The Federal Inland Revenue Service (FIRS), has said that an increase in tax collection will enhance Nigeria’s revenue and cut down the urge to borrow to fund the economy.
According to the revenue agency, it would ultimately lead to a lower national debt burden.
In a paper presentation titled: “Interaction between Tax Policy, Legislation, and Administration: 8 Implications for Tax Revenue Collection Amidst Nigeria’s Current Economic Challenges”, the Head, Treaties and International Tax Policy, FIRS, Kehinde V. Kajesomo, said, the government should come up with innovative ways to boost tax collective as it would drive development.Food and travel guides
Kajesomo said, “To collect more taxes, it’s essential to leverage the relationship between tax policy, tax legislation, and tax administration by ensuring they are well-aligned, efficiently implemented, and adaptable to changing conditions. Continuous improvement in each area, coupled with robust feedback mechanisms, can significantly enhance tax compliance and revenue collection.
“A well-coordinated approach ensures that tax policy is effectively translated into legislation and administered efficiently, leading to optimal tax revenue collection. This, in turn, supports economic recovery, and diversification.”
In 2023, Nigeria’s Tax-to-GDP ratio stood at 9.4 per cent, which is one of the lowest in the world and in Africa, a significant drop from the 10.86 per cent ratio reported in 2021 by the National Bureau of Statistics (NBS).
Kajesomo noted that the country’s present economic realities are posing a setback to tax revenue collection.
The Nigeria Economic Summit Group and Stanbic-IBTC in the Business Confidence Monitor for the month of October stated that Nigeria’s business operating environment is largely hostile, as underlying business and economic challenges have amplified significantly and showed weaker performance.
According to the report, the current business performance index for October 2024, showed “a decline in business activities compared with September 2024. Most businesses faced significant hurdles, limiting their growth performance with inadequate power supply, insecurity and limited access to financing topping the list.”
He said that while the current economic conditions had led to low public trust in the tax system leading to non-compliance, reduce tax base due to reduced profitability and closure/relocation of company, reduced oil production/revenues and its effect on the budget, and pressure on non-tax revenues source amongst others, the FIRS chief added that multiple taxation, inflation, exchange rate fluctuation, complex tax laws, multiplicity of tax administration, and weak enforcement have all combined to weaken tax revenue collection in the country.
“Ultimately, the success of Nigeria’s tax system hinges on the continuous collaboration between policymakers, legislators, and tax administrators, along with the commitment to transparency and accountability. Through these combined efforts Nigeria leverages its tax system to overcome its economic challenges and achieve long-term stability and prosperity.
“The interactions between tax policy, legislation, and administration are pivotal to Nigeria’s ability to address its current economic challenges.
“Nigeria must continue to reform its tax policies to better align with its economic realities, strengthen its legislative frameworks to close loopholes and enhance compliance, and modernize its tax administration to improve transparency and efficiency. By doing so, the country can build a more resilient and diversified economy, reduce inequality, and foster sustainable growth,” he said.
As a way of shoring up Nigeria’s tax revenue, Kajesomo emphasized the need for a synergy among relevant stakeholders.
According to him, breaking the barriers to low tax collection will reduce dependence on oil and support diversification.
“Effective taxation strategies can play a pivotal role in addressing Nigeria’s economic challenges. By leveraging tax policy, legislation, end administration, the government can drive economic recovery, support diversification, and reduce dependency on oil, address inequality, and build a more resilient economy in the long term,”
“A tax system that is fair and transparent can increase voluntary compliance. Tax policies that are perceived as equitable, and legislation that is easy to understand and follow, can improve the public’s willingness to pay taxes. Efficient tax administration further reinforces trust by ensuring that everyone is paying their fair share,” he further said.
