Tax Payments Now Account For 70% Of Nigeria's Revenue As Oil Continues To Wither Away
Tax receipts which once upon a time were previously supplementary, now account for about 70% of Nigeria’s total revenue according to Nigeria’s Federal Inland Revenue Service (FIRS).
Meanwhile other revenue lines, including oil, accounted for just 30% of the country’s revenue.
Mr. Muhammad Nami, the Executive Chairman of FIRS, disclosed this recently in Abuja when he made a presentation titled, “Weathering Economic Turbulence,” at an interactive session with stakeholders.
While speaking Nami called for the amendment of the country’s tax laws, saying most of them date back to pre-independence times. He stressed that the country’s revenue situation was very dire, explaining that Nigeria has always relied on oil revenue for its budgetary needs, with little regard for revenue from tax. However the fall in oil prices, reduction of production quota, and oil theft had reduced the country’s revenue to critical levels.
The FIRS boss further revealed that the total Federation Account revenue for June 2020 was just N696 billion (about $2 billion), “which is equivalent to what a county in the United States spends.”
According to him, the “Nigerian economy is projected to contract by over five per cent in 2020 due to COVID-19 and other disruptions. Oil prices have plummeted (from $97.98 in 2012 to below $50 in 2020)
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He said despite efforts by the FIRS and Nigeria Customs Service (NCS) to drive up Value Added Tax (VAT) collection, “Collection has indeed gone up, but Nigeria’s VAT gap remained at a pitiable 70%, compared with South Africa at 12%, Morocco at 28%, and Zimbabwe at 38%”
Nami reiterated that Nigeria’s tax-to-Gross Domestic Product (GDP) ratio was currently about 6%, compared to Egypt at 15%, Ghana and Kenya at 17%, and South Africa at 28%. It is documnetd fact that the World Bank recommends a minimum of 15% Tax to GDP ratio for economic growth and poverty reduction, he stated.
Nami stated: “A Debt Management Office (DMO) report indicates that about N1.21 trillion (about $3.1bn) was used to service debt from January to June 2020.
“Over N3 trillion (about $7.7bn) is proposed for debt servicing in 2021. The report further projects that Nigeria’s debt stock will grow significantly by end of 2020.
“God forbid that Nigeria should default in debt repayment obligations. Nigeria’s debt to revenue ratio is worsening – it is estimated at 538% at the end of the fourth quarter, that is 190% increase from 2019 figure (348%).”
Nami identified the problems of tax administration in the country to include the false belief that Nigeria is rich and does not require tax money, resistance to tax payment and tax being seen as an unnecessary burden, and lack of political action to tackle low level of tax payment.
Photo > Courtesy UP