The Nigerian Governors’ Forum (NGF) at the weekend lamented that the worsening insecurity and currency depreciation is affecting the business environment and consequently, productivity and income to be taxed.
Olanrewaju Ajogbasile, gave the hint at a one-day capacity building for members of the Finance Correspondents Association of Nigeria (FICAN) on Friday in Abuja.
Ajogbasile, also said that the lack of trust between the government and the citizens continues to be a drawback to tax collection in Nigeria.
Speaking on the theme: New Approaches to Tax Administration in States, Ajogbasile added that it has made tax collection difficult as many are unwilling to pay because they do not trust as their monies will be used judiciously.
Perceived weak social contract between citizens and the government continues to threaten the legitimacy of taxation.
Nigeria still recovering from a combination of adverse fiscal and macroeconomic conditions that had exerted strong pressures on the fiscal
sustainability of its national and sub-national governments, leading to low revenue generation.
He also pointed out that worsening insecurity and currency depreciation has affected the business environment and consequently, productivity and income to be taxed.
With revenue from Nigeria’s main source of revenue –oil-on the decrease, experts say that tax revenues are becoming essential for state governments at all levels.
maintaining fiscal sustainability, especially with the boom and bust cycles of the Nigerian economy.
He further added that “lack of standard operating procedures and processes guiding operations of SIRSs and their zonal/area offices; proliferation of private contractors/consultants for same revenue items; and weak collaboration between State and Local Governments on joint collections, among others.
To address this imbalance, Ajogbasile said several reforms have been introduced by National and sub-National governments, and according to him, it has yielded results.
“Improved collaboration between SIRSs, trade unions, and associations; establishment of tax appeal tribunals to improve turnaround for closing out tax disputes.
Engagement of mobile money agents for informal sector revenue collection, where the SIRS lacks reach.
However, this is done under a performance contract and driven by a technology-enabled process to ensure transparency in the collection.
Passage of Consolidated State Revenue Codes by States to address the multiplicity of taxes; Implementation of tax relief in response to COVID-19.
The prohibition of tax consultants for the assessment and collection of Personal Income Tax – where the SIRS has the competence and reach.
Passage of Consolidated State Revenue Codes across 26 States to address the multiplicity of taxes; innovative IGR mobilization strategies for improving/sustaining nominal IGR growth – Presumptive tax, HNWI units, USSD offline payment, risk transfer strategies; Implementation of structured tax relief in response to COVID-19.
The prohibition of tax consultants for the assessment and collection of Personal Income Tax; Improving property records for effective property tax administration.
Publication of annual budgets and audited financial statements to promote transparency and accountability, and citizens’ budget and citizens accountability report.
“The structure of the Nigeria economy reflects a predominance of the services sector which accounts for nearly 55% of the GDP for Q4 2021. Unfortunately, economic activities in this sector still suffer low productivity and wages.
“According to the 2017 GDP record for 22 States’, the Service sector accounted for 54% while Agriculture and Industry accounted for 23% each, respectively.
“The poor employment record (33% unemployment rate for Q4 FY20 and estimated 35% for FY21) reflects low productivity and the absence of a strong manufacturing base.
“According to the 2017 data, only three and four States out of the twenty-two states that reported data on the gross domestic product had agriculture and industrial base that accounted for up to 20% of economic activities in their States.
“Over 25 collectible items for State governments under the Taxes and Levies (Approved list of collection) as amended, 2015.
“A total number of registered taxpayers (States & FCT) was estimated to reach 35 million persons 2019/2020. This is about 50% of the total labor force of 70 million persons (NBS, 2020).
Average tax effort (tax-to-GDP) of States stood at ~2% (NGF, 2018).
“The adverse fiscal pressure has been primarily due to over-dependence on FAAC transfers which are constantly threatened by the increasing volatility in oil prices and mounting subsidy payments. The impact of this has been exacerbated by long years of increases in government permanent expenditures arising from the increased cost of governance, new minimum wage, and rising debt service.
“The COVID-19 pandemic also impacted government spending, economic activities and invariably government’s internally generated revenue.
“The Tax-to-GDP ratio in Nigeria was estimated at 6% (2019, OECD). In comparison, the average for 30 African countries according to the OECD Revenue Statistics in Africa 2021 report stood at 16.6%. Examples of the Tax-to-GDP ratios in other African Countries analyzed included Ghana (13.5%), Niger (10.1%), Egypt (14.2%), DRC Congo (8%), and Kenya (17.3%), Uganda (12.1%) and South Africa (26.2%).
“Worsening insecurity and currency depreciation is affecting the business environment and consequently, productivity and income to be taxed” stated the NGF representative.
By Chidi Ugwu,
Independent Newspaper