June 2, (THEWILL)- The rapidly declining investors’ confidence in the Nigerian economy is set to witness a reversal. This is indicative of the initiatives being proposed by the Presidential Fiscal Policy and Tax Reforms Committee constituted by the Federal Government in 2023.
The committee was set up by President Bola Tinubu to review and redesign Nigeria’s fiscal system with respect to (1) revenue mobilisation, both tax and non-tax (2) quality of government spending and (3) sustainable debt management. In addition, the committee will identify relevant measures to make Nigeria an attractive destination for investment and facilitate inclusive economic growth
During its public consultation dialogue on the proposed changes to the nation’s tax policy held in Lagos recently, the Committee Chairman, Taiwo Oyedele, urged Nigeria to do away with what he called nuisance taxes. According to him, this category of taxes have very low revenue yield, high cost of collection and constitute the ultimate burden on poor and small businesses.
Taiwo presented an array of unnecessary taxes and policies that hinge on the deeply rotten system which constitute a recipe for business failure, poverty and low revenue profile. He noted that Nigeria’s notorious culture of lacking in ease of doing business revolves round corruption, numerous taxes, levies and official extortions that cannot make genuine business to thrive.
This, generally, accounts for the unhealthy present socio-economic reality encapsulated in slow economic growth with the GDP around 3 percent in the past 10 years. High inflation of 33.7 perent as of end of April 2024, and high unemployment rate of over 35 percent.
Other vices include high widespread poverty with over 95 million in monetary poverty and 133 million in multidimensional poverty. Low revenue, high public debt, declining investment and increase in the rate of emigration. The challenging lack of conducive business environemtn creates the multiple windows of failed businesses, poverty and lack of investment.
According to him, the manufacturing sector and small and medium enterprises are the worst hit. He disclosed that the sachet water producers bear the burden of about 13 taxes and levies most of which are paid on a daily basis.
“Many of these businesses are nano, micro, small and are barely surviving. They have no ability or capacity to pay taxes. Imagine asking the vulcanizer to file tax returns, where will he start? He cannot hire Accountants, he cannot hire Lawyers or even Tax practitioners. What every country should do is to protect their most vulnerable population” Oyedele said.
The manufacturing sector is exposed to numerous taxes and levies most of which are a duplication. This include state and local government taxes on environmental preservation, ooze layer protection and similar commitments.
Additionally, the electronic process of registering a business, payment of taxes or registering a complaint are increasingly cumbersome and frustrating while non-state actors play active part in revenue collection which often translate to official extortion.
Alluding to the idea canvassed by the leadership of the Federal Inland Revenue Service (FIRS), Nigeria should abolish multiple revenue collection agencies which constitute avoidable cost and pave the way for deepening corruption.
According to Oyedele, the Committee has recommended that Nigeria should create a central tax agency, known as the Nigerian Revenue Service, eliminating over 100 different collection agencies at the federal, state and municipal levels.
Oyedele disclosed that the Federal Government has signed into law the withholding tax bill proposed by his committee which exempts manufacturers and small businesses from paying the tax.
“We sent the withholding tax proposal to the National Assembly for approval and I just heard it has been signed,” Oyedele said.
The tax advisory committee also recommended that governments at national and sub-national levels do away with over 60 taxes, leaving only eight taxes which are income tax, value added tax, property, custom duties, excise tax, stamp duties, special and harmonised levy.
It also recommended that the government restructure the budget and classify items under infrastructure; human capital investment; personnel cost, headcount & productivity; administrative overheads; debt service & sinking funds and fully implemented zero-based budgeting, and introduce long-term appropriation.
It called on the government to tackle systemic corruption, prioritise spending on basic needs to address multidimensional poverty, restrict borrowing to productive spending and self-financing projects, and enhance public procurement effectiveness.
On his appointment last year, the Executie Chairman, FIRS, Zacch Adedeji made it clear that he would persuade the government to adopt single-revenue agency window as against the multi-revenue system that had existed in over the years.
He also adopted a strategy that focused on expanding the tax net instead of introducing new taxes to burden the people. The new structure he put in place at FIRS helped to achieve these objectives leading to the impressive performance of the agency.
The FIRS chairman said a single revenue-collection agency is responsible for collecting revenue in other countries, which he noted is a better approach.
“But here in Nigeria we have more than 62 agencies collecting (revenues) one way or the other on behalf of the federal government,” Adedeji said.
“And when you see people (agencies) instead of going to their area of strength, everybody tries to collect (revenue) — the leakage is all there.” Speaking on the target for 2024, Adedeji said the agency is aiming for a tax revenue of N19.4 trillion. According to himi, the strategy for reaching the target is to develop proactive engagement by establishing regular communication.
“We will provide customised and efficient services that address the unique needs of large taxpayers and key sector contributors,’ he said.
“We will improve service delivery, expand tax net and enhance compliance measures by improve enforcement activities in line with relevant laws, and increase collaboration with strategic stakeholders.
“So the focus is to improve tax collection effectiveness without increasing tax.”
Following the impressiver performance of the revenue agency, the government said it is committed to support the FIRS towards a sustainable tax culture that will ensure the continuous flow of revenues even at an improved level.
Among the steps recommended by the Fiscal Policy and Tax Reforms Committee for immediate implementation are measures to ensure prudent public financial management an improve public sector efficiency, optimise value from non-tax revenue sources e.g. government assets and natural resources, develop a tax intelligence system “Data4Tax” to expand the tax net and increase personal relief allowance for employees and tax deductions for employers in respect of salary increases, transport subsidy and net increase in employment.
Others are option for Nigerian businesses (other than those in the oil and gas sector) to pay all their taxes and levies in Naira, address impediments to global employment opportunities for Nigerians based in Nigeria, suspend VAT on diesel, give tax waivers on CNG, CNG conversion, and renewable energy items, as well as.suspend multiple taxes which place burdens on the poor and small businesses and compensate with windfalls revenue of certain agencies.
The government should also promote export of goods, services and intellectual property and modify Tax ProMax to allow part payment and waive penalty and interests on tax liabilities.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
