• Monday, July 15, 2024
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Oyedele-led committee proposes five executive orders to fast-track reforms

The Taiwo Oyedele-led Presidential Committee on Fiscal Policy and Tax Reforms has proposed five executive orders to accelerate fiscal reforms and revive Nigeria’s economy.

The first order includes measures to curb inflation and foster price stability, such as suspending import duty and VAT on specified items, allowing millers to import paddy rice, pegging the exchange rate for import duty at N800, prioritising productive spending, and paying down accumulated ways and means.

A second order aims to generate employment by providing relief for wage awards, subsidising transport for low-income staff, and enabling Nigerians to work as remote employees for foreign companies.

To boost non-oil exports and international trade, the committee suggests tax exemptions for repatriated export proceeds of services and intellectual property, zero-rated VAT for all non-oil exports, relaxation of restrictions on the use of export proceeds, and the removal of the Tax Clearance Certificate (TCC) as a condition for forex applications.

Another order seeks prudent financial management and fiscal sustainability. It requires MDAs to remit operating surpluses above N5 billion, bans foreign trips for events targeted at Nigerians, mandates electronic payment of estacode, directs payments to MDAs’ contractors to be made directly, and requires all payments of fees to be in naira with MDAs’ forex banked with the CBN.

The final proposed order focuses on tax information consolidation and collaboration, mandating the use of NIN and RC numbers, and establishing a national tax data governance framework.

These orders are part of about 450 policy recommendations by the committee to improve Nigeria’s revenue profile and create a more conducive, internationally-competitive business environment.

“Our executive orders have not yet been sent to the president. We are still finalising engagement rounds and will seek the finance minister’s approval next,” said Oyedele at a stakeholder exposure and impact assessment session in Abuja. “We are meeting with finance commissioners across states, local governments, the Joint Tax Board, and others to ensure broad consensus.”

The committee also proposes an amendment to the constitution to require Ministries, Departments, and Agencies (MDAs) to submit audited accounts of previous years’ budgets as a condition for new budget approvals. This transparency aims to address the issue of agencies not accounting for previously allocated resources.

Further, the committee recommends that the government should allocate a minimum percentage of annual spending to infrastructure and human capital development, replacing broad categories like capital and recurrent expenditure with specific headings such as infrastructure, human capital investment, personnel cost, headcount & productivity, administrative overheads, debt service & sinking funds, and implementing zero-based budgeting.

“We want our budget to clearly outline spending on roads, electricity, ports, and potable water to improve welfare and stimulate economic activities,” Oyedele stated.

Another proposal is for a detailed heading for personnel cost, headcount, and productivity to enable effective planning, requiring MDAs to justify their employee numbers and planned hires.

“We’ve seen politicians hire hundreds of thousands as personal assistants near elections, which isn’t a good use of resources. We think productivity per capita for civil servants can be measured and improved,” Oyedele noted.

Administrative overheads should also be categorised, and there should be a dedicated section for debt service and sinking funds. Importantly, infrastructure and human capital development must have a minimum budget percentage, while personnel cost, administrative overheads, and sinking funds should have caps.

The Tinubu administration opposes accompanying the annual budget with a Finance Act, a practice adopted under President Buhari. “The Finance Act was well intended but became misused. We think comprehensive reforms should occur every five years, not annually,” Oyedele added.

The committee also recommends reducing the total number of taxes citizens pay to single digits and aims to raise the tax-to-GDP ratio from about 11% to at least 18% over the next two to three years, with a revenue-to-GDP target of 30%.

VAT should be transferred to the exclusive list for central collection, with states entitled to up to 90% of total collections. The committee also seeks to remove VAT on essentials such as food, health, rent, and education, which account for over 80% of Nigerians’ spending. This removal would result in a 60% drop in VAT revenue, to be offset by increasing VAT on other items.

The committee proposes gradually cutting Company Income Tax (CIT) by about 5% from the current 30% over the next two years. Nigeria’s CIT rate is among the highest globally, effectively up to 40% with other taxes, deterring investment.

To tackle corruption, the committee recommends a constitutional amendment barring people convicted of corruption from receiving presidential pardons. It also suggests that tax violators and evaders be ineligible for public office.

The committee is developing a whistle-blowing framework to combat corruption in the tax system and proposes amending the constitution to ensure an equal number of ministers from each political zone to reduce governance costs.

The committee also revealed a new regulation simplifying Withholding Tax (WHT), particularly beneficial for SMEs. It proposes establishing the Nigeria Revenue Service to replace the Federal Inland Revenue Service, consolidating tax and levy collections to curb duplication of tax audits.

Another proposal is to replace the abused pioneer status with priority sector incentives, rewarding companies based on their investments in the economy. Existing exemptions will be honoured until they expire.

The committee seeks to cut the collection cost by revenue-generating agencies to 1% to increase government revenue and reduce borrowing. Current fees range from 4% to 35%, which is unsustainable.

Recommendations include transitioning monthly FAAC allocations to daily disbursements and delegating to junior accountants across government tiers. The committee has also developed the first national fiscal policy document addressing tax collection, spending, and borrowing.

Proposals also include a national strategy for taxing the informal sector, potentially exempting up to 95%, and reducing the tax burden on low-income earners. Minimum wage earners would be exempt, with reduced rates for those earning between one and two million.

Lastly, the committee recommends establishing revenue courts to resolve tax disputes promptly, fostering a better business environment. “Simplicity, clarity, certainty, convenience, efficiency, flexibility, sustainability, accountability, and transparency will guide our tax system going forward,” assured Oyedele.

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