When it comes to boosting tax revenue, it is easier to look at the introduction of more taxes with little or no attention paid to improving already existing taxes. For tax practitioners, the latter should be the focus of any tax administration serious about making taxation more efficient.
From obsolete tax laws to moribund provisions, these tax practitioners are emphasizing the urgent need to review extant tax laws, bringing them up to speed with global best standards. This review according to them should entail in no small measure, the abolishment of provisions that negates current realities.
This call is coming on the heels of recent statistics from the Federal Inland Revenue Service, FIRS detailing existing taxes in the country over 100 with less than 10 of them reaching 98 percent of the country’s entire tax revenue with the implication that only a few taxes in the country are living up to expectation.
Identified tax laws up for review
First on the list that should be reviewed with immediate effect in the rank of priority by these experts is the Stamp Duty Act which was introduced into the country by the British in the 1890s and was made into law in 1939.
Taiwo Oyedele, an ace tax practitioner with Pan African experience, recently pointed that the Stamp Duty Act which came into existence before the nation’s independence has not experienced significant changes apart from changing its currency provision from Pounds to Naira and Kobo. This minor change has neglected the recent phenomenon of electronic money transfers which wasn’t in existence when this law was made, creating a square peg into a round hole effect.
Buttressing the need to review the Stamp Duty Act, making it easy to understand via its language of communication necessitating a translation to Yoruba, Hausa, and Igbo including Pidgin. This according to the expert will do a lot of good as simplicity is the soul of driving compliance.
On tax administration, Oyedele also noted that the administration of taxation in Nigeria hasn’t impacted revenue growth in the economy. This he attributes to doing things manually across tax collection, relations with business owners, filing forms, filing returns among others making the system crude and prone to corruption.
For the experienced tax man, policy formulation has also hindered achieving an effective tax system in Nigeria. He particularly frowns at the area of clarity, consistency, and harmonization of tax laws across tiers of government which has giving rise to the spate of multiple taxations in the country affecting particularly Small and medium-sized enterprises (SMEs).
In another perspective
Beyond reviews of tax laws, promoting professionalism amongst tax practitioners has also been identified as a remedy to tax irregularities in the nation. This call has been promoted in a recent statement by Dame Jumoke Simplice, the immediate past president of the Chartered Institute of Taxation of Nigeria, CITN.
Emphasizing the need for employing qualified tax practitioners in the tax system, she reiterated that political affiliations shouldn’t be a consideration for appointing tax officers. The need for political autonomy as well as capacity building for revenue collection also made it in the spotlight.
Analyzing factors responsible for low tax compliance, Simplice bemoaned the level of corruption in the system discouraging citizens from paying taxes as at when due.
In her words,
People get disenchanted when they see in the news that government officials are stealing billions of naira and there is no real consequence because no one has been jailed. So, it will not encourage voluntary compliance. We cannot continue to pay lip service to anti-corruption and then do plea bargaining with corrupt persons, it does not work. People will be discouraged when government takes so much and people can’t see what the money is being used for.
The state of the Nigerian Tax System
Data from Organisation for Economic Co-operation and Development (OECD) showed that the tax-to-GDP ratio in Nigeria increased by 0.6 percentage points from 5.7 percent in 2017 to 6.3 percent in 2018. In comparison, the average for 30 African countries increased by just under 0.1 percentage points over the same period and was 16.5 percent in 2018.
Since 2010, the average for the 30 African countries has increased by 1.4 percentage points, from 15.1 percent in 2010 to 16.5 percent in 2018. Over the same period, the tax-to-GDP ratio in Nigeria has decreased by 1.0 percentage points, from 7.3 percent to 6.3 percent. The highest tax-to-GDP ratio in Nigeria was 9.6 percent in 2011, with the lowest being 5.3 percent in 2016.
In 2020, the Federal Inland Revenue Service (FIRS) said it pulled in ₦4.952 trillion in non-oil revenue, lower than ₦5.076 trillion which is projected to make in the year and much lower than ₦5.261 trillion it made in the same period of 2019.