The Federal Government has announced its intention to nip off various widespread tax malpractice in the country, stressing that the country’s tax to Gross Domestic Product (GDP) of six per cent is one of the lowest levels in the world.
This was stated on Friday by the Minister of Finance, Mrs. Kemi Adeosun while speaking at the Nigerian Stock Exchange & Bloomberg CEO Roundtable in Lagos.
Adeosun who spoke on the theme: “Innovating out of Nigeria’s recession: exploring new paradigms for Nigeria’s economic growth” , also said the Federal Executive Council has approved the signing of the Global Convention on the Base Erosion and Profit Shifting (BEPS) which allows companies who generate profit in Nigeria to evade taxes by shifting these profits to countries or jurisdiction where little or no tax is payable.
She said the government will adopt best value in deployment of government resources, focus on enabling infrastructure and effective revenue mobilization with the recently released Economic Recovery and Growth Plan (ERGP).
According to her, revenue mobilization is critical to the success of Nigeria’s economic reform agenda, stating that Federal government must amend low level of tax compliance across tax payers.
Adeosun said, “Revenue mobilization is critical to the success of Nigeria’s economic reform agenda. To do this, we must amend Nigeria’s low level of tax compliance. Our tax to GDP of six per cent suggest widespread ignorance of our tax laws.
“We have just 14 million active tax payers out of an estimated 69.9 million economically active in Nigeria. Out of that 14 million, majority are P.A.Y.E. Among those paying tax, there is widespread malpractice that results in only half of the actual income being subjected to tax
“Recently, Federal Executive Council (FEC) granted permission to the Ministry of Finance to sign the Global Convention on base erosion and profit shifting which allows companies who generate profit in Nigeria to evade taxes by shifting these profits to countries or jurisdiction where little or no tax is payable. This practices harm Nigeria and it must stop. Nigeria’s tax to GDP is one of the lowest levels in the world.
“We need a sustainable revenue base that will deliver It is well documented that in the entire nation, only 214 people pay tax of over N20 million and they are all in Lagos state. Our low tax to GDP compares negatively to other countries such as Ghana which is 16 per cent, South Africa 27 per cent while the OECD average is 37 per cent.
“If we want to grow, we must address these issues and do so aggressively and to do that we may have to step on big toes because we really have no choice. Fairness demand that those who have more must carry their fair share of the tax burden and so to this end, for the last 15 months, we have engaged in huge data gathering exercise with a leading investigation agencies.
“I am sure you are aware of the controversy surrounding about the amount of money we are using to service our debt at the moment. The solution is not to reduce our debt but to increase our revenue,” she said.
She said federal government intends to revive Public Private Partnership (PPP) and revive existing and failed PPP projects.
Adeosun noted that the country’s private sector is extremely efficient, creative and resilient but it needs predictability in policy.
“We will introduce new assets clause of guaranteed instruments that will provide adequate safeguard for the protection of private capital,” she said.
She explained that the dwindling global oil prices has cost the nation’s economy but the federal government under the leadership of President Muhammadu Buhari is going back to basics and fix what has been broken.
According to her, Oil is only 10 per cent of our economy but it represents up to 60 per cent of our revenue which is why when the price of oil fell, we had a double impact. We lost revenue and government found it difficult to really meet its needs.
“We cannot benchmark ourselves against the Saudis. They have 30 million population and generate 10 million barrels of oil every day. With our 190 million at 2.2 million barrels at the most. We are rather closer to the Indonesians who have 257 million population and 800, 000 barrels a day
“In Nigeria, for every barrel of Oil, we have 90 people sharing it, the Saudis three and Indonesians have 321 people sharing a barrel of oil, this shows that we really cannot afford to rely on oil but use the oil revenue to generate and stimulate activities in other areas of the economy which is encapsulated in the recently released ERGP. Nigeria has the potential to be a regional power however central to these are there critical factors One is best value in deployment of government resources, focus on enabling infrastructure and effective revenue mobilization We have to go back to basics and fix what has been broken.
“Agriculture is 20 per cent of our economy whereas a 10 per cent increase will translate to 2 per cent increase in our GDP. We will continue to prioritize infrastructure spending. In the last 12 months, we have spent approximately N1.2 trillion on capital projects. Our road spending was N200 billion which compares to N19 billion in 2015, transport and aviation received N143 billion compared to N6 billion in 2015,” she stated.
From Left: Chief Dr. Mrs. Nike Akande, President, Lagos Chamber of Commerce & Industry (LCCI); Mrs. Selloua Chakri, Head of Market Structure Strategy, MEA, Bloomberg L.P; Mrs. Kemi Adeosun, Honourable Minister of Finance, Federal Republic of Nigeria and Mr. Oscar Onyema, Chief Executive Officer, The Nigerian Stock Exchange (NSE) at The NSE & Bloomberg CEO Roundtable event at the Exchange on Friday.