Experts in the tax sector have reiterated that Nigeria’s current tax to Gross Domestic Product (GDP) which stands at 6 per cent will no longer be sustainable in the long run, if the country is to achieve meaningful economic growth.
They stated this over the weekend at a pre-summit event ahead of the 28th Nigeria Economic Summit tagged “Critical Tax Reforms for Shared Prosperity.” which was organised by Nigerian Economic Summit Group (NESG) and the Federal Ministry of Finance, Budget and National Planning.
In his welcome remarks, NESG Board member, Mr Frank Aigbogun, said tax revenue is critical for the government to finance its activities and financial development objectives for shared prosperity and promote the efficiency of government and the economy.
Aigbogun said the introduction of a yearly finance act has supported tax legislation and encouraged policy implementation, which can be strengthened by addressing issues related to tax compliance, taxation and support to households and enterprises.
He said, “Nigeria suffers from low tax compliance and that the country’s tax to GDP ratio stands at 6 %, which is significantly lower than the average across African countries, which stands at 18 %,”
“Political leaders can lead by example by supporting a cultural change through tax compliance. Taxes should promote economic growth, especially for MSMEs that contribute a huge part of our GDP. Taxes can help finance public education and healthcare, offering better chances for people to improve their economic status. Taxes are the financial backbone of social security, protecting the poor. However, policy weaknesses, lack of reforms, and public understanding prevent taxes from playing a significant role in development,” he stated.
In his presentation, a tax expert and thematic lead, NESG Fiscal Policy & Planning thematic group, Mr Taiwo Oyedele, said the Nigerian economy is facing several challenges, including reduced foreign remittances, heightened insecurities, multiple exchange rate windows, low tax to GDP ratio and a high debt service cost to GDP ratio.
He noted that, “Some of the taxation issues include the introduction of new taxes on corporates, naira devaluation, increased inflation at 18.6 %, unemployment at 33%, poor policy coordination, petroleum subsidy and geopolitical tension/crisis,”