Nigeria is characterized by multiple taxations with the government uncovering 44 cases of multiple taxes embedded in the many Bills awaiting the National Assembly’s passage.
The incidences of multiple taxations injected in the taxation Bill compounds Nigeria’s taxation system, making it vulnerable to tax evasion, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele lamented on Monday in Abuja at the 153rd meeting of the Joint Tax Board ( JTB) which had the theme: “Harmonisation and Codification of Taxes at National and Subnational Levels”.
He said all the proposals for multiple taxation were included in the bills before past National Assemblies”, noting that, the administration of former President Muhammadu Buhari engaged him to identify all those multiple taxes.
“I got my team to work on it, we have the existing ones, and on top of that I asked my team to go through all the bills at National Assembly at different stages, we found forty-four (44) different bills with provisions about levies and taxes all over the place”.
Oyedele revealed that a new tax was introduced by the Buhari administration to be executed by the Financial Reporting Council of Nigeria (FRCN).
“I don’t know whether you have seen the act, they have a new act and that act not only imposes levies on accountants, it imposes taxes on companies listed in the stock exchange, based on their market capitalisation”.
“I can’t imagine how anybody will come up with a law like that. There are companies that are making losses and market status can be anything, I now have to pay you for what, why do I have to pay that tax? So, these taxes are building up every single day”.
He warned that “we will get to a point in this country if we don’t address this problem, that the total taxes and levies, we have to pay will be more than 100 percent of what you are making so it will not make economic sense for anybody to do business”.
Speaking to one of the disadvantages of having a multiple tax system, he argued, that “the more the number of taxes you have the less the tax revenue you collect. So we are doing the opposite of what we should be doing.
“It discourages investment for very obvious reasons and it could give an avenue for corruption because if the number of taxes are so many that even professionals don’t know all of them then an officer can just claim to be collecting anything that may not even get to government”.
“Multiple taxations introduce complexity for doing business and it depletes the returns on investment; it erodes business capital like if you have to pay a levy based on market capitalisation, it doesn’t matter if you have made a profit or not for that year you have to pay, so essentially you are paying it out of your capital. It’s one of the fastest ways for businesses to collapse”.
He said there was no need for the
federal government to introduce Police Trust Fund.
“You want to fund the police, you introduced a tax, and the reason why you collected corporate income tax, personal income tax, and fees is to decide what you want to spend it on, you cannot start producing taxes for every single thing that you want to do as a country. There are others including industrial training levy which you have to pay even when you are training your staff etc”.
The most underperforming tax in Nigeria According to Oyedele “is the Personal Income Tax (PIT), because Personal Income Tax across the world is the highest revenue yielding head, whether developing or developed country, countries make the most money from Personal Income Tax.
“South Africa made the equivalent of N27.7 trillion from personal income tax, I couldn’t find the 2022 figure for Nigeria so I put 2021 and the amount is not PIT but I just wanted it to look decent and it’s N1.6 trillion”.
He said introducing more taxes isn’t the best way out for the country.
“The solution is not to introduce more taxes but to focus on the fields that are high revenue yielding and easy to administer and difficult to evade and we will make far more than we are collecting today in the form of taxes, we do not need many taxes to collect more revenue but the reverse, less taxes more revenue”.
“In Nigeria, we do many taxes we have them all over the place, about 98 to 99 percent of the revenue collected from taxes, federal, state, and local government, comes from less than 10 taxes so the other ones are just there to annoy our people”.
According to him, ” In Nigeria, “we have multiple taxes, we have too many agencies collecting revenue, unprofessional means of tax administration, so there’s low tax morale and about 83 percent of our people do not pay their taxes because they feel it’s okay to evade payments of taxes. We have very manual processes particularly at local government and some states still.
“We need to be at a point where the number of taxes at all levels will be in single digits, it will not exceed nine tax items. We need to clarify taxing right, so there’s no doubt as to who will collect what and how it should be shared.
He argued that “every revenue, taxes, levies should “be collected by the tax authority and governments also need to improve how they fund agencies, our political leaders are part of the reason why we have these challenges.
“They approve the budget of agencies without releasing the fund so everybody is now looking for one levy or the other to get this fund, but the more we keep doing that like the Financial Reporting Council of Nigeria which is the latest one, the more we compound an already difficult situation we have”.
Speaking at the event, the Executive Chairman of the Federal Inland Revenue Service (FIRS) and Chairman of the Joint Tax Board (JTB), Mr Muhammad Nami said “The intention of the government is to eliminate multiple taxations to encourage investment, to raise adequate revenue because the irony of everything is that the more of these taxes we have, the less revenue we generate so what we want to do will reduce the number of taxes, block leakages in the tax system, and raise more revenue for the three tiers of government”.
“While we are here do that going forward the local government chairmen, state governors, and president will have more money to build roads and other infrastructure that we require, more money to provide social infrastructure for the people, more money to build schools and hospitals, more money to secure properties and life of our citizen.
According to Nami, “As the new administration attempts to address the many socioeconomic challenges facing the nation on many fronts, it becomes imperative for all the levers of State to shake off any lethargic antecedents and focus on the goal of a national resurgence.
“The unique and privileged offices we occupy as drivers of the nation’s tax administration processes present us with a rare opportunity to take hard, but necessary decisions that are expected to yield long-term benefits and add immense value to our collective prosperity as a nation.
“In recent years, especially since the dawn of our current democratic dispensation, the importance of taxation has continued to be reiterated and reinforced by all, and the critical role that tax revenue plays in funding government and governance cannot be over-emphasized.
