A fragmented tax system responsible for Nigeria’s low tax revenue – Nami
Federal Inland Revenue Service (FIRS) Executive Chairman Muhammed Nami said Nigeria’s fragmented tax system and agencies were responsible for the country’s tax revenue losses.
In a statement made available to reporters on Wednesday morning, the Special Assistant (Media and Communications) to the Executive Chairman of FIRS, Johannes Oluwatobi Wojuola, quoted Nami during the Senate public and stakeholder hearing on the framework of Medium Term Expenditure 2023 (MTEF) and Fiscal Paper Tuesday in Abuja.
Nami said, “In Nigeria, we have 774 local governments, each of them has revenue authority; each of the 36 states also has tax authorities with their respective mandates; then we have the FIRS and customs. What I would advise for efficiency and to do things according to global best practices is that we should change our tax laws to harmonize the tax agencies and the tax system.
“With this, when the FIRS, for example, visits ‘Company A’, it can provide a valuation to the company, as well as the person who owns the company; he can also ask the company to account for the VAT it has collected, and request the PAYE it has deducted from its employees as well as the Personal Income Tax of the Promoters of the Company.
“This is currently not the case, and as such has created a huge void in our tax system.”
For his part, Senate Finance Committee Chairman, Senator Solomon Adeola, urged the federal government to explore new strategies that would bolster federation revenue, including restructuring the remittance formula for government-owned enterprises (GOE ).
According to the Committee, the federal government should consider a situation where the GOEs remit 100% of their revenues to the government, while being funded by a fixed percentage of the cost of collection, as is the case with the FIRS and customs.
The Committee disagreed with the current situation where some government agencies were withholding one hundred percent of their revenues, spending them and paying out the government’s operating surplus.
The Committee recommended that these GOEs retain only 5-15% of their cost of collection from the revenue generated to cover their salaries, operating expenses and capital expenditures, as Nigeria Customs and FIRS currently do, while remitting the difference of 85%. at 95% of their gross income, unlike the current practice of operating surplus where they spend between 70 and 90% of their gross income. The Committee further urged the federal government to apply the same logic to the operation of public universities by funding only research and infrastructure needs through the school tax already administered by FIRS, while allowing vice- chancellors to use the school’s income. fees and other innovative sources of revenue to run universities.