Monday, December 5, 2022

Nigeria’s tax to GDP ratio lowest in the world

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From Romanus Ugwu, Abuja

European Union (EU) has lamented that Nigeria’s tax to Gross Domestic Product (GDP) ratio is one of the lowest in the world.

Head of EU Corporation Cecile Tassin-Peizer made the remark at a Workshop on the Draft Directives for the Harmonisation of Tax Expenditure Evaluation Methodology in ECOWAS member states held in Abuja on Tuesday.

In her own remarks at the event, she noted that; “the global economic challenges resulting from the COVID-19 pandemic and the invasion of Ukraine by Russia have affected economic opportunities of countries and individuals. West Africa is no exception. In fact, one can argue that the impact of these challenges are felt even higher in this region than in so many others.

“Domestic revenue is an important source of government expenditure funding, but revenue mobilisation remains a crucial challenge. Efficient management of internal taxation for improved revenue generation cannot be overemphasised. As we all know, the tax-to-GDP ratio in this region is too low and our host country, Nigeria is one of the lowest in the world.

“Therefore a project such as this can demonstrate what is possible and can work with you (member states) and the regional organisation to turn the trends,” she charged.

Responding, the federal government revealed that it is planning to curtail external borrowing through blockage of leakages from tax remittances.

Director, Technical Services, Ministry of Finance, Budget and National Planning, Fatima Hayatu, who made the disclosure at the event, dismissed the impression in many quarters that the debt volume of the federal government is very high.

She also argued that with financial discipline the debts are serviceable, assuring that: “So much has changed since the last time we met especially as it concerns tax incentives and remittances not bringing development and stopping external borrowings. The system has become more transparent, tax incentives to encourage ailing industries have also improved.

“The tax rebate that the federal government has given has improved agriculture and the industries affected by the COVID-19 pandemic. It has helped them to retain their staff and it is an achievement for us as a government. We want people to retain their jobs and get employed to reduce the spate of insecurity in the country,” she argued.

On the impact tax remittances are having on the volume of debts, she said; “if we pay more taxes and redirect the taxes to the right fiscal sectors, we will certainly reduce our debt burden.

“If you look at the ratio of the debt burden to our GDP, you will notice that it is not as if the debt is too much. The debt is not what the government cannot surmount. This programme is to brainstorm on how to block leakages where taxes are diverted to.

“If we transparently block the leakages, the government will borrow less and there will be more funds to execute projects without borrowing,” she argued.

Earlier in her opening speech, she said; “I am delighted to observe that the ECOWAS Commission is keenly committed to improving taxation and controlling tax expenditures in the sub-region through careful designing and implementing a series of meetings and workshops.

“Permit me to inform this Workshop that the issue of tax expenditure is recently attracting the concerns of stakeholders. In particular, it has generated heated debates and is taking the attention of not only the government but also civil society organisations, academia, members of the private sector and the general public. “However, I am delighted to observe that reforms in tax expenditure management are gaining traction in Nigeria, resulting in the continuous development of in-house capabilities, internal restructuring in our agencies for greater efficiency and increased interest by development partners for collaboration on this crucial initiative.

“Nigeria is committed to strengthening transparency in its public financial management towards the drive to boost domestic resource mobilisation. As part of the indicative fiscal policy focus areas for the Annual Finance Bill 2022 to accompany the budget, Nigeria will implement the following measures:

“Rationalisation of exemptions by phasing out antiquated pioneers and other tax incentives for matured industries; deepen government reforms to reduce revenues forgone to support the fiscal policy; and The establishment of a more sustainable and effective monitoring of the use of tax incentives,” she promised.

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