Boosting Revenue and Addressing Development Challenges Through Progressive Taxation

Nigeria’s tax system assumes a pivotal role in garnering domestic resources and delivering fiscal revenue for the nation. Regrettably, the proceeds have not mirrored Nigeria’s economic magnitude, prompting appeals for a reassessment of the tax policy.

The Federal Inland Revenue Service has announced a historic revenue generation of over N10 trillion in 2022, a commendable feat, however, falling short in light of Nigeria’s status as the largest economy in Africa. The Nigeria Extractive Industries Transparency Initiative has flagged subpar payments from companies in the oil and mining sectors, citing outstanding taxes and royalties owed to the Federal Government exceeding 10 billion dollars.

In response, the International Monetary Fund has counselled the Federal Government to elevate its tax-to-GDP ratio to nine per cent, with the objective of fortifying the country’s revenue and addressing developmental hurdles. President Bola Tinubu has commissioned fiscal policy expert Taiwo Oyedele to steer the initiative to elevate the revenue target to 18 per cent of the tax to GDP ratio, which currently stands at below eight per cent.

Oyedele has advocated for a realignment of the tax burden, promoting a more progressive tax system that places a larger onus on the affluent in society, while concurrently decreasing the corporate income tax rate to stimulate business expansion. This proposition has garnered favourable feedback from experts, with Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprises, praising it as a means of propelling economic development through income redistribution.

Former President of the Chartered Institute of Taxation of Nigeria, Dr. McAntony Dike, emphasised the constitutional grounds for taxing individuals based on their income, affirming that the lack of tax compliance among the country’s affluent has deprived the government of vital revenue.

Godwin Anono, President of the Standard Shareholders Association of Nigeria, perceives the proposed policy as a stride towards diminishing inequality, mandating the elite to contribute their equitable portion to society. He also urged the government to deploy modern technology to expand the taxpayer base, specifically targeting individuals in the informal sector who are currently evading tax obligations.

The involvement of stakeholders in the discourse on progressive taxation denotes an escalating consensus on the necessity for a more equitable and efficient tax system in Nigeria. By leveraging the proficiency of tax professionals, assimilating international best practices, and ensuring transparency in the administration of public funds, the government can pave the way for sustainable economic growth and development.

In summary, the proposition for progressive taxation signifies a noteworthy prospect for Nigeria to redress its developmental impediments and amplify revenue for essential public services. Through collaboration between policymakers, tax experts, and the private sector, the country can establish the groundwork for a fairer and more effective tax system that benefits all citizens.