‘Efficient implementation of Finance Act requires stakeholders’ support’
Efficient implementation of the Finance Act requires the support of all stakeholders, and ensuring that accounting and tax records are adequately kept by their clients and payments are made in good time.
Addressing participants at a Tax Breakfast Seminar: 2020 National Budget and Finance Act, organised by KPMG Nigeria, in Lagos, at the weekend, the Executive Chairman, Federal Inland Revenue Service (FIRS), Muhammad Mani, said tax plays a vital role in providing the required revenue for the provision of critical infrastructure in a nation. He pointed out that Nigeria has witnessed poor tax performance over the years, which he attributed to tax administrative procedure, centred mostly on enforcement.
According to him, this approach led to the reduction of voluntary compliance, opening ways for tax revenue erosion, and high cost of tax administration in Nigeria.“Over the years, there has been over-centralisation of power at the centre, leading to critical issues not being attended to in good faith. There were proliferations of IT initiatives with little or no contribution to tax revenue collecting result.”
He said the nation’s tax-to-GDP ratio in 2018 stood at 6.39 per cent, noting that the figure is far behind its peers in other emerging economies. He added that the FIRS is poised to rebuilding an institution that is capable of delivering efficient services to tax payers as well as optimising tax collection to adequately fund government projects.
Speaking at a panel session, the Chief Executive Officer, Seplat Petroleum Development Company Plc, Austin Avuru, maintained that unless Nigeria imbibes a flexible tax regime, the country would continue to face problems in tax administration. Avuru pointed out that investments are lacking in the traditional basin segment, which has contributed to failure on the part of the oil sector to meet up with yearly projections.
“The thing about taxation is that the judgment will eventually come at the flow of funds into the system. If a tax regime is good enough, then we will be able to see inflow of capital; if it is not good enough, we will see capital flight.
“Consistently over the last 10 years, we have been drawing our budgets on assumptions of oil production. But the truth is that if we do not invest in the oil industry, then there is no way to achieve projections that are drawn up every year in the budget.”He argued that if the government puts in place a flexible tax regime that makes provisions for increase and reduction in oil price and cost, then there would be a much-improved leap in economic growth.
Senior Partner, KPMG Nigeria and Chairman, KPMG Africa, Kunle Elebute, said there was an urgent need to achieve GDP growth of about seven to eight per cent in Nigeria to boost the economy. He said: “I know that we are challenged, but the honest truth is that there is a link between the growth of the economy and how corporate performance plays out.
“If a company does not grow at the rate at which it will give the real boost, the population of that industry’s acceptance will be low and the company will make losses. We need to see much faster economic growth in this economy for us to see much higher tax revenues.”
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