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THE Presidential Committee on
Fiscal Policy and Tax Reforms
recently announced plans to
overhaul the nation’s tax system
so that the rich will pay more.
Part of the plan also includes
cutting down the number of
multiple taxes payable in Nige- ria to less than ten from over 60
taxes that are officially collected
by different levels of govern- ment. The tax system is overdue
for reforms. According to the
Head of the Tax Reforms Com- mittee, Mr. Taiwo Oyedele, the
move will boost government’s
revenue mobilisation and lift the
country’s tax take to 18 per cent
of the Gross Domestic Product
(GDP) within three years from
the current 11 per cent.
Statistics show that Nigeria
currently generates significantly
lower tax revenue than other
frontline economies in sub-Sa- haran Africa. This is largely due
to poor tax compliance, especial- ly among high-net-worth indi- viduals, including multinational
companies. The latest plan is to
make the rich pay what is fair, so
that the poor can be protected.
In addition, the plan will ensure
a reduction in the corporate in-
come tax rate to below the pres- ent rate of more than 40 per cent.
This will also boost business op- erations, just as the new rate will
be benchmarked against Nige- ria’s peers in Africa.
Available data show that about 200,000 wealthy Nigerians of one per cent of the popula-
tion enjoy stupendous wealth, while over two thirds of the population live in extreme pov-
erty. Unfortunately, a good number of the rich also evade tax. At present, Nigeria’s tax
revenue as share of the GDP represents just a third of the 34 per cent average for members of the Organisation for Economic Co-operation and Development.
Among the estimated four million registered companies in the country, less than 250,000 actively pay tax, while less than a quarter of the 41 million registered people pay income tax.
No doubt, Nigeria’s tax system is fraught with overlapping local, state and federal juris- dictions. The rich take advantage of this to evade tax at the detriment of the economy. The multiplicity of taxes has contributed to tax evasion. There is need to streamline the tax system in the country and create a transparent tax structure.
The new tax system will determine what kind of taxes should be paid, how they should be collected and the agencies saddled with the responsibility. At this period of acute revenue shortage, mounting national debt, reforming the tax system is imperative. The plan to deploy technology to widen the tax net and boost revenue is welcome. The evasion of tax by the rich should be treated as economic sabotage with appropriate sanctions on defaulters.
Tax evasion by the wealthy persists because both federal and state governments have been soft on them and tax officials may have been compromised.
Henceforth, government should be proactive on tax collection, while exploring all avenues to retrieve unpaid taxes. By law, paying taxes is the responsibility of every taxable citizen and company. Section 24(f) of the Constitution makes it a duty for every citizen to “declare
his income honestly to appropriate and lawful agencies and pay his tax promptly.”
A recent report by the Nigeria Extractive Industries Transparency Initiative (NEITI) re- vealed that multinational companies in the country are in default of tax payment totalling trillions of naira. Recently, the Federal Inland Revenue Service (FIRS) said that high-networth Nigerians and businesses were under-declaring their assets, thereby short-changing federal and state governments of the much-needed revenues.
The opaque nature of our tax system is largely to blame for the lapses. The present situ- ation where state governments collect personal income tax and accept whatever the rich declare as assets and profits is unacceptable. This is one of the challenges of our present tax administration that must be overhauled. The government and appropriate agencies should show strong willingness to enforce our tax laws. In fact, taxing the super-rich will make the tax code more equitable and support investment.
It is sad that many foreign investors are leaving the country. There will be no economic growth without investments. The corporate rate should be raised to ensure that gains are more broadly shared. Nigeria’s current tax code falls far short of what it should be. Fairness
should be at the heart of our tax reforms. A fair tax system will reduce poverty and inequality in the country.
To address the flaws in our tax system, we urge the committee on the tax reforms to make the wealthy to pay more taxes, reduce tax breaks tied to the income of the wealthiest households as is the case in America and many European economies, and bolster corporate and estate tax.
