To eliminate multiple taxation and increase revenue, the federal and state governments have commenced harmonisation and codification of taxes at the national and sub-national levels.
In line with this, President Bola Tinubu is also expected to inaugurate the Presidential Committee on Fiscal Policy and Tax Reforms on Tuesday which will be chaired by Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PriceWaterhouseCoopers (PwC).
At the 153rd board meeting of the Joint Tax Board which had in attendance tax administrators from 36 states and the Federal Capital Territory in Abuja on Tuesday, chairman of the JTB, Muhammad Nami said the board is taking this harmonisation drive very seriously, and would not end up like past unsuccessful attempts, especially as the new administration is focused on eradicating multiplicity of taxes.
The issue of multiple taxation has for decades been a burden for businesses in Nigeria. Businesses owners have repeatedly lamented how they are made to pay taxes, levies, among others to various tires of government which negatively impacts their business.
Despite this, Nigeria’s tax to GDP ratio is put at 10.8%, one of the lowest globally.
Nami, who is also executive chairman of the federal Inland Revenue Services said government plans to reduce the current number of taxes, block leakages in the tax system and raise more revenue for the three tiers of government.
For Nigeria to attain optimum tax revenue collection capacity across the Federal, States and Local Government tax authorities, the chairman said the country must make hard but necessary reforms that would yield long term benefits.
He said an objective of the meeting themed, “Harmonization and Codification of taxes at the National and Sub-national levels, key to achieving a tax friendly environment in Nigeria is to adopt new ways for optimisation of tax revenue for all levels of government for a more efficient, effective, inclusive more sustainable tax administration; bring coherence in the entire tax revenue administration processes.
“The implication is that, what we call informal taxes, black taxes, whatever name you call it, at both local government, state and at the centre, the intention of government is to eliminate those multiple taxation to encourage investment, to raise adequate revenue because the irony of everything is that the more of these taxes that we have, the less of the revenue we generate”, he said.
“By the grace of God, this is not another promise that will not be fulfilled. Government has already announced the Constitution of a presidential committee and recently, I was at NEC to speak to governors, to solicit for their support so we realise this in good time. And we are very confident that the inauguration of the committee by President means that we are going to start work immediately, promises made in the past which were not kept would be kept this time around.”
The chairman further disclosed plans to include the informal sector in the tax administration. He said government is investing a lot and has formed some partnership with informal trade unions, and would ensure that services and goods that are not taxable are not reduced to taxation.
“We are doing proper planning, enumeration of tax papers in the informal sector, to make sure that those that are rendering services that are not taxable are not made to pay. Those trading in goods like tomatoes, food items from the farms are not made to pay taxes, not doing enough turnover of at least 25 million are not made to pay VAT. So we are doing a lot.
to ultimately provide the needed revenue to provide critical infrastructure and social services.
Executive Secretary of the Joint Tax Board, Obomeghie Nana-Aisha, who decried the proliferation of tax collectors payment of illegal taxes, an which often don’t get to government assured that government will harmonise tax collection to make tax payment a seamless process.
She said government would also ensure transparency by making public the taxes to be paid.
Also speaking, Oyedele said the key to Nigeria’s tax revenue problem is not to introduce more levies and taxes but to focus on the few that are high revenue yielding, easy to administer, difficult to evade .
“Ironically, the more the number of taxes, the less the tax revenue you collect which means the lesser taxes, the more you collect. We will make far more than we are collecting today, we do not need many taxes”, he said while noting that the current list of taxes is too much for businesses to survive in the country.
While disclosing that there are about 44 different bills at the National Assembly with provisions on levies and taxes, Oyedele warned that Nigeria may get to a point that the total taxes will be 100% more than what business make, which would discourage investment.
He listed the key challenges of Nigeria’s tax system to include multiplicity of taxes and multiple revenue collection agencies; largely fragmented, rudimentary, and complex tax system which has added to business risk; low revenue due to low tax morale and high prevalence of tax evasion; and high cost of revenue administration and compliance among others.
This, according to him, depletes returns on investment, erodes business capital, and may trigger business collapse.
Comparing Nigeria to South Africa, Chairman of the presidential committe decried that Nigeria with a larger economy and four times the population of South Africa collected N15.1 billion taxes in 2022 while the latter raked in N78. 2 billion. This he said calls for sober reflection.
He said the most underperforming tax is the personal income tax , which is the highest revenue yielding for most countries and must be harnessed.
Oyedele also recommended the need for the country to administer single digit tax at all levels of government, provide clarity on taxing rights, and simply approach to tax compliance.