As Nigeria’s revenue problem intensifies especially with issues around global oil prices, experts have urged that the tax collection policies and mechanisms in the country be reviewed to boost revenue inflow which will be used to address capital and recurrent expenditures.
This was discussed during a pre-summit webinar held ahead of the 28th edition of the Nigerian Economic Summit (#NES28) themed ‘critical tax reforms for shared prosperity’ hosted by the Nigerian Economic Summit Group (NESG).
Frank Aigbogun, Board member, NESG and Publisher, BusinessDay said tax revenue is critical for the government to finance its activities but in Nigeria, tax revenues are inadequate and far from potential which limits the government’s ability to address critical challenges.
“Policy weaknesses, lack of appropriate tax reforms and public understanding are the main obstacles preventing these taxes from playing a more significant role in Nigeria’s economic development,” he said.
He said Nigeria suffers low tax compliance which contributes to the depressed revenue mobilization, adding that the country’s tax to GDP ratio is six percent which is lower than the 18 percent average for African countries
“Nigeria needs a paradigm shift in tax paying culture, political leaders can support this cultural change through tax compliance themselves, the structure of taxes should also promote economic growth and a business friendly environment especially for Small and Medium Scale Enterprises,” he said.
Aisha Obomeghie, executive secretary, Joint Tax Board, (JTB) tax reforms have always been employed over the years however it seems to be one sided, concentrating mainly on collection.
She revealed that numerous taxes and levies are being collected by the three tiers of government most of which the JTB does not manage.
“The federal government collects 11 different taxes, the state government collects 19 different taxes while the local government collects 21 and the JTB does not administer up to 20 percent of the taxes,” she said
Obomeghie recommended that the government sifts out the unnecessary taxes to 2 or 3 and also build up a database for taxing authorities to key into to collect the right amount of taxes.
She said the digital economy which has the prospects to boost tax revenue can be difficult to reach, but assured that the national data bank which will reduce the problem of tax evasion will soon be activated.
Taiwo Oyedele, Africa tax leader, PwC said taxes operate within the context of the economy noting that macroeconomic indices are not encouraging yet the national assembly keeps introducing new taxes although businesses are struggling whereas other countries are reducing corporate income tax rate to attract more investments.
“We also have multiple agencies trying to collect revenue leading to inefficiencies and tax morale is low, some politicians don’t have tax clearance certificate, many MDAs are not tax compliant, Nigeria taxes poverty and it cannot become rich through this because it has ripple effects on other parts of the economy ,” he said.
Rajul Awasthi, Senior Public Sector Specialist and Co-lead of the Domestic Resource Mobilization Global Solutions Group at the World Bank said from the public finance perspective, the government of Nigeria is facing an existential crises.
“Federation revenue are predicted to be significantly lower in 2022 due to the draining impact of the fuel subsidy, there is a need to rationalize tax expenditures, also the PMS subsidy regime should be moving towards full elimination by 2024,” he said.
Segun Ajayi-Kadir, Director-General, Manufacturers Association of Nigeria (MAN), said Nigeria needs money but some critical things need to be considered when imposing taxes such as the structure and status of the economy.
“We need to widen the tax net rather than increasing the tax base, we need to promote harmonization of taxes to attract more investment and there is need for enhanced consultation with stakeholders between the private and public sector before directives are implemented,” Ajayi-Kadiri, represented by Oluwasegun Osidipe, Director of Research and Advocacy, MAN said.
The 28th edition of the Nigerian Economic Summit is scheduled to hold from the 24th to 25th of October at Transcorp Hilton Abuja and via Zoom, with the theme 2023 and beyond; priorities for shared prosperity.