Nigeria’s current tax system is fragmented and inefficient

By Juliana Taiwo-Obalonye, Abuja

President Muhammadu Buhari on Tuesday in Abuja described Nigeria’s current tax system as fragmented and inefficient, calling for a harmonized system within a single system to boost revenue generation.

According to a statement by the President’s Special Advisor on Media and Publicity, Femi Adesina, President Buhari addressed the 2nd National Tax Dialogue on the theme “Tax Harmonization for Better Revenue Generation”.

He expressed his administration’s commitment to effective tax administration to improve tax revenue in the country.

President Buhari, who expressed concern about the country’s current tax system characterized by fragmented administration, multiple and sometimes overlapping taxes, said: “In most fiscally efficient countries, the processes and practices of tax administration are harmonized within a single system.

“One of the key outcomes of this year’s tax dialogue is to promote synergy in tax administration between different levels of government.

“The harmonization of taxpayer identification across the country is a good start, but we need to do more to promote the ease of doing business (including ease of tax compliance) in Nigeria.

“On our side, we started by specifying in the 2021 finance law that the FIRS is the only authority responsible for administering taxes for the federal government.

“This clarification has become necessary in order to prevent taxpayers from being burdened with multiple tax compliance obligations to different agencies of the same government.

“The multiplicity of tax administration is as undesirable as a multiplicity of taxes; it creates uncertainty and instability; and above all, it is ineffective.

Faced with falling commodity revenues, President Buhari told participants in the tax dialogue that there is an urgent need to maximize domestic revenues within the framework of existing tax policy and laws.

He proposed improved tax revenue for the country which will not necessarily impose new tax rates on Nigerians.

“We all know that good intentions are not enough because they simply cannot pay for infrastructure, security or social amenities. It is therefore necessary to improve tax revenues without necessarily increasing new taxes.

“Commodity revenues, including crude oil, are too volatile and unreliable. Therefore, I pledge government support for any viable tax revenue improvement initiative that should emanate from this dialogue,” he said.

Regarding Nigeria’s tax-to-GDP ratio, the President said the country must also do more to ensure a vibrant domestic revenue base that bequeaths a sustainable economic base, political stability and social harmony to the next generation. .

“According to the Organization for Economic Co-operation and Development (OECD), in its Africa Income Statistics 2021, the average tax to GDP ratio of 30 selected African countries in 2019 was 16.6% while Nigeria n recorded only 6.0%.

“It is clear that much remains to be done in the area of ​​tax revenue mobilization.

“I expect discussions at this 2022 National Tax Dialogue to focus on what we need to do to maximize legitimate revenue collection and massively improve the tax-to-GDP ratio.”

On the importance of the tax dialogue, which was instituted by the Minister of Finance, Budget and National Planning, and the Executive Chairman of the Federal Inland Revenue Service (FIRS), the President noted that the first edition in 2021 has been very productive and integral in influencing tax policy, as well as the legislative and administrative changes that were introduced last year.

He added that the most important testimony to the success of the first edition is that the FIRS reached 100% of its fundraising target in 2021 and surpassed the N6 trillion revenue threshold for the first time ever. .

Congratulating FIRS on the achievement, the President assured Nigerians that the current administration would continue to “maintain careful stewardship of our collective resources.”

In her remarks, the Minister of Finance, Budget and National Planning, Zainab Ahmed, said the dialogue was designed to engage Nigerian fiscal space stakeholders in a meaningful discourse to glean information, ideas and experiences with policy formulation and improvement. tax environment.

According to the minister, the federal government’s main tax revenue objectives include developing an economy that is not overly reliant on resource wealth.

She explained that Nigeria’s economic history provides enough facts that resource wealth alone cannot lead to sustainable development, self-sufficiency and sustainability.

Other tax revenue targets are:

“To institutionalize a healthy tax culture among Nigerians. The right attitude towards taxation will enable every Nigerian to become a co-custodian of the tax system and the Commonwealth.

“To create a participatory tax system in which taxpayers and other stakeholders understand and accept that they have equal interests in the tax system.”

FIRS President Muhammad Nami thanked the President for his directive to government agencies to allow FIRS to connect to their ICT systems; noting that this singular statement softened the motives for the Service to deploy its transparent data acquisition system.

“We are confident that the moment all agencies achieve 100% compliance with the President’s directive, Nigeria will be the envy of other countries in tax compliance and domestic tax revenue mobilization,” he said. he declared.

Regarding the service disbursements to the Federation account, Nami announced that statistics from the March 2022 Federation Accounts Allocation Committee (FAAC) meeting show that out of the total revenue of N803.072 billion from all tax agencies, the tax revenue paid by the FIRS was 513 naira. 522 billion (63.94%) while non-tax revenue from all other agencies stood at 289.55 billion naira (36.06%).

The President noted that the average fee or FIRS contribution to FAAC in 2021 was 59.45%.

“I mentioned in my welcome speech to the 2021 edition of the Tax Dialogue that the world has entered a tax race in which Nigeria must be the winner.

“The country’s revenue profile in 2021 has clearly shown that our continued survival as a nation depends on tax revenue.

“This trend is expected to continue for some time to come. Thus, everyone must be on hand to support the tax system and make it work effectively.

“However, it is surprising that some people have started doing politics with tax revenue generation.

“We humbly invite the President to intervene to deter political tax gladiators from sheathing their swords. Tax revenue is an inherently apolitical issue; it should be treated as such by all, regardless of their political leanings,” he said. declared.

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