• President: no more excessive borrowing
• Stiff penalty likely for tax evasion
Nigeria loses N20 trillion yearly to tax gaps, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms Taiwo Oyedele disclosed yesterday.
Oyedele gave the figure after President Bola Tinubu inaugurated the committee and charged its members to actualise his administration’s desire to achieve an 18-cent Tax-to-Gross Domestic Product (GDP) ratio within three years.
The committee chairman told reporters in Abuja that the N20 trillion yearly tax loss was mainly attributable to evasion and inefficiency in collection modes.
He said: “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.
“There are some areas where we expect that the increase (18 per cent tax-to-GDP) would come from.
“If we get to a point where it becomes necessary to look at existing tax rates and all of that, it will be as a result of the harmonisation of taxes that we have repealed from the current legislation.”
President Tinubu told the members that attaining the 18 per cent tax-to-GDP target was possible if the country’s revenue profile and business environment were improved upon.
He reminded them that they were expected to deliver a schedule of quick reforms and recommend critical reform strategies and modes of implementation within one year.
The President called on stakeholders, especially in the monetary sector and all Nigerians, to support the committee in the critical national assignment.
He vowed to end the vicious cycle of borrowing by Nigeria to “service previous debt” because the trend makes socio-economic development difficult.
President Tinubu directed the ministries, departments and agencies (MDAS) to cooperate with the 70-member committee in achieving its mandate.
His words: “The consequences of the ongoing failure of our tax regime are real and significant. The inability of the government to efficiently raise revenue has led directly to an overreliance on borrowing to finance public spending.
“A government that cannot properly fund itself will also lack the flexibility or fiscal scope to sensibly manage the economy or respond to external shocks.
“Instead, debt service begins to consume an ever greater portion of the government’s already meagre revenues. This traps the economy in a vicious cycle of borrowing simply to service previous debt and leaves almost no scope for socio-economic development.
“As President, I am determined to end this cycle. On the day of my inauguration, I promised that my administration would address all of the issues impeding investment and economic growth in Nigeria.
“This promise is why I saw an end to the fuel subsidy. It is the reason the Central Bank has called an end to its multiple exchange rate system under my watch. It is for the same reason we gather here to inaugurate the Presidential Committee on Fiscal Policy and Tax Reforms.
“Our target is to improve Nigeria’s revenue profile while making the business environment more conducive and internationally competitive.
“Our aim is to transform the tax system to support sustainable development while, at the same time, achieving a minimum of 18 per cent tax to GDP ratio within the next three years.
“To ensure seamless implementation, the committee shall be empowered, not merely to make recommendations, but to also provide practical support to the government in the execution and delivery of the recommended changes.
“The committee is expected to achieve its mandate within a period of one year. It is, in the first instance, expected to deliver a schedule of quick reforms which 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.”
Oyedele, a former Principal Policy Partner and Africa tax leader at PriceWaterhouseCoopers, pledged the commitment of the committee members to serve the nation.
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He said: “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.
“Our tax administration has improved, but remains relatively basic, with instances of unregulated collections by untrained officers, particularly at the local government level, being widespread.
“Our revenue generation falls below even African standards, yet our collection costs are among the highest. This is due, not only to multiple taxes but also to numerous collection agencies and fragmented revenue reporting procedures.
“Public willingness to pay taxes is strained because of a lack of trust in government, both among individuals and businesses, irrespective of size.
“The burden of tax falls heavily on those who comply, while those who evade often get away with little or no consequences. We need to change this.
“The process of resolving tax disputes is protracted and costly, with inadequate mechanisms for many small businesses and vulnerable individuals to seek fair tax resolution, as professional services are often beyond their means.”
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.
He said: ‘’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.”
During the news conference by Oyedele, World Bank Country Director in Nigeria Shubham Chaudhuri praised President Tinubu for ending fuel subsidy.
He said that subsidy added close to two percentage points of GDP to government revenues.
Chaudhuri stressed that for a government to provide basic services such as healthcare, education, and infrastructure, it needs to spend between 15 per cent to 20 per cent of GDP.
Nigeria has been spending between 10 per cent and 12 per cent of its GDP while its revenue is between about seven per cent to eight per cent of GDP.
President of the Manufacturers Association of Nigeria (MAN), Francis Meshioye, believes the inauguration of the committee represented a landmark step for the country.
He emphasised the importance of levying fair taxes and ensuring that they were deployed appropriately to enhance the business environment.
Meshioye called for a strong link between the government’s fiscal policy, taxation, and the well-being of the people.
He added: “One thing that is of significant importance is that there’s a realisation that there has to be a link between the government’s fiscal policy and taxation and the well-being of the people.”
A 400-level student of the Economics Department of the University of Ibadan, Orire Agbaje, is a member of the committee.
Agbaje is the President of the Nigerian Universities Tax Club.
Special Assistant to the President on Social Media and Digital Communications, Olusegun Dada, posted a picture of Tinubu with Agbaje after the ceremony on his verified X account.
FCT-IRS to block tax leakages
Also yesterday, the Federal Capital Territory Internal Revenue Service (FCT-IRS) said it has begun plans to correct errors in remitting taxes by residents.
Its chairman, Haruna Abdullahi, said the loopholes, if not stopped, would continue to deny the FCT of its “genuine resources.”
Abdullahi spoke at a workshop for Payroll and Personnel Information Systems (IPPIS) and Government Integrated Financial Management Information System (GFMIS) platforms in Abuja.
He said: “FCT-IRS as a revenue generating agency in the nation’s capital, Abuja, must enlighten the people on issues related to tax clearance, considering how important it is at the moment.
“Without tax clearance, an individual will not enjoy certain services at national and sub-national level.”
CITN-FCT Chairman Kennedy Iwund advised the government to comply with the provisions of tax laws.
Iwundu also said that wrong remittances cause challenges in the system and must not be allowed to continue.
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