Dipo Olowookere
By Dipo Olowookere
Nigeria’s Minister of Finance, Mrs Kemi Adeosun, has disclosed that Nigeria will reduce the rate at which it borrows money for developmental projects only if the tax to gross domestic product (GDP) hits 10 percent.
According to the Minister, the country’s tax to GDP ratio is at 6 percent.
Mrs Adeosun, while addressing newsmen, noted that with the tax to GDP ratio at 10 percent, the economy will flourish and consequently bring down the interest rate, which is presently in double digits.
The Minister informed newsmen that if the strategy of this present administration of President Muhammadu Buhari is allowed to be implemented, the private sector will be better for it because they will have the opportunity to assess funds to grow their businesses.
However, she emphasised that to make this happen, Nigerians must be ready to pay their taxes.
“We must pay taxes properly in Nigeria, if we do this, we do not need to borrow.
“Of course I am not suggesting that there isn’t a responsibility on the part of government; we have to be more responsible, to be more efficient (when people citizens pay their taxes).
“We are really focusing on this, we are finding ways to cut cost, but fundamentally, we must invest but we don’t have the power we need, the roads, we are work in progress.
“A lot of money is needed to reposition this economy and we need to generate more through tax.
“We just need to move our tax to GDP from 6 percent from where it is now to 10 percent; it will significantly reduce the amount of money we need to borrow and that will have a wider effect on the economy.
“One, it would reduce the demand for short-term borrowing and help bring down interest rate.
“Two, it would create headroom for the private sector to borrow; that is the strategy,” Mrs Adeosun said.
In June 2017, the Federal Government launched the Voluntary Asset and Income Declaration Scheme (VAIDS).
The platform was put in place for defaulting Nigerian taxpayers to work out a flexible way to pay their outstanding tax liabilities due from them relating to the last six relevant tax years, regularize their tax transactions and obtain genuine tax clearance certificate for all the relevant years without fear of criminal prosecution for tax offences and with the benefit of forgiveness of interest and penalties.
Mrs Adeosun had stated at the launch of the initiative that the policy embraces all federal and state taxes such as Companies Income Tax, Personal Income Tax, Petroleum Profits Tax, Capital Gains Tax, Stamp Duties, Tertiary Education Tax, Technology Tax, Tenement Rates, and Property Taxes.
“VAIDS is specifically targeted at taxpayers who have not been fully declaring their taxable income/assets; have not been paying the tax due at all; have been underpaying or under remitting; are under a process of tax audits or investigations with the Relevant Tax Authority; are engaged in tax disputes with the relevant tax authority but are prepared to settle the tax dispute out of court; are new taxpayers who are yet to register with the tax authorities; and are existing registered taxpayers who have new disclosures to make.
“It does not matter whether the relevant tax default arose from undeclared assets within or outside the country.
“If tax should have been paid, VAIDS is providing a once in a lifetime opportunity to declare the tax outstanding and resolve it definitively,” the Minister had said.
She had also said, “Nigeria’s tax to GDP ratio, at just 6 percent, is one of the lowest in the world (compared to India’s of 16 percent, Ghana’s of 15.9 percent, and South Africa’s of 27 percent).
“Most developed nations have tax to GDP ratios of between 32 percent and 35 percent. Whilst considerable progress has been made with taxing those in formal employment, self-employed persons, professionals and companies are able to evade full tax payment due to the inability of the tax authorities to access and assess their true income.
“According to Federal Inland Revenue Service the total number of tax payers in Nigeria is just 12,649,654 [as at April 2017]. Of these, 96 percent have their taxes deducted at source under PAYE and just 4 percent comply with Direct Assessment.”
