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FG to impose tax on carbonated drinks, harmonise debts

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My failure to give Amaechi birthday gift led to my ouster as NPA boss, Hadiza Bala alleges

 

 

Okey Onyenweaku, Washington D.C, USA

Nigerians may soon start paying taxes on carbonated drinks. This will enable Nigeria which has become desperate for revenues to fund its budget.

Speaking at the Governor Talks session, the Minister of finance at the on-going IMF/ World Bank Annual meetings in Washington D.C, USA, said the government was planning to increase its revenue from taxes with plans to introduce excise on specific items such as carbonated drinks as well as impose VAT on some items imported into the country.

She also said the government was keen at scanning the environment to develop a comprehensive database of all the debts that government owe both the sovereign or the subnational and also the debt of the state-owned enterprises and debts that are owed to creditors.

She explained the government wanted to show more clearly the debts that are related to specific projects and debts that owed to countries like china for major projects which are now reported as public debt without details were broken down more clearly.

“We are also looking at introducing excise duties on some categories of products especially carbonated drinks and VAT on some categories of imports into the country. But it is not all taxes increases, there is also a proposal to build tax rates for SMEs we also increase the minimum tax level to make it easy for people to plan their taxes’’,she said

She emphasised the need for the rebuilding of a social contract between the government and the citizens saying in “Nigeria we don’t have adequate social contract. The government was not asking for or enforcing tax collection and therefore taxpayers also were not taking up their civic responsibilities. This is because we are largely dependent on oil revenue and people are not used to paying taxes.

“Very recently at the Nigeria economic summit they shared a citizens survey and 75 per cent of people that was surveyed said ‘we don’t think there is anything wrong in not paying taxes and it not a problem’ and there a few that said ‘I don’t see what the taxes are used for so why should I pay tax’. We have a very low tax morale we are planning a strong strategic communications process to educate people on why they need to pay taxes. Because we rely heavily on oil and it is not going to be there forever. So we have to boost domestic revenue generation and use tax revenue to develop their economies and Nigeria should not be an exception.

“We currently have a pervasive revenue generation problem that must change to successfully finance our development plans. Speaking to the facts, our current revenue to GDP of eight per cent is sub-optimal and a comparison of oil revenue to oil GDP and non-oil revenue to non-oil GDP performance reveals the significant area that requires immediate and dire intervention as the non-oil sector. This performance attests to the realities of our inability to efficiently and to a reasonable degree, completely collect taxes from our non-oil economic activities.

“Nigeria when compared with peers shows that we are lagging on most revenue streams including VAT and excise revenues as we not only by far have, one of the lowest VAT rates in the world but weak collection efficiencies. So also, do we have a lot of incentives and deductions that further constrain the fiscal space that are given in hope of stimulating growth of our industries and to reduce hardship for the poor and vulnerable.

In boosting revenue, she said the government was working with the National Assembly to review its Joint venture contract of 1989 “which had a position that once the oil price goes beyond 20 dollars there is opportunity to renegotiate and increase the royalties that come to the government so that in the future we have incremental revenue coming from the crude oil.”

Asides this she said “in tune with the fourth industrial revolution, we want a technological led reform. For example, in a bid to leverage available big data in our public sector domain, Project Light House was launched last year and driven centrally at the Ministry of Finance to provide intelligence to the FIRS, state tax authorities and other revenue collecting agencies. On the Customs front, we are in the process of developing our national single window and customs is using block chain technology to improve revenue’’.

 

Nigeria debt stock keeps rising as the federal and state entities have borrowed so much money that debt service now consumes more than 70 percent of revenue, according to the finance ministry. While Nigeria total debt stock comprising the federal government, States and the federal capital territory stood at N24.947 trillion or $81.274billion as at March 31, 2019.

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SEYI’S QUESTION AND WORLD BANK PRESIDENT RESPONSE:

 

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In your speech earlier you spoke about working with countries for electricity investment and we understand that Nigeria is in talks with the World Bank for about $3 billion electricity loan for transmission and distribution.

 

Nigeria already has a debt to tax — debt to GDP to revenue problem that is very low — very high.  And so, what is your take on that?  And what terms should we be looking at for that loan?

 

So, the question’s on electricity which is so important for people in empowering people and in allowing new entrance into the market.  Women, small businesses and so on to connect to the — to machinery, to the internet, to various ways of economic development.

 

So, we put a lot of emphasis on trying to have 24/7 electricity in as many places as possible, more people connected to grids than are currently connected.  And this is one of those where some progress has been made and yet lots more needs to be made especially in Africa.

 

As far as the specific projects, one thing I do want to mention, debt sustainability becomes very important as countries think about how the investments in electricity can be made.  If there is already a lot of debt, maybe it’s legacy debt that’s left over from past projects, it makes it difficult to have the new investment that’s needed in order to get transmission and distribution systems running.

 

I don’t have a comment on the specific with Nigeria.  We are involved in a lot of countries on trying to have improvements in the structure of their state-owned enterprises or of their electricity systems, so that they work.  And particularly in West Africa, I think there can be a lot of progress made in terms of connecting more people and having more dependable power

 

 

 

 

 

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NUME’S QUEESTION AND IMF MD’s RESPONSE:

 

 

 

Question: What is the IMF going to do to help Nigeria recover stolen assets. Also, can you expatiate on your comment that fiscal capacity should be given more room

 

You bring a question about a country that doesn’t only matter to citizens, Nigeria matters to the whole of Africa. When Nigeria does well, Africa does well. The economic recovery remains too slow to reduce vulnerabilities and most importantly to reduce poverty in the country. What we experience is some good thoughts about shaking up economic policy now that a government has been constituted in Nigeria. We have been consistent to talk about three issues in Nigeria that needs to be tackled.

One is the question of fiscal capacity. As you know the tax collection level in Nigeria leaves quite a lot of room for improvements and without strengthening the fiscal position of the government, the expenditure side will suffer. So the recommendation that we always give is that countries should strive for 50% of GDP in terms of collection to fund the responsibilities of the government and in Nigeria, this is still quite far. If I am not wrong, we are still in the single-digit territory. Secondly, we have been recommending that the country diversify its economy because reliance on oil doesn’t serve very well.
Last but not the least to fight corruption and to make sure that the riches of Nigeria serves Nigerians inside the country and in that regard, as you know last year the Fund adopted very strong policies on anti-corruption and we worked with governments to build their capacity to make serving citizens of the country with the money of the country is possible.

 

 

 

ZAINAB AHMED DURING A PANEL SESSION on Decoding Debt; Getting Transparency right,

 

Where we want to go next is to make sure we scan the environment and make sure we have a database of all the debts that government owe. Whether it is the sovereign or the subnational and also the debt of the state-owned enterprises and debts we owe to creditors.

 

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Also, we want to be able to show more clearly the debts that are related to specific projects and debts that we owe to countries like china for major projects. Right now, they are reported as public debt but there is no detailed breakdown to show that they are related as project borrowing.”

You won’t see now the debt reports related to projects we have taken for sources like the China Exim Bank and we want to also put that in the public domain. There is an increasing demand from the civil society and the public in Nigeria of that level of detailing.”

 

 

 

 

SIMON ATEBA’S QUESTION AND WORLD BANK PRESIDENT RESPONSE

 

 

As you know recently, Africa had lots of good news , we had the man from Ethopia who won the noble peace prize. Despite all this good news, you reported that the  Economy of Africa  has continued to  be slow in 2019. You also said one of the ways to bridge that gap is to empower women. Could you please tell us exactly on how Africa can empower women and brace the economic… also if you can touch on climate change which is one of the biggest problems facing Africa

I agree that there has been good news

We have been pleased to see the relationship between the countries looking very actively towards peace and how to find peaceful relations in that part of Africa  and its happening elsewhere as you noticed. On the other  side, there has been sluggish  investments so when we have this very challenging situation of undulating growth in some countries provided young people are looking for jobs  and not the investments or the systems  to create enough jobs

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We work hard on that and that involves the rural…. which is so important and we work specifically with countries on what and how they can improve their structure and that brings me to the role of women

They are half the population  often producing half or even sometimes more than half the GDP and yet often not recognised  and not allowed within the structure of the economy either  without documentation  from the national authorities without having rights to have jobs in equal measure with men or to own properties the same way. So we work very specifically on those issues .we have a big program, we have a report of women business.

I’m pleased by some of the developments, we do  see  progress being made in some countries  with actual changes in law  and then the implementation of that  change in law.

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If I may connect that back to the economy. If you have girls that can be educated and women that can participate in the economy, you  have a much better chance of getting a growth rate that is sustainable  for the country, we are not at that point now . I began my remarks today with there is a big urgency in getting the laws right and the systems right so that more people can participate within their economic development

 

 

Speaking at the Governor Talks session, the Minister said the government is planning to increase its revenue from taxes with plans to introduce excise on specific items such as carbonated drinks as well as impose VAT on some items imported into the country.

“We are also looking at introducing excise duties on some categories of products especially carbonated drinks and VAT on some categories of imports into the country. But it is not all taxes increases, there is also a proposal to build tax rates for SMEs we also increase the minimum tax level to make it easy for people to plan their taxes.”

She emphasised the need for the rebuilding of a social contract between the government and the citizens saying in “Nigeria we don’t have adequate social contract. The government was not asking for or enforcing tax collection and therefore taxpayers also were not taking up their civic responsibilities. This is because we are largely dependent on oil revenue and people are not used to paying taxes.

“Very recently at the Nigeria economic summit they shared a citizens survey and 75 per cent of people that was surveyed said ‘we don’t think there is anything wrong in not paying taxes and it not a problem’ and there a few that said ‘I don’t see what the taxes are used for so why should I pay tax’. We have a very low tax morale we are planning a strong strategic communications process to educate people on why they need to pay taxes. Because we rely heavily on oil and it is not going to be there forever. So we have to boost domestic revenue generation and use tax revenue to develop their economies and Nigeria should not be an exception.

“We currently have a pervasive revenue generation problem that must change to successfully finance our development plans. Speaking to the facts, our current revenue to GDP of eight per cent is sub-optimal and a comparison of oil revenue to oil GDP and non-oil revenue to non-oil GDP performance reveals the significant area that requires immediate and dire intervention as the non-oil sector. This performance attests to the realities of our inability to efficiently and to a reasonable degree, completely collect taxes from our non-oil economic activities.

“Nigeria when compared with peers shows that we are lagging on most revenue streams including VAT and excise revenues as we not only by far have, one of the lowest VAT rates in the world but weak collection efficiencies. So also, do we have a lot of incentives and deductions that further constrain the fiscal space that are given in hope of stimulating growth of our industries and to reduce hardship for the poor and vulnerable.

In boosting revenue, she said the government is working with the National Assembly to review its Joint venture contract of 1989 “which had a position that once the oil price goes beyond 20 dollars there is opportunity to renegotiate and increase the royalties that come to the government so that in the future we have incremental revenue coming from the crude oil.”

Asides this she said “in tune with the fourth industrial revolution, we want a technological led reform. For example, in a bid to leverage available big data in our public sector domain, Project Light House was launched last year and driven centrally at the Ministry of Finance to provide intelligence to the FIRS, state tax authorities and other revenue collecting agencies. On the Customs front, we are in the process of developing our national single window and customs is using block chain technology to improve revenue.

 

 

 

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