Business
Experts task govt on OPS, FIRS clash over 18% tax-GDP
BY EMEKA EJERE
Fiscal policy experts say the target of increasing the country’s tax-to-GDP ratio to 18 percent from 10.86 percent within three years can be achieved, without overburdening businesses with more taxes, if only government can properly harness the huge tax potential of the nation.
The experts are reacting to fears being expressed by corporate organisations that the resolve of the Federal Inland Revenue Service (FIRS), to increase the country’s tax-to-GDP ratio by over eight percent will lead to increase in taxes.
Nigeria ranks very low on the global scale of paying taxes while the country’s tax-to-GDP ratio is one of the lowest in the world and well below the African average, at approximately 10.8 percent.
This has led to an over-reliance on borrowing to finance public spending, which in turn limits the fiscal space, as debt service costs consume a greater portion of government revenue annually, resulting in a vicious cycle of inadequate funding for socio-economic development.
Recall that the major aim of the Fiscal Policy & Tax Reforms Committee constituted by President Bola Tinubu, and headed by Mr. Taiwo Oladel, is “to transform the nation’s tax system to support sustainable development and achieve a minimum of 18 percent tax-to-GDP ratio within the next three weeks and then years without stifling investment or economic growth.”
According to President Tinubu, “The consequences of the ongoing failure of our tax regime are real and significant. The inability of the government to efficiently raise revenue has led directly to an over reliance on borrowing to finance public spending.
“A government that cannot properly fund itself will also lack the flexibility or fiscal scope to sensibly manage the economy or respond to external shocks.”
However, the Acting chairman of FIRS, Zacch Adedeji, said such resolve would not necessarily lead to increase in taxes or introduction of new taxes as the President Tinubu-led administration is determined to create a wholesome environment for businesses to flourish.
The FIRS chairman had said the agency under his leadership would in the next three years achieve an eight percent raise in tax-to-GDP ratio to surpass Africa’s average of 16.5 per cent without stifling investment or economic growth. The plan had triggered muffled apprehension among corporate entities that the decision could cause an increase in tax rates or introduction of new ones.
Addressing representatives of top large tax-paying companies during a get-together in Lagos, Adedeji said, “Our belief, understanding and vision as a revenue-generating agency is not to introduce any new tax as we only want to use data to improve compliance.”
A statement by his Special Adviser on Media and Communication, Dare Adekanmbi, quoted the FIRS chairman as saying that the invited companies and those willing to voluntarily carry out their tax obligations have nothing to be afraid of.
“Our plan is simple. We want to grow tax revenue and we only want to tax prosperity and not poverty. Therefore, it is not in our interest to kill the trees that bear the fruits. My first ‘love letter’ to you is to appreciate what you have done. So, you don’t have anything to be afraid of.
“We will not collect what is not due to us. But we don’t want anyone not to pay what is due to us. Fair engagement is our plan. Rest assured that the 18% tax-to-GDP target would not translate to increase in taxes.
“If you have been listening to Taiwo Oyedele, who is the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, you will have known that part of the mandate of the committee is to reduce the number of taxes,” he said.
Growing the tax base
Speaking on how to grow the country’s tax-GDP, pioneer and immediate past vice Chancellor, Christopher University, Mowe, Ogun State, Prof Friday Ndubuisi, stressed the need for government to justify the taxes collected from taxpayers by providing the necessary public goods, saying a situation, where the people are left to provide everything for themselves even after paying their taxes gives room for tax evasion.
“We were paying tax regularly while I was the vice-Chancellor of Christopher University, but at the end of the day we were providing water for ourselves, providing light for ourselves and providing security for ourselves. Is it supposed to be like that?”, he queried.
“It is not good for government to keep depending on borrowing for the provision of public goods, thereby piling loans upon loans. Government should generate revenue from within through taxation. But in doing that, there must be accountability”.
On his part, , former Commissioner of Finance, Budget & Economic Planning, Ekiti State, Dr. Tunji Adeniyi, stressed the need for government to create enabling environment for business to thrive, saying it is only when that is done that people bring in investments and jobs are created.
He admonished government at all levels to be more prudent in the use of taxpayers money, arguing that reckless spending by government officials fuels tax evasion.
“It is only when value is created that you have income, and it is only income you can tax. You cannot tax someone without a job. “If you expect tax revenue to go up, then volume of production should also go up“, Adeniyi said,
Adeniyi stressed the need for the placement of the right people in critical positions. “If you engage the wrong people in critical positions, it will be difficult to create value“, he said.
“Removal of petrol subsidy is also a way of creating value if the money saved by so doing is used for the good of the society“.
Also speaking, a public affairs analyst, Pastor Felix Jarikre, identified accountability and transparency as key drivers of voluntary tax payment, stressing that lack of same kills tax morale.
He said, “Where public accountability and transparency are absent, large-scale corruption is inevitable. When the government is perceived to be very corrupt, the tax morale is drastically lowered. With less tax revenue, government revenue is negatively affected.
“Corruption can come in the forms of embezzlement, extortion, contract fraud, bribery, nepotism, cronyism, money laundering etc. Because it increases inequality, corruption is harmful to Nigeria’s political, economic and social development. No doubt, it also discourages foreign direct investment.
“With corruption affecting the growth potential of the economy, invariably the size of the projected tax-base is reduced. Experts have also noted that until Nigeria deals with tax fraud, fighting corruption would be a mirage.”
In his submission, a Chartered Accountant, Chief Blakey Ijezie, described the Presidential Committee on Fiscal Policy and Tax Reforms, as a reflection of President Tinubu’s commitment to bringing about transformative reforms in fiscal policy and taxation, noting that the move is hinged on the President’s promise to remove all barriers to business growth in Nigeria.
Ijezie, who is the Managing Partner, Okwudili Ijezie & Co. (Chartered Accountants), expressed confidence that Oyedele as the chairman of the committee will never fail.
“I see the setting up of the Taiwo Oyedele Fiscal Policy & Tax Reforms Committee as one of the best moves by President Bola Tinubu since he ascended the Aso Rock Villa on May 29, 2023 – to at least tackle the dwindling revenues accruable to the Federation Account”, Ijezie said.
