asserted that poverty cannot be reduced or eradicated if government at all levels does not resolve the fundamental issues of inequality.
He averred that inequality was the root of poverty in Nigeria, adding that the challenges of insecurity had deepened economic crisis and impacted negatively on social and healthcare services.
Abdul maintained that there was a need for federal government to develop bold initiatives in dealing with inequality, noting that since the embrace of the Structural Adjustment Programme (SAP) in 1986, that government enacted consistent policies that benefitted a few individuals.
Speaking on fairer tax regime, the micro-economic adviser of African Development Bank (AfDB), Dr. Robert Asogwa, harped on the need for African countries to increase the size of tax collections, given the increase in the Gross Domestic Product (GDP).
He said that many Asian economies had extensively utilised the fiscal system, especially in the area of taxation, noting that effective tax system was the only means to address issues of social and infrastructure spending.
Similarly, the executive director of Civil Society Legislative Advocacy Centre (CISLAC), Mr. Auwal Ibrahim Musa, insisted that it’s impossible for government to build infrastructure, finance education and healthcare system without collecting taxes.
He advocated for a national dialogue on tax holidays and the expected beneficiaries.
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