President Bola Ahmed Tinubu
Appraising Tinubu’s Move to Reform Nigeria’s Tax System
By Zekeri Idakwo
During the week, President Bola Ahmed Tinubu inaugurated a 40-man Committee on Fiscal and Revenue Reforms. According to the Chairman of the Committee, Taiwo Oyedele, “Nigeria loses N20 trillion yearly to tax gap”. This is worrisome, to say the least.
The primary mandate of the Committee is to help address the issue of “tax evasion and inefficiency in collection mode”, and the proposed 18% tax increase to-GDP, as well as reducing government over dependent on borrowing.
Tax evasion is a major problem in Nigeria, as it is in many countries. It is estimated that the country loses billions of dollars every year to tax evasion. A successful tax reform would need to address this issue head-on, through a combination of strong enforcement and incentives for compliance.
Tax reform is an important issue with far-reaching implications. Generally, tax reform is aimed at making the tax system fairer, more efficient, and easier to comply with; and most importantly to raise additional revenue for the government, address loopholes in the system and to stimulate economic growth.
Also Read: The Exit of Multinationals from Nigeria over Business Climate By Zekeri Idakwo
Nigeria’s current tax system is volatile and porous, which gives room for manipulations and other corrupt practices.
Some of the drawbacks in Nigeria tax system is that the government relies heavily on borrowing, without thinking of alternative sources of revenue and tax reforms that could sustain the economy in the long run.
Tax reform could not only raise additional revenue, but it could also help to diversify the government’s sources of income and make the system more equitable. A lot of countries around the world have made significant reforms to their tax systems in recent years, often with positive results.
There are several potential implications of tax reform in Nigeria. First, it could lead to higher revenue for the government, which could be used to fund public services or reduce the budget deficit.
Second, it could make the tax system more decent by ensuring that everyone pays their fair share and by eliminating loopholes.
Third, it could make the tax system more efficient by simplifying the rules and regulations.
Finally, it could have a positive impact on economic growth, as it could incentivize investment and job creation.
However, low-income earners are often disproportionately affected by high taxes, and making the tax system more progressive could help to alleviate this burden. Additionally, lower taxes for low-income earners could encourage economic activity and boost employment, as people would have more money to spend and invest.
Another area of concern is the effectiveness and implementation of the tax reform. The government needs to ensure that the reforms are actually implemented, and that the new system is efficient and effective.
According to the presidential Committee on Fiscal Policy and Tax Reforms Chairman, “There are some areas we expect that the increase (18% tax-to- GDP) would come from”. And I can easily guess those areas. One of such area is to increase taxes on luxury goods and services, which would target those with higher incomes while having a minimal impact on low-income earners.
Another option is to raise taxes on corporations, especially those that are highly profitable. Additionally, increasing taxes on activities that have negative externalities, such as pollution, could help to address environmental concern.
Meanwhile, the three years period given the Oyedele-led Presidential Tax Reforms Committee to execute its job is realistic, methinks. President Tinubu’s inauguration of the Committee is the first intentional tax reforms’ move – in Nigeria – that I personally believe will yield positive results, if it will be closely monitored.
It will be interesting to see how the Tinubu government achieves its lofty goals for Nigeria’s tax system, in the next three years.
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