Only 9% of companies in Nigeria pay tax – Reps

The House of Representatives Committee on Finance have expressed concerns that only 9% of companies registered in Nigeria are captured in the tax net, while only about 35 million Nigerians pay tax, highlighting the need for reforms.

James Faleke, chairman, House committee on Finance said this in his opening remarks at the ongoing public hearing on the four tax reform bills on Wednesday at the National Assembly. The bills include the Nigeria Tax Bill, Joint Revenue Tax board bill, Tax Administration Bill and the Nigeria Revenue Service Bill.

The chairman stated that the imbalance in the payment of tax is unsustainable if Nigeria must adequately fund critical infrastructure needed to build the Nigerian economy to a desirable level.

Read also: Nigeria to attain $1tn economy through tax reform bills Senate

He cited experts estimates suggesting that Nigeria requires $3 trillion (₦1.8 quadrillion) over the next 30 years (that is, equivalent to $100 billion annually) to bridge its infrastructure deficit, but stressed that IGR falls significantly short of this amount, leading the government to borrow substantially in order to bridge the funding gap.

“This reality highlights the urgency of implementing tax reforms that will simplify and enhance revenue collection, reduce reliance on borrowing, and drive sustainable development”, he said.

Speaking further, he noted that for many decades, Nigeria’s tax laws have remained largely unchanged, and no longer in tune with economic realities
noting that while these laws served their purpose at the time they were enacted, the economic and business landscape has evolved significantly over time.

Falake informed that the reform bills when enacted will repeal 11 laws including: Companies Income Tax Act (CITA) – 1979, Value Added Tax Act (VAT) – 1993; Personal Income Tax Act (PITA) – 1993; Income Tax (Authorised Communications) Act – 1966; Capital Gains Tax Act – 1967; Stamp Duties Act – 1979; Casino Act – 1965; Deep Offshore and Inland Basin Act -1999; Industrial Development (Income Tax Relief) Act ; Petroleum Profit Tax Act – 1959 (when I was born); and Venture Capital (Incentives) Act – 1993.

The chairman further stressed that Nigeria urgently needs reforms. He said being the largest economy in Africa, Nigeria’s tax-to-GDP ratio remains one of the lowest on the continent.

“In 2023, data from the International Monetary Fund (IMF) showed that Nigeria’s tax-to-GDP ratio was approximately 9.4%, compared to South Africa at 21.6%, Kenya at 14.1%, and Senegal at 19.1%”, he said.

Read also: MAN supports tax reform on free-trade zone operations in Nigeria

“The tax reform bills provide us with a once-in-a-lifetime opportunity to create a modern, efficient, and effective tax system for Nigeria. We must seize this moment to make the process as robust, inclusive, and credible as possible.

“As we commence the public hearing, I urge all stakeholders to participate actively and share their insights. Your contributions today are invaluable to ensure that these legislations will help shape policies that will govern taxation in Nigeria for generations to come”, he urged.