The Federal government has been forced to turn to taxes as a new source of revenue as things on the oil front are not looking up.
For decades, Nigeria has depended on oil as its mainstay, and in recent years, the oil price crash and oil market volatility has left the country’s economy groaning.
The executive director of Abuja-based Policy and Legal Advocacy Centre,Clement Nwankwo, in an interview, said that with crude holding sway as the main source of state revenue, tax enforcement was lax and people showed little interest in what those in power did with the funds.
Now the government of Africa’s biggest oil producer is unable to fund its budget and is counting on ramped up borrowing and taxes to fill the gap.
“These taxes are going to come with new demands by citizens for transparency and accountability,” Nwankwo said. “People are going to feel entitled to the ownership of the public purse, rather than the previous experience where they felt it wasn’t money that belonged to them.”
Officials make the case that Nigeria has one of the lowest tax ratios globally.
It’s tax-to-GDP measure was 1.6 per cent in 2012 compared with 14.9 per cent in nearby Ghana and 25 per cent in South Africa, 25.5 per cent in the U.K. and 26.8 per cent in Norway, according to World Bank data.
It would be recalled that International Monetary Fund, IMF, Managing Director, Christine Lagarde, while on a visit to Nigeria in January, urged the government to raise its value added tax rate of 5 per cent.
Tunde Fowler, who headed the Lagos’ revenue office, was moved by Buhari to the helm of the Federal Inland Revenue Service (FIRS), the federal tax agency last year with the expectation he will reproduce the Lagos’ results at the national level.
“Our mandate now is to ensure the increase in non-oil revenue to ensure stability in the entire system,” Fowler told a meeting of heads of tax offices across the country in the northern city of Kano last week.
Replicating Lagos’ success across Nigeria won’t be easy, said Taiwo Oyedele, head of tax at PricewaterhouseCoopers LLP in Nigeria.
The major levy in Lagos was personal income tax, while to increase federal revenue, the government will have to look at “very complex” value added taxes and corporate income taxes on foreign companies, many of which operate, but don’t have an official presence in Nigeria, he said.
The federal tax agency, which collected N3.7 trillion last year, has set a target to increase revenue by 32 per cent this year and expects 70 per cent of the income to come from value-added tax. The government has begun more rigorous enforcement of the stamp duty law and expects it will yield about N2 trillion annually.
