Lower tax revenue may hurt 2016 budget implementation’
Nigeria ranks 181st out of 189 economies on ease of paying taxes
EXCEPT the nation’s approach to tax administration is reviewed, the Federal Government’s appropriation bill for 2016 may not be achievable, as an imminent decline in tax revenue is expected to be sustained by the end of the 2015 financial year, tax experts at the PricewaterhouseCoopers (PWC) have observed.
Nigeria’s tax revenue has been dwindling from about $37.5 billion collected in 2013 to about $30 billion in 2014, with experts at PwC warning that a further decrease is imminent by the end of 2015, if the country does not do things differently in widening its tax net.
West Africa Market Tax Leader, PWC, Taiwo Oyedele, during the firm’s “2015 paying taxes conference, tagged “The burden and benefits of tax compliance in Nigeria: Managing the changing tax landscape and preparing for the inevitable taxing times ahead”, added that Federal Government’s planned budget of about N8 trillion for 2016 cannot be achievable if it does not expand its tax net.
As a nation, we collected about N6.7 trillion in 2013 and in 2014; it came down to about $30 billion. So the tax revenue from 2013 has reduced in 2014 and if we do not do anything different, it would reduce further in 2015. We know that the government is looking at a budget of about N8 trillion for 2016. The only way we can achieve that is to register revenue significantly or we borrow and in my view, the federal government is already heavily borrowed and so borrowing more is not a viable option,’’ Oyedele said.
He said petroleum profit tax has gone down from over N3 trillion to just a little over N1 trillion while other taxes such as Value Added Tax (VAT), company income tax have increased slightly from N2 billion to about N2.5 billion.
“‘We can double tax collection in the next 12 months, but doubling it would exclude petroleum profit tax because the price is going down. If we can just get everyone who needs to register for VAT, get them to charge VAT and to remit to the federal government, the amount of money we get from VAT which currently is about N500 to N700 billion, can easily go up 300 per cent.
Nigeria ranks 181 out 189 economies covered by the survey on the ease of paying taxes. By contrast, the total tax rate for the model company in Nigeria is 33.3 per cent up by 0.9 percent from last year 32.4 per cent.
“So this means we have a long way to go especially because our tax to Gross Domestic Product (GDP) ratio is very low at 8 per cent. Worldwide and even in Africa, we are looking at 25 per cent. If we have to move from 8 per cent to 25 per cent representing about 300 per cent increase, we should not make the process of paying taxes complicated,” he said.
He said the conference is aimed at bringing tax shareholders together such as tax administrators, Lagos Inland Revenue Service (LIRS), Federal Inland Revenue Service (FIRS), Joint Tax Boards, Manufacturers Association of Nigeria (MAN), local and multinational tax players to address the challenges facing tax system in the country.
Oyedele added:”The haphazard approach that we have always had with tax matters is not going to help the country, especially now that we have to use tax as a replacement for crude oil in a way that it will not inhibit businesses, in a way that it will not create roadblocks for growth but rather to help generate revenue and achieve sustainable economic growth that will increase standard of living and generate revenue for infrastructure development.”
He said as a result of this PWC presented a white paper with Nigeria Leadership Initiative (NLI) to tackle issues bothering about tax collection, but stressed that the initiative is yet to see the light of day.
“We must work together on this journey. If we continue to make gradual process consistently, we will definitely get there. Our report is in its tenth year and every year that we carry out our survey, we engage tax authorities to get audience from the law makers, but this process has been painfully slow,” he said.
He said the proposed bill to introduce security tax would only worsen the already complicated tax structure, pointing out that manufacturers have been complaining and many of them have relocated to neighbouring countries as a result of multiplicity of taxes.
“GDP figures show that in the last two years, manufacturing has been in recession and the federal government keeps introducing taxes. We need to get to a point as a nation where we have institutions who will call everybody to order,” he added.