By Merit Ibe
The Lagos Chamber of Commerce and Industry (LCCI) has berated Nigeria’s current tax-to-Gross Domestic Product (GDP) ratio of 10.86 percent, which is far below the African average of about 15 to 20 percent, despite reforms and policy changes to boost revenue, simplify compliance and address critical fiscal challenges.
President of the chamber, Gabriel Idahosa made the remark yesterday during a program organized by the chamber themed: “Emerging Tax Matters,” where he emphasised the pivotal role taxation plays in shaping economic growth, promoting equity and enabling sustainable development.
Idahosa noted that under its new leadership, the Federal Inland Revenue Service (FIRS) has set ambitious goals to increase tax collection by 57%, targeting a revenue of N19.4 trillion for 2024.
“This projection includes N9.96 trillion from oil revenue and N9.45 trillion from non-oil sources, signaling a shift toward non-oil revenue generation to strengthen the economy.”
He noted that government’s aim to achieve a tax-to-GDP ratio of 18% within the next three years through the newly introduced tax reforms, requires a concerted efforts of the public and private sectors, along with targeted reforms aimed at simplifying tax policies and encouraging compliance.
The LCCI boss also pointed out the place of the private sector which is indispensable in Nigeria’s economic development and, by extension, its tax base, noting that multiple taxation continues to pose a significant challenge to businesses.
He noted that the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Mr. Taiwo Oyedele has recommended a suspension of certain taxes that disproportionately burden SMEs and the less affluent, a move expected to foster a more conducive environment for business growth and compliance, emphasising a growing need for collaboration between the private sector and government to ensure that tax policies support business innovation and competitiveness.
Idahosa said the drive to expand the tax net, streamline the system, and boost compliance is essential for securing Nigeria’s economic future.
“Yet, for these reforms to succeed, the government must foster trust through transparency and fairness, while businesses and citizens must embrace a culture of tax compliance.”
For his part, Executive Chairman, FIRS, Zacch Adedeji, said the introduction of a simplified and business friendly tax regime on advanced payment of tax on specified transaction was to address the complexities in the 2024 Regulation.
Specifically, Adedeji pointed out the changes to include exemption of small businesses from withholding tax compliance, reduced rates for businesses with low margin, exemptions for manufacturers and producers in farming and other measures to curb evasions and minimize tax avoidance.
He emphasised the place of tax incentives, which he said are crucial for encouraging investment and economic growth.
“Nigeria has introduced several incentives to attract foreign investment and support local industries. For instance, the Ministry of Finance (MoF) released a Circular on fiscal incentives for the gas sector. This Circular is in line with the Presidential Gas for Growth Initiative which aims to improve the investment climate in Nigeria and to increase the utilisation and supply of gas in the domestic market. To this end, a zero percent VAT rate is now applied on Feed Gas for all processed gas, Compressed Natural Gas (CNG), Imported Liquefied petroleum gas (LPG), LPG and CNG equipment components, conversion and installation services and all equipment relating to the expansion of CNG and LPG, including conversion kits.”
He noted that as various tax incentives are explored to stimulate local industries, there was the need for transparency and effectiveness in the implementation of these incentives.
“Evaluating their impact and ensuring they align with national development goals is critical for maximizing their benefits.
“The informal sector, which constitutes a large part of our economy, poses unique challenges.
“ Many small and micro businesses operate outside the formal tax system. To engage this sector effectively, the government is exploring simplified tax regimes and registration incentives. The recent restructuring of the FIRS into three operational groups—Small/Emerging Taxpayers, Medium Taxpayers, and Large Taxpayers—allows for a more focused approach in managing and supporting different segments of taxpayers.
“As we move forward, we must continue to innovate and enhance our tax system. Soon, we will introduce the FIRS e-Invoice, a digital solution for managing invoices in line with the Tax Administration and Enforcement Act 2007.
“This initiative, as part of our Digital Transformation Strategy, will facilitate real-time transaction validation and storage, benefiting Business-to-Business, Business-to-Consumer, and Business-to-Government transactions.”
Adedeji told the audience that the emerging tax matters in Nigeria present both challenges and opportunities, advising that embracing reform, leveraging technology and ensuring transparency, “we can develop a tax system that supports sustainable growth and equitable development.
“Our collective efforts will pave the way for a more prosperous and resilient Nigeria.”