Mr. Taiwo Oyedele, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has revealed a staggering annual loss of around N20 trillion (approximately $26 billion) for Nigeria due to gaps present within its tax system.
These gaps encompass issues such as tax evasion and inefficiencies in the collection process.
Oyedele shared his insights with journalists on Tuesday, joined by notable figures including Mr. Zaccheus Adedeji, the Special Adviser to the President on Revenue; Shubham Chaudhuri, the World Bank Country Director in Nigeria; and Otunba Francis Meshioye, President of the Manufacturers Association of Nigeria (MAN). Their discussion followed the committee’s inauguration by President Bola Tinubu at the State House in Abuja.
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Expressing concern, Oyedele emphasized the prevailing leniency towards tax evaders and the urgent need for consequences. He pointed out that a transformative shift is essential, underlining that Nigerians are willing to pay taxes if they witness the tangible benefits.
Highlighting the committee’s core objective, Oyedele further revealed that its task revolves around eliminating the multitude of taxes that hinder the prosperity of Nigerians. This ambitious aim entails streamlining and harmonizing the tax structure to offer a more manageable and simplified array of taxes.
In his words, “Our committee is dedicated to removing numerous tax obstacles that hinder our people’s prosperity. Nigerians can anticipate a future with fewer, more harmonized taxes as a result.”
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“But then it seems like it’s a contradiction. How do you then raise the revenue? Now, we know where we’re going to get the revenue from – there’s a huge tax-gap. What that means is as of today, without introducing any new taxes, if you get everyone that needs to pay their taxes to pay, we will not be where we are. So we think that the gap is somewhere in the region of N20 trillion.
“In addition to that, you would also imagine that we have inefficiencies in the way we collect the little that we collect. And that inefficiency is coming from, you know, sometimes, I think in the 2023 budget, we have like 63 MDAs that were given revenue targets. Those MDAs want to be able to focus on their primary duties of why they were established, the revenue mandate is a distraction for them.
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“So imagine that we asked the FIRS to collect those revenues on their behalf so those agencies, by focusing on their primary mandates, they’ll facilitate the economic development we’re looking for. FIRS will collect the revenues efficiently, which means not only is the top line growing because of collecting it is reducing. And that gives you a much bigger margin to take care of the people.
“So these are some of the areas where we expect that the increase (18% tax-to-GDP) would come from. If we get to a point where it becomes necessary to look at existing tax rates, and all of that, it will be maybe as a result of the harmonization of taxes that we have repealed from the current legislation”, he said.
Shedding more light on the targets, Oyedele said “We don’t want to tax investment because it seems counter-intuitive. If you need more investment for the economy to grow, why do you make it more expensive to invest? Why don’t I allow you to invest and when you’re making the returns on your investment, we can talk about the taxes at that point? Why am I taxiing production when I need more production to even create employment for our people when I can wait for you to produce and tax the consumption?
“How do I ensure that while I’m taxing consumption, it does not come in the way of, you know, the quality of life and so on and so forth? And that’s where the policy design comes in. So in designing your policy and part of the mandates of this committee is to get a lot of data about our people. So when we are collecting data about our people, it is not because we want to tax everyone.
“So when you have that data, you use it to design the fiscal policy such that the poor and vulnerable do not carry the burden of tax. So that’s why you see – and we have a bit of that already – you see basic food item is exempted from VAT, right? So that’s the plan.
“The plan is to ensure that there are some of us who can afford those things. Some of us will go to a five-star hotel today and have lunch which is 25,000 naira. For some people that is their monthly income. So the person that can pay 20,000, 25,000 to buy a meal, they can afford a little bit more to take care of society as a way of contributing to our economy”.
