Diversified revenue, tax reform will spur growth post COVID-19 – experts
… say economy to contract 8% worst-case scenario
Finance experts in Nigeria have called for the need to diversify revenue generation sources at all levels of government while implementing a reformed tax system in order to improve economic growth in the country going forward.
This was the discussion at a webinar themed “Nigeria’s Fiscal Sustainability: Imperatives, Impediments and Options” hosted by the Nigeria Fiscal Policy Roundtable (NFPR), a fraction of the Nigerian Economic Summit Group (NESG) held recently.
Asue Ighodalo, chairman, NESG board, said in his address that it was necessary for Nigeria to diversify its revenue base, enhance economic growth and protect the its economy from external shocks, and these can be achieved by enhancing the country’s fiscal policy.
He mentioned that Nigeria recently kicked off a 2021-2025 development plan intended to succeed the vision 2020 and economic recovery growth plan (ERGP), adding that the country’s fiscal sustainability was expected to play a huge role in the new development plan, especially after the economic problems the COVID-19 pandemic had provoked.
Furthermore, Ighodalo said the enactment of the Finance Bill, creation of a favourable threshold to optimise tax collection and reduction of the tax burden on the financially disadvantaged of society would help to improve the economy and cushion the financial effects of taxes.
Speaking at a panel session, Kayode Fayemi, governor, Ekiti State and the chairman of the Nigeria Governors Forum (NGF), said the NGF set up an internally generated revenue dashboard that focused on sharing knowledge and experiences in tax collection and revenue generation across Nigerian states, adding that states cannot continue to depend on federation returns, which is quite low at the moment.
“If there is a sustained improvement in IGR, blocking tax leakages, creating new tax sources and improved efficiency in tax collection, there will be improved socio-economic indices and citizens will see a direct correlation between tax payments, usage, economic and infrastructural development,” Fayemi stated.
Leaders need to continue to ensure that resources generated from tax payers are effectively utilised and that government at all levels should ensure that tax leakages are plugged and properly utilised, he said.
Zainab Ahmed, minister of finance, said low revenue was a major challenge for the country, which had further been compounded by the outbreak of the Covid-19 pandemic. The minister, who was represented by Sarah Alade, special adviser to President Muhammadu Buhari on Finance and Economy, said the impact of COVID-19 would affect the GDP of Nigeria, which in its best-case scenario might contract by 4 percent and in the worst-case scenario contract by 8 percent.
The minister mentioned that 21 million jobs could be affected by the pandemic, but the economic sustainability plan would help mitigate the effects and ensure stability through the support of MSMEs, accelerating infrastructural development, deregulation of refined petroleum products, incentivising the use of pension funds and supporting states to access external funds amongst others.
Taiwo Oyedele, research director and commissioner of the FPR, said tax officials face a number of challenges including inconsistent government policies, unrealistic targets and political interference.
Oyedele, who is also the Fiscal Policy Partner at PWC, recommended that social exchange, communication, transparency and accountability would help solve some of the problems of tax collection the government was facing. Furthermore, it is important for government to regularly publish tax revenue collection data and ensure that all levels of society comply fully with tax laws, he advised.