Taiwo Oyedele, chairman presidential committee on Fiscal Policy and Tax Reforms, has said that the new tax policies will enable manufacturers and small business operators to grow the economy, thereby increasing tax revenues for the government.
Speaking on the topic, ‘Fiscal & Monetary Policy Reforms; Removing Barriers to Private Sector Investment’, at the ongoing 30th Nigerian Economic Summit, he said that the government prioritised small businesses in the recently gazetted Withholding tax and Value-Added Tax regulations.
“We prioritised manufacturers and SMEs in our reforms. Now, there are no taxes on manufacturers anymore,” he said.
“When we withhold your income, and you’re borrowing at 35 percent, it means you’re funding the government at 35 percent. How do you grow? We’ve done the same for VAT, this allows their costs to go down,” he added.
Recently, the FGN published a set of regulations on Withholding taxes and Value-Added Tax, exempting a category of business owners and manufacturers from tax deductions.
The regulation exempts SMEs with an annual turnover not exceeding N25 million, which is N2 million in a calendar month.
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It also exempts businesses in manufacturing, agriculture, and other production activities regardless of their turnover.
He further stated that the government is focused on developing a system to automatically get the right people to pay taxes rather than taxing low-income earners.
“One of our focuses is getting people to pay taxes, particularly people on the higher end. We discovered that about 90 percent of people who pay taxes have no business paying taxes.”
“So we are developing a system that uses an ID using the National Identity Number for individuals, the RC number with CAC for businesses, and all economic activities will be linked to that ID.”
“So when you declare your income, and it doesn’t correlate with your economic activity, you will have to reconcile that difference. Also, you must invoice everything you do using a system connected to the govt.
If you don’t, we’ll get the information from a third party, and each time you sell, the system monitors your inventory. So, the people who need to pay taxes will pay,” he said.
According to the International Monetary Fund, Nigeria has one of the lowest revenue-t0-GDP ratios in the world, leaving its fiscal position weak.
While Nigeria’s tax-to-GDP ratio is only 10.9 percent, other African countries such as Tunisia (32 percent), South Africa (27 percent), and Kenya (15.2 percent) have higher ratios.
Nigeria also has one of the lowest VAT rates in Africa at 7.5 percent, compared to Tunisia (19 percent), South Africa (15 percent), and Kenya (16 percent).
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