CEM REPORT, ECONOMY | Multiple taxes have been a plague to Nigerian businesses for way too long. Business owners have continually lamented over forced payment of taxes, levies, and other charges to various government agencies at the state and federal government levels that hurt their operations.
Despite this, Nigeria’s tax-to-GDP ratio is 10.8%, one of the lowest in the world.
To change this and make the business environment more friendly the federal and state governments have commenced harmonisation and codification of taxes at the national and sub-national levels.
As this present administration led by President Bola Ahmed Tinubu aims to eliminate multiple taxation and increase revenue, he is expected to inaugurate the Presidential Committee on Fiscal Policy and Tax Reforms today Tuesday, which will be chaired by Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PriceWaterhouseCoopers (PwC).
This harmonisation move comes amidst failed attempts by the previous administration.
According to the chairman of the Joint Tax Board (JTB), Muhammad Nami at the board’s 153rd meeting stressed that the new administration is focused on eradicating the multiplicity of taxes and as such the board is handling the harmonisation drive with all seriousness.
“This is not another promise that will not be fulfilled. The government has already announced the Constitution of a presidential committee and recently, I was at NEC to speak to governors, to solicit their support so we realise this in good time. And we are very confident that the inauguration of the committee by the President means that we are going to start work immediately, promises made in the past which were not kept would be kept this time around.”
Nami, who is also executive chairman of the Federal Inland Revenue Services said the country must make hard but necessary tax reforms that would yield long-term benefits to attain optimum tax revenue collection capacity across the Federal, State and Local Government tax authorities.
He said an objective of the meeting themed, “Harmonization and Codification of taxes at the National and Sub-national levels, the key to achieving a tax-friendly environment in Nigeria,” is to adopt new ways for optimisation of tax revenue for all levels of government for a more efficient, effective, inclusive more sustainable tax administration; bring coherence in the entire tax revenue administration processes.
“The implication is that, what we call informal taxes, black taxes, whatever name you call it, at both local government, state and at the centre, the government intends to eliminate those multiple taxations to encourage investment, to raise adequate revenue because the irony of everything is that the more of these taxes that we have, the less of the revenue we generate.”
The chairman noted that the harmonisation process would further reduce the number of taxes, block leakages as well as boost revenue generation.
“Once multiple taxation ends, there will be funds at all tiers of government to build roads, schools and hospitals and to secure lives and property.”
The chairman further disclosed that the Federal Government is working to end taxes on tomatoes and other raw food items. He said the government is investing a lot and has formed some partnerships with informal trade unions, and would ensure that services and goods that are not taxable are not reduced to taxation.
“We are doing proper planning, enumeration of tax papers in the informal sector, to make sure that those that are rendering services that are not taxable are not made to pay. Those trading in goods like tomatoes, and food items from the farms are not made to pay taxes, not doing enough turnover of at least 25 million will not be allowed to pay company tax or value-added tax (VAT). So we are doing a lot to ultimately provide the needed revenue to provide critical infrastructure and social services.
Executive Secretary of the Joint Tax Board, Obomeghie Nana-Aisha, criticized the proliferation of payment of illegal taxes, which often don’t get to the government assured that government will synchronize tax collecting to make paying taxes easy.
She continued that there would be appropriate public awareness of the harmonisation process. The aim of the sensitization, according to her, was to raise public understanding about “what tax to pay and what tax not to pay.”
“We intend to create awareness on when taxes should be paid and not a situation where people are made to pay taxes they do not know about.
“There will be lots of sensitisation on this for seamless payment of taxes.
“This will also help with ease of doing business while making tax environment friendly. People pay all manner of taxes; some legal and others illegal. Unfortunately, not all the monies go into government coffers.
“Some of the taxes go to the Federal Government and others do not. So, the essence of our gathering today is to harmonise all the collections such that you know what to pay and where to pay.”
She said the government would also ensure transparency by making public the taxes to be paid.
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Taiwo Oyedele, chairman of the Presidential Fiscal Policy and Tax Reforms Committee, disclosed that the key to Nigeria’s tax revenue problem is not to introduce more levies and taxes but to focus on the few that are high revenue yielding, easy to administer, difficult to evade.
He said the most underperforming tax is the personal income tax, which is the highest revenue yielding for most countries and must be harnessed.
“Ironically, the more the number of taxes, the less the tax revenue you collect which means the lesser taxes, the more you collect. We will make far more than we are collecting today, we do not need many taxes.”
Oyedele explain that about nine types of taxes were paid to the Federal Government noting that the state and local government councils receive much more taxes than the Federal Government
Furthermore, he said that the harmonisation process would go a long way in reducing corruption, tax evasion, among others.
While disclosing that there are about 44 different bills at the National Assembly with provisions on levies and taxes, Oyedele warned that Nigeria may get to a point where the total taxes will be 100% more than what businesses make, which would discourage investment.
He listed the key challenges of Nigeria’s tax system including a multiplicity of taxes and multiple revenue collection agencies; a largely fragmented, rudimentary, and complex tax system which has added to business risk; low revenue due to low tax morale and high prevalence of tax evasion; and high cost of revenue administration and compliance among others.
