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Enhancing Nigeria’s Fiscal Capacity

by Jonathan Nda-Isaiah
1 year ago
in News
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In a bold move to address Nigeria’s longstanding challenges with tax collection, President Bola Tinubu has set in motion a comprehensive strategy to overhaul the country’s tax administration system.

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No doubt, an efficient tax drive system inarguably, would always serve as the most run-of-the-mill and important government intervention to redistribute income among the population of any society such as Nigeria, with over 200 million people.

Aside from oil, which remains the major revenue source for Nigeria, tax revenue continues to impact the nation’s economy, building government’s fiscal capacity at both national and the sub-national levels to provide the public goods and services that citizens need for growth.

Despite being a veritable alternative system for raising government revenue for development purposes however, not many people are disposed to willful payment of taxes due to a lack of public confidence, official corruption, embezzlement, infrastructure deficit, high levels of evasion, and rising public debt among other issues.

Several citizens are still oblivious to the fact that taxation is the key contribution they make towards national development.

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According to the chairman of the Revenue Mobilization Allocation And Fiscal Commission (RMAFC), Mohammed Shehu, less than 40 million Nigerians are presently captured in the tax net and paying taxes.

Like in many African countries therefore, available reports indicate that Nigeria has one of the lowest tax collection rates in the world at approximately 10.8 percent of gross domestic product (GDP), well below the African average.

President Bola Tinubu appears to be worried about this trend.

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Recognizing the crucial role of taxation in funding national development, the president has empowered the Federal Inland Revenue Service (FIRS) to spearhead a technological transformation that promises to enhance revenue generation, improve transparency, and foster a culture of voluntary tax compliance.

The president’s decision in July 2023 to establish a presidential committee on fiscal policy and tax reform, signaled his administration’s commitment to enhancing the efficiency of revenue collection.

Appointed to lead this crucial effort is Dr. Zacch Adedeji, the current executive chairman of FIRS, wh o still serves  as a Special Adviser on Revenue to the President.

Adedeji, has been tasked with the daunting challenge of transforming Nigeria’s tax system to support sustainable development and achieve a minimum 18% tax-to-GDP ratio within the next three years.

This target reflects the president’s determination to bolster the country’s fiscal capacity and ensure that the government can adequately provide the public goods and services that citizens need for growth.

One of the key priorities identified by the revenue boss  is the establishment of a data-driven system that can make revenue targets predictable, a prerequisite for realizing the government’s fiscal projections.

This is particularly crucial as the FIRS has been mandated to collect a record-breaking N19 trillion in the 2024 fiscal year, a target set by President Tinubu and enshrined in the national budget.

The cornerstone of this paradigm shift is the establishment of a customer-centric organizational structure designed to streamline processes and enhance efficiency in tax operations.

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According to the revenue boss, there are several ways in which technology can play a pivotal role in improving tax collection processes and increasing revenue.

“Transitioning from paper-based to digital systems can streamline tax collection processes, making them more efficient and less prone to errors. Online platforms can be developed for taxpayers to file their returns, make payments, and access relevant tax information easily.

“Advanced data analytics tools can help identify patterns, trends, and potential tax evasion cases by analyzing vast amounts of data. This enables tax authorities to target their efforts more effectively, resulting in increased revenue collection etc

This underscores the service’s commitment to embracing these technological solutions, recognizing their potential to modernize the agency’s systems and create a more efficient, transparent, and taxpayer-friendly environment.

This is seen as a crucial step in addressing the challenges that have historically hampered tax collection in Nigeria, such as multiple taxes and revenue collection agencies, a high prevalence of tax evasion, a complex tax system, and poor accountability in the use of tax revenue.

The integration of various government agencies’ data onto a single platform, facilitated by technology, is expected to address this problem and provide real-time visibility into revenue streams.

This highlights the president’s recognition of the critical role that taxation plays in funding national development, particularly in the face of Nigeria’s reliance on oil revenues.

By empowering the FIRS to drive a technological transformation, President Tinubu is signaling his determination to enhance the government’s fiscal capacity and ensure that tax revenue is effectively utilized to improve the lives of the country’s citizens.

 

Nigerians eagerly await the results, with high expectations that the technological innovations and reforms will lead to a more efficient, transparent, and taxpayer-friendly tax system.

 


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