President Bola Tinubu Tuesday has projected an 18 percent tax to GDP ratio in the next three years in efforts to break the vicious cycle of overreliance on borrowing for public spending, and the resulting debt servicing that has overburdened Federal government revenues.
The projection is based on the revelation by Taiwo Oyedele, the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms that the country can still ramp up its tax collection by N20 trillion.
Nigeria’s tax collecting agency, the Federal Inland Revenue Service (FIRS) collected N10.1 trillion in tax revenue in 2022, the highest tax collection in its history, and surpassing 2021’s collection of N6.405 trillion.
The president acknowledged Nigeria’s current international standing in the tax sector but noted that the nation still faces challenges in areas such as ease of tax payment and its Tax-to-GDP ratio, which lags behind even Africa’s continental average.
Consequently, Tinubu charged the newly inaugurated Taiwo Oyedele-Committee to improve the country’s revenue profile and business environment within its one-year mandate. The focus of the committee is divided into three main areas: fiscal governance, tax reforms, and growth facilitation.
He declared that “we aim to transform the tax system to support sustainable development while achieving a minimum of 18 percent tax-to-GDP ratio within the next three years.
”Without revenue, the government cannot provide adequate social services to the people it is entrusted to serve.
”The Committee, in the first instance, is expected to deliver a schedule of quick reforms that can be implemented within thirty days. Critical reform measures should be recommended within six months, and full implementation will take place within one calendar year.”
Recounting the President’s sterling track record on revenue transformation, the Special Adviser to the President on Revenue, Zacchaeus Adedeji described the committee members, drawn from the public and private sectors, as accomplished individuals from various sectors.
”Mr. President, you have the pedigree when it comes to revenue transformation. You demonstrated this when you were the Governor of Lagos State over 20 years ago,” the Special Adviser said.
Oyedele, formerly, the Fiscal Policy Partner and Africa Tax Leader at PriceWaterhouseCoopers (PwC), and chair of the new committee, noted that “many of our existing laws are outdated, hence they require comprehensive updates to achieve full harmonisation to address the multiplicity of taxes, and to remove the burden on the poor and vulnerable while addressing the concerns of all investors, big and small.”
Oyedele further noted that Nigeria’s tax dragnet is so small that a gap of N20 trillion needs to be bridged.
“There’s a huge task gap. What that means is as of today, without introducing any new taxes, if you get everyone that needs to pay their taxes to pay, we will not be where we are. So, we think that the gap is somewhere in the region of N20 trillion.
“In addition to that, you would also imagine that we have inefficiencies in the way we collect the little that we collect. I think in the 2023 budget, we have like 63 MDAs that were given revenue targets. Those MDAs want to be able to focus on their primary duties of why they were established, the revenue mandate is a distraction for them.
“So imagine that we asked the FIRS to collect those revenues on their behalf so those agencies by focusing on their primary mandates, they’ll facilitate the economic development, we’re looking for.
“FIRS will collect the revenues efficiently, which means not only is the top line growing because of collecting it is reducing. And that gives you a much bigger margin to take care of the people.
“So these are some of the areas where we expect that the increase (18% tax-to-GDP) would come from”, he said.
He however clarified that “the mandate that this committee has is to get rid of so many taxes that come in the way of prosperity for our people. So Nigerians should look forward to a more harmonized fewer number of taxes”.
Oyedele also stressed that “part of the mandate of this committee is to get a lot of data about our people. So when we are collecting data about our people, it is not because we want to tax everyone.
“So when you have that data, you use it to design fiscal policy such that the poor and vulnerable do not carry the burden of tax.
“If we get to a point where it becomes necessary to look at existing tax rates, and all of that, it will be maybe, as a result of the harmonization of taxes that we have repealed from the current legislation.”
Muhammad Nami, a day earlier had said that hard but necessary reforms will only help the government to attain optimum tax revenue collection capacity across the Federal, State, and Local Government tax authorities.
Nami, Chairman of the Joint Tax Board (JTB) at the 153rd meeting of the Board, said tax authorities must continue to explore and adopt measures and innovative initiatives to optimise tax revenue at all levels of government.
Speaking on the theme: “Harmonization and codification of taxes at the National and Sub-national levels: Key to achieving a tax-friendly environment in Nigeria”, Nami said all the levers of State must shake off lethargic antecedents and focus on the goal of a national resurgence in the new administration’s attempt to address the many socioeconomic challenges facing the nation.
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