Improving Nigeria’s Revenue Through Taxation: A Necessary Measure for Economic Development
Nigeria’s taxation system serves as a vital instrument for generating domestic resources and contributing to the country’s fiscal revenue through its Ministries, Department and Agencies (MDAs). However, the amount of tax remittances has not been proportional to the size of Nigeria’s economy. The Federal Inland Revenue Service (FIRS) reported that it was able to generate over N10 trillion in 2022, the highest figure in the agency’s history. Nonetheless, some experts argue that this amount is insufficient given the size and volume of business in Nigeria, which is the largest economy in Africa.
The Nigeria Extractive Industries Transparency Initiative (NEITI) reported that some companies in the oil and mining sectors had underpaid over 10 billion dollars in taxes and royalties to the Federal Government. Furthermore, the International Monetary Fund (IMF) has urged the Nigerian government to increase its tax to nine per cent of its Gross Domestic Product (GDP) in order to boost the country’s revenues and address development challenges.
Addressing these concerns, President Bola Tinubu has appointed tax expert Mr Taiwo Oyedele from PriceWaterhouseCoopers to raise the revenue target of the tax to GDP ratio to 18 per cent, compared to the current rate of below eight per cent. Oyedele has proposed shifting more of the tax burden to the wealthy while reducing the corporate income tax rate to below 40 per cent in order to stimulate business growth.
To achieve the 18 per cent tax to GDP target and enhance the country’s revenue earnings, experts have put forward various suggestions for implementing this policy. Dr Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprises (CPPE), has welcomed the planned tax hike as a form of progressive tax that is common in developed countries. He emphasized that high net worth individuals should pay more tax to the government, as a means of income redistribution.
Former President of the Chartered Institute of Taxation of Nigeria, Dr McAntony Dike, expressed support for the plan to tax more people, citing the legal requirement for anyone earning income to pay their taxes. He also highlighted the need for greater tax compliance among the wealthy, stating that Nigeria lags behind countries like South Africa in this regard.
Mr Godwin Anono, President of the Standard Shareholders Association of Nigeria, viewed the imposition of tax on wealthy Nigerians as a positive step towards reducing inequality in society. He called on the government to use technology to bring more eligible taxpayers into the tax net, especially those in the informal sector.
In conclusion, it is evident that enhancing Nigeria’s revenues through taxation is essential for the country’s economic development. By ensuring that affluent individuals and corporations pay their fair share of taxes, the government can generate the necessary revenue to provide public goods and services for all citizens. Additionally, harnessing technology and promoting transparency in public fund management are crucial steps towards building a strong social contract between the government and the people.
Reference: Realnews Magazine
