- Tax reforms necessary to optimise revenue collection
- Ensure the wealthy and corporations pay their fair share.
- But a tax revolution is not the solution.
Phillip Isakpa
Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms set up by President Bola Ahmed Tinubu, is increasingly being seen by analysts as oscillating between wanting to see an increase in government revenue without raising taxes and his recent doubling down on raising the rate of value added tax from 7.5 percent to 10 percent.
In June, an upbeat Oyedele, appearing on a television programme said he was optimistic that Nigeria did not need to impose new taxes to raise revenue and advocated better tax administration and the use of technology to close the estimated N20 trillion tax gaps.
“We have over 60 different taxes and levies but haven’t collected enough to adequately fund infrastructure like roads,” he said, before adding, “Instead of introducing new taxes, we advocate consolidating and harmonising existing ones.”
He said then that “by identifying those who should be paying but aren’t, we can potentially double our revenue within two to three years”.
But analysts are beginning to suggest that Oyedele appears to have shifted slightly from that position with his recent doubling down on his wide ranging proposal to overhaul VAT including an increase in the rate.
Abiodun Ihebuzor, who is an institutional reform facilitator and also a farmer, told business a.m. in a note in response to the Oyedele’s new push, that while the reform ideas seem conceptually brilliant, she said “no idea is perfect, and the concerns on tax reforms should not be driven by innovation in IGR [internal revenue generation] growth.”
“Who will tell ‘the king and his advisers’ that we are naked?” Ihebuzor asked.
According to him, Nigeria’s fiscal conundrum is often misconstrued as a revenue problem when, in fact, it is an expenditure problem. “The country’s revenue base is substantial, with a GDP of about $400 billion or more and a diverse economy. However, the issue lies in the inefficient allocation and utilisation of resources,” he said.
Ihebuzor explains further: “As the saying goes, ‘it’s not how much you make, but how much you spend.’ Nigeria’s government expenditure pattern is characterised by a high recurrent expenditure, accounting for over 70 percent of the budget. This leaves a meagre 30 percent for capital projects, essential for driving economic growth and development.
“Furthermore, weak institutions and corrupt political elites are exacerbating the problem. They create a culture of extortion and embezzlement, where a significant portion of revenue is lost to corruption rather than being utilised for the benefit of citizens.
“Take, for instance, when Elon [Musk] paid his tax, was it embezzled or stolen as is the case in this clime?” Ihebuzor asked, rhetorically.
According to the policy reform expert, tax reforms are necessary to optimise revenue collection and ensure the wealthy and corporations pay their fair share, but added that a tax revolution is not the solution. “A gradual and structured approach to tax reform is needed rather than a radical overhaul that could destabilise the economy,” he said.
He stressed the point about the necessity for wide consultation in handling public policy reforms, noting that “public and private policy reforms without broad consultative mechanisms are devoid of inclusion principles and perpetuate a corrupt fiscal system. It’s like trying to fix a car without consulting the mechanic – you’ll only end up causing more damage,” the policy expert said.
Commenting on Oyedele’s recent attempt on television to explain the committee’s work and President Tinubu’s tax agenda in relation to revenue generation and the economy, Ihebuzor said it was tempting not to commend Oyedele’s ideas as presented, but added that it was “more tempting to commend the ideas with existing knowledge and reality of broken trust between citizens and government.”
According to the policy expert, “the speed at which the new fiscal and tax revolution agenda is done can only be likened to the passing of the new national anthem law.”
He is angry that in Nigeria “corrupt political elites merge with fraudulent intellectual elites to tweak institutions and systems in their favour using misleading information and skill in fallacies.
“In an era where politicians and government officials are extortionists, caution is necessary to avoid creating an environment that encourages corruption and exploitation. Transparency, accountability, and a fair tax system that promotes economic growth and development are essential,” Ihebuzor emphasised.
To Ihebuzor the way forward is to recognise that Nigeria’s fiscal challenge is an expenditure problem, not a revenue problem, and she suggests that addressing inefficient resource allocation, optimising revenue collection by blocking the leakages is one way, if true, through this tax reforms, and ensuring transparency and accountability in government spending are crucial.
“Strengthening institutions, addressing corruption and extortion by political elites, and involving broad consultative mechanisms in policy reforms are vital to unlocking the country’s full economic potential,” he added.
Ihebuzor warned that without inclusive policy reforms, noting that Nigeria would only just be “rearranging the deck chairs on the Titanic – it’s a recipe for disaster. Let’s get it right this time and build a fiscal system that works for all Nigerians, not just the corrupt elite.”
