Plans by the federal government to seek a drastic reduction of the current 62 levels of taxes to a sizeable nine has drew applause by members of the organised private sector, reports Ibrahim Apekhade Yusuf
FOR many discerning Nigerians who staked a bet that the President Bola Tinubu-led administration was going to make good after all, despite all odds stacked against it, they got a moment of epiphany of sorts when the government announced that it was ready to work on the problem of excesses taxes.
Making this announcement was the Chairman of the Presidential Fiscal Policy and Tax Reforms, Mr Taiwo Oyedele last Tuesday.
He revealed to the utmost amusement of many that the federal government was working assiduously to reduce taxes from the current 62 to a maximum of nine, to create a more business-friendly environment in the country.
He spoke at the 2023 annual conference of Institute of Chartered Accountants of Nigeria, ICAN, in Abuja.
According to him, the step had become imperative, as the current multiplicity of taxes had made tax administration cumbersome and ineffective.
Oyedele compared Nigeria’s tax revenue of N15.194 trillion in 2022 to the equivalent of N78 trillion revenue of South Africa, with only 10 taxes in the same period.
He further stated that to achieve the tax reduction goal, administrative intervention and constitutional amendment would be required.
Oyedele noted that the move was part of President Bola Tinubu’s reforms as the federal government’s aims to achieve an 18% Tax-to-GDP ratio within three years.
According to him, the plan is to enable the rich to pay more tax in favour of the less-privileged, just as he also envisages a reduction in the corporate income tax rate below the current rate of more than 40% to help boost business.
Also speaking at the event, the Accountant General of the Federation, Dr. Oluwatoyin Madein, noted that accountants played very critical roles and unique responsibilities in driving the nation’s development.
She said: “Transparency builds trust”, and as such accountants must ensure accountability in both the public and private sectors.”
The AGF tasked accountants to also address the unique needs of marginalised communities, with a view to ensuring inclusiveness of the various segments of the nation.
It would be recalled that the President had in early July given hints about his administration’s preparedness to turn things around in the nation’s tax ecosystem.
Specifically, President Tinubu approved Four Executive Orders delaying and suspending the start of certain taxes paid by businesses.
The action, many economists observed, was consistent with President Tinubu’s promise to address business-unfriendly fiscal policy measures and tax multiplicity at his inauguration on May 29, 2023.
The executive orders include: “The Finance Act (Effective Date Variation) Order, 2023, has now deferred the commencement date of the changes contained in the Act from May 23, 2023 to September 1, 2023. This is to ensure adherence to the 90 days minimum advance notice for tax changes as contained in the 2017 National Tax Policy.
“The Customs, Excise Tariff (Variation) Amendment Order, 2023. This has also shifted the commencement date of the tax changes from March 27, 2023 to August 1, 2023 and also in line with the National Tax Policy.
“The President has given an Order suspending the 5% Excise Tax on telecommunication services as well as the Excise Duties escalation on locally manufactured products.
“Further to his commitment to creating a business-friendly environment, the President has ordered the suspension of the newly introduced Green Tax by way of Excise Tax on Single Use Plastics, including plastic containers and bottles. In addition, the President has ordered the suspension of the Import Tax Adjustment levy on certain vehicles.”
Also speaking with some select journalists at the just concluded annual meetings of the International Monetary Fund (IMF) and the World Bank in Marrakech, Morocco, Wale Edun, Minister of Finance and Coordinating Minister of the Economy, had hinted that the federal government is considering introducing new tax reforms as part of measures to ramp up revenues and curb borrowing in a bid to revive the economy.
He hinted that the 2024 budget would be based on a conservative oil price benchmark.
“We have to be conservative despite rising oil prices. Deciding the benchmark is a collective effort — ministry of budget and planning, ministry of petroleum, ministry of finance,” he said.
“We must also increase revenue via ramp-up in oil production, curb oil theft, remove wastages like tax waivers,” the minister said.
The federal government’s N21.83 trillion budget for this year is based on an oil price benchmark of $75 per barrel. Although the price of Brent crude, the global benchmark, has rallied to close $90 per barrel, the government continues to grapple with revenue shortfall amid the decline in oil production and rising debt service costs.
At about 7 percent of GDP, Nigeria’s revenue ranks amongst the lowest globally and the government spends a large chunk of its incomes to service debt, which has grown to N87 trillion, according to the Debt Management Office.
Another plan is to aggressively push for investments, which he believes will ease current funding pressure and debt.
Edun said the removal of petrol subsidy and foreign exchange reforms have stoked investors’ interest in the country.
He said: “Everybody is positive about Nigeria including the rating agencies. There is a very good vibe, there’s a very good buzz and there’s a lot of interest in the Nigerian economy, in the reforms that are currently being undertaken, and of course, in the investment opportunities that the largest economy in Africa, the largest population in Africa, the most youthful population in Africa has to offer. In addition to that, of course, the resources that are on ground.
“When you put all that together after, perhaps, China, India, Nigeria is the next largest economy that is being sought after as an investment destination. What it takes is for the country to be ready to attract that investment, to turn the initial interest in agriculture, solid minerals, industry, manufacturing, import substitution into investments.”
He reiterated the government’s commitment to growing the Nigerian economy, reducing poverty, and improving living conditions for Nigerians.
“I think we are laying the groundwork for achieving that. The president is making the tough decisions and the reception is very positive. We are here at the World Bank IMF meetings, and so we get a sense of what the whole world thinks because here you have the development finance institutions, private bankers, investors, analysts, rating agencies, and the reaction, from what I know so far, is very positive,” Edun said.
Businesses thumbs up proposal
Expectedly, some financial experts have drummed support for the federal government proposal to tax additional wealthy Nigerians, describing it as a means of income redistribution that can enhance the country’s fiscal revenues.
They said this in separate interviews in Lagos.
Firing the first salvo, the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE) Dr Muda Yusuf, said the government proposal was a welcome idea.
“This approach is a form of progressive tax, because high networth individuals are expected to pay more taxes.
“It is a means of income redistribution and a common practice in most civilised countries where there is economic development,” Yusuf said.
He condemned a situation where wealthy citizens do not remit the right percentages of taxes to appreciate government authorities.
“Their tax remittance is not commensurate with their net worth and affluent lifestyle. They often short-change the government,” Yusuf added.
Echoing similar sentiments, former President, Chartered Institute of Taxation of Nigeria (CITAN), Dr Mc-antony Dike, described the government proposal to tax more wealthy citizens as constitutional. Dike said, “Our tax laws dictate that every Nigerian who earns an income whether legitimately or otherwise must pay their tax.
“Indeed the Personal Income Tax Act 2011, as amended, removed the exemptions it granted to the president of the Federal Republic of Nigeria,” adding that anybody who earns legitimate income legitimately or must pay tax.”
He noted that rich Nigerians who do not pay tax were denying the government the revenue to provide public utilities for the citizens.
“As a matter of fact, a country like South Africa has demonstrated a greater tax compliance culture than we have in Nigeria.
“Indeed, before the advent of Value Added Tax in South Africa in the late 1990s, personal income tax was contributing close to 60 per cent of total tax collection in that country,” Dike stated.
Also, the President Standard Shareholders Association of Nigeria, Godwin Anono, said the federal government proposal to tax more wealthy Nigerians was a novel initiative.
“The planned policy is a sort of reduction of economic inequality in our society.
“Where the elite are expected to take care of the economically vulnerable citizens through its taxes,” Anono added.
He advised that the federal government should employ technology to bring more eligible tax payers into the tax net.
Also speaking in a television magazine programme monitored by our correspondent on Arise TV at the weekend, the Director General of the Nigeria Employers Consultative Association Mr Adewale Smatt-Oyerinde who admitted that businesses contend with over 60 categories of multiple taxations expressed delight that the proposal to bring these down would go a long way in bringing about the ease of doing business in the country.
According to him, the Nigerian business owners who face a legion of woes including multiplicity of taxes also have to provide energy to run their businesses; of course at such a huge cost, amongst other several encumbrances, a development he said was quite a disincentive for businesses.
Therefore, the proposal to cut down on these legion of taxes businesses have to cater for is a huge incentive and is indeed a welcomed development.
The NECA boss however said the world was watching to see how well this policy brief would be implemented to determine the government’s sincerity of purpose or otherwise.
Oyerinde’s position aligns completely with other members of the business community many of whom have lauded the proposal and would rather it is imp
