The Federal Government has taken some major steps to harmonize revenue collection and ease tax burden on individuals and businesses in the country.
President Bola Ahmed Tinubu last week submitted four tax reform bills to the National Assembly for consideration and passage.
The bills are the Nigeria Tax Bill 2024 which is expected to provide the fiscal work for tax in the country, Tax Administration bill which will provide a clear and concise legal framework for all taxes in the country and reduce disputes.
The others are the Nigeria Revenue Service establishment bill which will repeal the Federal Inland Revenue Service Act and establish the Nigeria Revenue Service and the Joint Revenue Board establishment bill which will create a tax tribunal and a tax ombudsman.
He said the bills will strengthen fiscal institutions in the country and align with the objective of the government.
When the present administration came into power last year, one of the areas it promised to take a critical look at is the country’s revenue collection system.
The resean for this is not far fetched given the country’s heavy debt burden, high debt service obligations and dwindling revenue inflows.
This is not to say that taxes were not collected, in fact, the country has over 60 revenue collecting ministries, departments and agencies (MDAs) in addition to the Nigerian Customs Service, Nigeria Ports Authority, Nigerian Postal Service and the Federal inland Revenue Service (FIRS). There are also over 200 official forms of taxes and over 600 unofficial taxes.
Incidentally, the country could still not collect enough revenues to fund its budgets because of multiplicity of collecting agencies and of course linkages.
Former special adviser to the president on revenue, Zacch Adedeji, who is now the Chairman of FIRS gave a hint on the plan by the new government to harmonise revenue collection and streamline the taxes.
The reason for this he said was that because of multiple taxations, compliance and trust in tax payment had become a huge challenge in Nigeria.
The plan according to Adedeji was to ensure that regulators focus on regulations while agencies in charge of tax collections will collect. “If we streamline and harmonise these taxes, we will know how much we have and then we can effectively utilise them,” he said.
The new plan means trillions of revenue generated or collected by the agencies will now be collected by the Federal Inland Revenue Service. It will also reduce cost of collection which in the first six months of 2024 gulped N463.576 billion out of a total revenue of N12.128 trillion.
The Presidential Fiscal Policy and Tax Reforms Committee headed by Taiwo Oyedele came up with a proposal for the restructuring of the Federal Inland Revenue Service (FIRS) and renaming it Nigeria Revenue Service (NRS) as part of the harmonisation of revenue collection in the country.
Oyedele said that states’ revenue services will be departments under the proposed NRS, thereby harmonising structure and collection of taxes.
The committee has since submitted its report and the government has also taken steps to bring to life a new tax system that will not only ensure effective collection, but also ease the burden of taxes on Nigerians.
Just last week, the Federal Government gazetted withholding tax regulations which grants small and medium enterprises (SME) operators with annual turnover of N25 million and below exemption from Withholding tax. It also announced the exemption of electric vehicles (EVs), compressed natural gas (CNG) and liquefied petroleum gas (LPG) vehicles, biogas production, CNG pumps, compressors and 57 other items from Value-Added Tax (VAT). The government said the VAT exemptions align with Nigeria’s broader economic goals under the Fiscal Policy and Tax Reform agenda, which seeks to enhance revenue mobilization, reduce tax burdens on strategic sectors, and stimulate economic growth.
While stakeholders applaud the new efforts to reform the country’s revenue system, some of the key challenges facing tax collection in the country is the absence of accurate statistics of tax payers as well as poor tax administration.