Increase ‘sin taxes,’ charging fees for electronic money transfers, rationalize tax expenditures, remove loopholes in tax laws, and improve tax compliance with a more disciplined revenue administration are the clear cut ways recently prescribe by the World Bank to the Federal Government of Nigeria for raking in about ₦10 trillion from tax in just 3 years and grow tax-to-GDP to about 7 percent.
The advice is on the wings of the bank’s recently released ‘Nigeria Development Update’ with a focus on calling the government’s attention to low hanging fruits to quickly increase its tax fortunes that will, in turn, help the government fund essential services, provide security to citizens, help tackle hunger and poverty, and deliver critical health and education services.
Beaming the searchlight on the nation’s tax-to-GDP ratio
It is important to state that Nigeria is currently the biggest economy in Africa with just a paltry four percent margin that is currently challenged by the outbreak of the Covid-19 pandemic and fall in oil prices due to a massive shake in 2020 necessitating the need to look beyond the oil sector for sustainability.
Still detrending its dwindling GDP-to-tax fortunes, the international body has affiliated the pandemic to a decrease in employment pointing to its February 2021 COVID-19 National Longitudinal Phone Survey. The survey indicated that the number of people working in February 2021 was similar to the number in September 2020—much higher than would be expected if employment were following typical seasonal patterns.
The world bank release below,
“In the longer term, fundamental reforms of the tax system will be necessary to stimulate post-pandemic investment and economic growth. As Nigeria tries to “build back better” after the COVID crisis, a more strategic approach to revenue mobilisation will also be necessary: not just taxing more, but taxing better; not just how much to collect, but how to collect, what to collect, and from whom,”
“The higher share of people working was more concentrated among women and people from poorer households, which indicates an ‘added worker effect,’ more members take on work to help the household to cope with economic shocks.
“Moreover, the commerce and service sectors have expanded beyond what would be expected given previous seasonal patterns, especially for women.
“Accompanying these labor market shifts, incomes for some households have increased since before the crisis, although this is far from universal. Yet even if incomes are stabilizing, households are feeling the impact of rising prices, which erodes their purchasing power and means that food insecurity is still widespread,” the report added.
“The COVID-19 crisis is far from over, and while the second wave of cases appears to have peaked and receded, how the pandemic will evolve is still unclear. Indeed, the December 2020 Business Expectation Survey Report and the CBN Consumer Expectations Survey for Q4 of 2020 reveal high, though easing, uncertainty and risk aversion among consumers and firms,”.