States across the country need to engage in contentious reform of their tax system to enable them deliver on the social contract with the citizens, Nigeria Governors’ Forum (NGF) Chairman Kayode Fayemi has said.
Fayemi, who said the 36 states recorded a compound annual growth of 12 per cent from N687 billion in 2015 to N1.21 trillion by 2020 from tax, added that the development stemmed from series of tax reforms the states implemented.
“These reforms comprise legal revisions, policy directives, institutional restructuring, and technological innovations to improve tax administrative processes and procedures,” he said.
The NGF chairman and Ekiti State governor explained that although the COVID-19 pandemic contributed to the decline recorded in 2020, current tax efforts by the states were still inadequate as the tax-to-GDP ratio is estimated to be less than three per cent.
“Advancing beyond our current revenue levels will warrant more systemic reforms to address low tax morale and voluntary compliance by taxpayers,” he added.
Fayemi spoke yesterday in Abuja at the seventh IGR Peer Learning Event organised by the NGF’s secretariat with the theme: Setting the Social Minimum Through a Tax-for-Service Programme.
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The NGF chairman stressed that despite efforts by the various states to address the needs of their citizens within available resources, there was the perception among the populace that the states have not done enough.right.
“Such justification is often predicated on the principle of reciprocity and economic exchange for which they fault government’s commitment.”
“Thus, where these recalcitrant taxpayers perceive a weak social contract, they call to question the legitimacy of taxes imposed on them by the law.
“Nonetheless, we must stand up to the trust placed in us as chief executives of our states and devise a more equitable social minimum, sustainably funded to strengthen our social contract with the citizenry,” he said.
Fayemi hailed the NGF secretariat for organizing the initiative, saying: “This redistributive measure, tax-for-service, is intended to bring about additional funding for healthcare, improve service delivery, promote trust in government and strengthen the legitimacy for taxes collected.”
The Executive Chairman of the Federal Inland Revenue Service (FIRS), Muhammad Nami, noted that in view of the dwindling earnings from oil sales, it was incumbent on the various levels of government to engage in reforms that would make tax payment attractive to the people.
“Going forward, taxation remains the only sustainable source of revenue anywhere in the world — Nigeria is not an exception.
“To this end, your excellences need to adopt the right tax policies that will ensure adequate funding for the much needed social-economic infrastructures,” Nami said.
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