Worried by Nigeria’s multiple and overlapping tax system, President Muhammadu Buhari hit the right chord last week when he canvassed for an efficient tax administration system that will boost the nation’s revenue base. The President, who described the present multiple tax system as inefficient and fragmented, stressed that it could breed uncertainty and instability in the country.
The President stated this at the Second Annual National Tax Dialogue held in Abuja, with the theme: “Tax Harmonisation for enhanced revenue generation.” The tax dialogue was designed to engage stakeholders in the tax system in a meaningful discourse designed to specifically aid policy formulation. It was, therefore apt that the President used the occasion to call for a harmonised platform within a single system that will raise the revenue profile of the country.
Besides, President Buhari argued that harmonising taxpayers’ identification across the country as the Federal Inland Revenue Service (FIRS) is doing, could be a good start, but advised that much more must be done to promote ease of doing business and ease of tax compliance. In that regard, he noted that “multiplicity of tax administration is as undesirable as multiplicity of taxes.” The current tax policy has placed a huge burden on taxpayers with different agencies of government, apart from the FIRS, asking for one form of tax or the other. Also, the situation has created some doubts and confusion in recent times. A good case in point is the recent row over the appropriate body charged with collection of Value Added Tax (VAT).
We agree with the President that the current multiple and fragmented tax administration is a disincentive to business growth and ease of doing business in the country. It is also reassuring that his administration is committed to an improved tax system which will not impose new tax rates on Nigerians. Good intentions are good but sometimes may not be enough. At the same time, we call for adequate implementation of government’s new plan on taxation. Nigerians, small businesses and corporate organisations have bitterly complained about multiple tax regimes by different tiers of government and agencies.
Uncoordinated tax system can stifle business operations and profitability. With government’s dwindling revenue, many agencies have resorted to imposing different taxes on business owners. Though Nigeria’s tax-to-GDP ratio put at 8 per cent, is one of the lowest in the world, while Nigeria contemporaries, even in Africa, have a tax-to-GDP ratio of between 16 and 25 per cent. However, multiple tax system is unacceptable and must be jettisoned forthwith. While efforts are on to improve the tax system, government should increase the country’s revenue base through diversification of the economy and promotion of non-oil exports.
Available figures show that countries with lower economy and fewer tax base but streamlined tax administration fare better than Nigeria in terms of tax collection and tax-to-GDP ratio. Although the FIRS reportedly collected N6.406trillion from taxpayers nationwide last year, the highest in its history, the tax revenue contributed 63.94 per cent of total revenue shared among the three tiers of government. The lessons from other countries that are solely dependent on revenue from oil have proved to be quite instructive since oil is a dwindling resource.
There is no doubt that tax remains a sustainable means of achieving national development. In that vein, we welcome any plan to improve revenue collection through voluntary compliance, in line with international best practices. If the tax system is efficient and transparent, it will gain the confidence of both local and international investors. But tax dodgers should not be allowed to continue cheating government and the nation. That is why the recent report by the Nigeria Extractive Industries Transparency Initiative (NEITI) that 51 oil and gas companies operating in the country owed government N1.32trillion should worry our tax administrators.
With the country’s dwindling revenue profile, it has become certain that Nigeria’s continued economic survival may now depend so much on tax revenue. All the same, government should not because of revenue generation challenges or fiscal constraints resort to multiple taxation. What the economy needs now is a robust tax system. This is a must for any economy that is desirous and genuinely committed to growth and development. In addition, there is need for synergy in tax administration among the different tiers of government. The Minister of Finance, Zainab Ahmed, has warned that resource wealth alone cannot lead to sustainable development. What Nigeria needs now is a healthy tax culture where every Nigerian or business owner will become a co-participant in the tax system.