Experts in the commerce industry have asked the Federal Government to widen its tax net in order to increase its revenue and ease the burden on the nation’s economy.
The experts, who spoke with Nairametrics in separate interviews, explained that beyond the technicalities around the assessment, rates, and computation of taxes, the government at all levels should ensure the creation of an enabling tax environment where the tax system is fair, equitable.
What they are saying
The President, Lagos Chamber of Commerce and Industry (LCCI), Michael Olawale-Cole, advised the Federal Government to widen its tax net in order to increase its revenue and ease the burden on the country’s predominantly oil-based economy.
He said, “Beyond the technicalities around the assessment, rates, and computation of taxes, we urge the government at all levels to ensure the creation of an enabling tax environment where the tax system is fair, equitable, and efficient to make tax payment easy.
“At different media opportunities, the chamber has advocated for the widening of the tax net to capture more qualified taxpayers who hitherto are not paying their taxes. In addition, the World Bank’s recently published Nigeria Development Update recommended that we impose higher taxes on ‘sin’ products or luxury patronised by the rich.”
Commenting on Nigeria’s debt stock, he added that a chunk of the Federal Government revenue in 2021 was spent on debt servicing.
Olawale-Cole said, “The Federal Government spent N2.89tn on debt servicing between January and August 2021. This figure represents 74 per cent of the total revenue of N3.93tn generated by the Federal Government within the same period, a development considered to be a dangerous trend for the economy.
“On the amendment of the Fiscal Responsibility Act to enable government to borrow for ‘critical reforms of significant national impact’ (which are not defined), we urge caution as this may lead to abuse of definition of what is ‘significant national impact.
“Our concerns are founded in the rising debt stocks of the government and wonder what the levels may become when more room is created for more borrowing.”
The chamber also expressed concern over the protracted insecurity crisis that had hampered production in certain parts of the country. According to the LCCI, the unyielding insecurity crisis has played a contributory role in depleting foreign direct investment in the country.
It said, “We note that in the last quarter of 2021, the economy was confronted with several challenges including subdued business and commercial activities across various sectors (evidenced by PMI data trend); significant FX pressures (evidenced by widening premium between official and parallel market rates); revenue pressure from oil and non-oil sources, inflationary pressures, subdued purchasing power, weak employment levels, worsening internal security situation and weak investor confidence.”
Olalekan Aworinde, a Senior Lecturer, Department of Economics, Pan-Atlantic University, explained that tax collection remains the major revenue of the government and revealed that there are lots of people that are not taxed in Nigeria.
He said, “The truth of this, I can tell you is that the only way out is for government to expand the tax net. Tax collection remains the major revenue of the government. There are lots of people that are not taxed; Nigeria is under-taxed.
“Of course there are some issues of double-taxation in certain cases, but I can tell you that a lot of people are under-taxed and a lot of people are evading taxes. So, if there are proper machinery in place so that people cannot evade taxes any longer, I can tell you that our borrowing will reduce drastically.
“A lot of people are not paying tax to the government. And even when they pay the correct tax to the government, there is a high level of corruption on the part of some tax authorities which reduces the revenue the government generates. If you look at what is happening in the polity concerning the Value Added Tax, it is as a result of the fact that revenues that these state governments receive are not enough for them and they feel they are being cheated.”