Financial experts have lamented the country’s tax to GDP ratio, describing it as one of the poorest in Africa. The figure, which stands at just 6 per cent is significantly lower than Ghana and Egypt at 16 percent, Morocco at 22 percent and South Africa at 27 percent.
This was revealed at the tax conference, themed, Understanding Tax and its effect on Nigerian Businesses, organized by the National Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA) in partnership with the Lagos Internal Revenue Services (LIRS) and the Federal Inland Revenue Services (FIRS) in Lagos.
Describing tax as a vital aspect of the Nation’s economy, especially as a source of Internally Generated Revenue (IGR) and a way by which Government finances social activities for citizens, the national president of NACCIMA, Iyalode Alaba Lawson stressed that there is a need to educate the masses now more than ever before. She noted that even though it was important to be tax compliant as it gives the people the audacity to question the Government when it doesn’t fulfill basic civil responsibilities to the citizens, she pointed out that several challenges continue to prevent people from complying. They include high tax rates, segmentation and valuation criteria, collection, multiple taxation and perceived inefficient utilization of the funds generated from tax.
“Some contentious tax related matters which require clarification include the Voluntary Asset and Income Declaration Scheme (VAIDS) recently introduced and Value Added Tax (VAT), which many of us need to be enlightened about as well as the appropriate tax collection authorities.”
In his presentation, the CEO of Med-View Airlines, Alhaji Muneer Alade Bankole represented by his Chief Financial Officer (CFO), Adedayo Olaniyan said that the only way Government can properly interplay with the economy is through good Monetary and Fiscal Policies and poor usage of tax collected over the years is affecting businesses and their bottom line.
Revealing the challenges arising from tax processes, a partner with Deloitte & Touche Nigeria, Oluseye Arowolo said just 214 Nigerians pay up to 20 million Naira as annual tax, just 914 people pay up to 10 million Naira while 14 million are tax registered as PAYE (Pay as You Earn). Just 70 million are economically active individuals and according to the Corporate Affairs Commission (CAC), there are just 2.5 million tax-registered corporates while there are 30 million on the CAC list. Decrying this lopsided figure, he admitted that Government and taxpayers have several challenges that need to be overcome soonest.
Listing Government’s limitations as two pronged, enforcement and administration, he added that illiteracy of taxpayers, insufficient human capacity and technology, poor tax compliance culture, multiple taxation arising from ambiguity of taxing powers of each level of Government and unsynchronized database to capture taxpayers are the major problems they face.
Debunking the double taxation allegation leveled against Government, the representative of LIRS, Tokunbo Akande insisted that double taxation does not exist in Lagos rather it was perceived multiple taxation. “Lagosians are not truthful when it comes to declaring personal income and this is a huge problem for us especially when we already have an idea of what an individual’s personal income comes to yearly. The state is working hard towards ease of doing business and we enjoin citizens to be partners of progress on this journey,” he said.
Speaking on understanding VAIDS and its effect on small and medium scale businesses (SMEs), Obinna Maduabuchi, a tax consultant said the main objectives of VAIDS is to increase the tax to GDP ratio, reduce tax evasion, widen the tax net, increase level of tax compliance and awareness and when all this is done, businesses would feel a positive impact not just on their businesses but in everyday life.