- targets 18% tax to GDP ratio in 3 years
By Chesa Chesa
President Bola Tinubu on Tuesday at the State House, Abuja inaugurated the Presidential Committee on Fiscal Policy and Tax Reforms, with a target to up Nigeria’s tax to GDP ratio to 18 percent within the next three years.
The committee is chaired by Fiscal Policy Partner and Africa Tax Leader at PriceWaterhouseCoopers (PwC), Taiwo Oyedele, who revealed that so few Nigerians are paying tax that the nation’s tax gap is put at about N20 trillion.
In his remarks on the occasion, President Tinubu vowed to break the vicious cycle of overreliance on borrowing for public spending, and the resulting debt servicing that has overburdened Federal Government revenues.
The President charged the committee to improve the country’s revenue profile and business environment evennnas he directed it to achieve its one-year mandate, which is divided into three main areas: fiscal governance, tax reforms, and growth facilitation.
Acknowledging Nigeria’s current international standing in the tax sector, the President said the nation is still facing challenges in areas such as ease of tax payment and its Tax-to-GDP ratio, which lags behind even Africa’s continental average.
He declared that “our aim is to transform the tax system to support sustainable development while achieving a minimum of 18% tax-to-GDP ratio within the next three years.
”Without revenue, 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, Mr. 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.
Chairman of the Committee, Mr. Taiwo Oyedele, noted that “many of our existing laws are out-dated, 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.”
Addressing a press conference shortly after the inauguration, 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 20 trillion naira.
“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 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 mandates 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 the 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 harmonization of taxes that we have repealed from the current legislation.”
