The Federal Government of Nigeria has unveiled strategies to bolster tax revenue for the 2023 fiscal year. This is even as it plans to bring more businesses into the tax net in the coming year while deploying technology to block leakages in already taxed businesses.
Part of these strategies as highlighted in the 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy paper is to expand the list of bodies and institutions collecting taxes for the government to include telecom companies, banks and other financial institutions, companies in construction, aviation sectors, among several others.
Already, the Budget Office of the Federation had revealed that it would begin the implementation of its proposed excise duties on telecommunication services and beverages in 2023. This is in spite of criticism and even rejection of the proposed telecoms tax by the Minister of Communications and Digital Economy, Isa Pantami, who supervises the telecoms sector.
While noting that non-oil revenues have remained more stable than oil revenue in recent times, the government said in the strategy paper: “To improve non-oil revenue receipts, tax administration will be improved and efforts will be sustained to expand the non-oil revenue base will be expanded. In addition, the tax system will be further strengthened over the medium term by improving collection efficiency, enhancing compliance, and reorganizing the business practices of revenue agencies as welle as employing appropriate technology.”
“In addition, efforts will be made to bring more businesses in the informal sector into the tax net. In 2021, the FIRS crossed the N6 trillion threshold for the first time despite the lingering effects of the COVID-19 pandemic. Strategies to achieve the revenue projections of the Service in the medium term include leveraging on relevant provisions in the Finance Acts, 2019, 2020, and 2021 to widen the tax net and to optimise collections; expanding the list of VAT collection agents currently limited to MDAs and Oil and Gas Companies, to include Telecoms, Banks and other Financial Institutions, Companies in Construction, Aviation, etc., in line with Section 14 (3) of the VAT Act,” the government said.
It added that the law now empowers the FIRS to appoint any person as its agent to withhold or collect VAT and remit same to the Service.
Other strategies highlighted include “reduction of revenues forgone through tax expenditures, including corporate bonds interest income exemptions, Capital Gains Tax exemptions, and tax avoidance by schemes by businesses. Overlaps and opportunities for tax expenditure double dipping will be eliminated.”
While noting that the deployment of the automated tax administration system (the TaxPro Max) in June 2021 has significantly improved tax administration and the deployment of resources, the government said it would be leveraging technology to further simplify tax processes, ease voluntary tax compliance, increase revenue collection and create a tax environment that is conducive for taxpayers to fulfil their tax obligations.
In addition, the government said it would scale up the automation of VAT in major supermarkets, the hospitality sector, and other key outlets nationwide to block leakages and improve VAT collection.
What experts are saying
While the government is desirous of boosting its revenue through the imposition of new taxes such as the 5% excise duty on telecom services, experts have warned that arbitrary imposition of taxes on already impoverished masses could spell doom for the government.
According to the Fiscal Policy Partner and Africa Tax Leader at PwC, Mr Taiwo Oyedele, the continuous introduction of new taxes without considering the poor may create a social problem for the Nigerian government.
“If we continue in this pattern of just introducing taxes without looking at the social aspects; whether we’re protecting people poor, we will very quickly create a social problem, which can bring down the government, like we’ve seen in places like Sri Lanka, and I hope that doesn’t happen because it might be too late at that point to make the corrections that we should have made before,” he said.
However, Economist and World Bank Consultant, the CEO of Ant Hill Concepts Limited, Dr. Emeka Okengwu believes that the government is doing the right thing to bring the economy back on track. According to him, the government will only collect company income tax from businesses that are doing well and individuals that are earning income through the pay-as-you-earn system.
“For you to pay the telecoms tax, it means you have money to buy credit, if you don’t buy credit on your phone, the government cannot tax you. It is time for all Nigerians to stop thinking about what the country can do for them and think about what they can do to help the country. What is currently happening in Nigeria was foretold, there is no way we won’t have run into this headwind because there is a fall in the global economy. So, now it is all about developing a wholistic economic development plan for our country,” he said.
If the comments ascribed to this Dr. Emeka Okengwu are his only comments on this government revenue drive, then he has taken a rather myopic view. It is a fact that the large chunk of government revenue comes from oil production. This same government acknowledged that a little less than half of daily production is lost to theft. What is it doing to arrest this theft. In simple analogy, if a thief burgles my house daily to steal my food, the rational thing for me to do is to either catch the thief or make my home impenetrable to the thief and not to force my household to eat less food.
This government should stop the oil theft, expand the tax net over the existing intentional and unintentional tax evaders, and arrest the dishonesty of its own tax managers (yes, employees of the FIRS and other tax collection agencies).
I am so sure that the income lost to these drains alone can meet our yearly debt obligations.
