Analysts at the Financial Derivatives Company Limited, FDC, have advised the federal government to strengthen its tax system, which has been described as a more sustainable option to raise government revenue.
The Lagos-based research and investment firm in its latest economic report noted that unlike revenue from oil and other exports, taxes have a very limited vulnerability to external pressure.
The analysts added that it takes less time, effort and cost to improve tax collection than to implement other long-term development plans such as agricultural reformation, construction of refineries that are expected to contribute to revenue.
Many have advocated the revival of the agricultural sector as the way out of the present economic challenge facing the nation. It is expected that agriculture would diversify the nation’s exports and thus expand the supply source of its foreign exchange.
In 2014, total tax revenue from the Federal Board of Inland Revenue was N4.69 trillion, from N4.78 trillion in 2013. From this, the tax to Gross Domestic Product ratio was 5.9 per cent in 2013 and 4.3 per cent in 2014, which was substantially lower than the sub-Saharan African average of 21 per cent in 2014.
To this, the FDC report stated: “This declining trend is not a problem of inappropriate policy but rather one of an inefficient tax collection system. Currently, the Nigerian tax system is generating much less than its potential. Because the tax officials are not well trained and equipped or well-paid and monitored there has been inefficiency and corruption in the past.
“In addition, the wide-spread perception that the government is corrupt and will not efficiently expend the collected revenue for the good of the general public, acts as a deterrent to tax payers. This is further complicated by the unnecessarily onerous process involved in the payment of tax.”
