Despite its efforts to reap the benefits of tax exemptions and concessions, the incentive has instead resulted in a huge loss of revenue for Nigeria, the federal government said on Monday.
The government said that although it had pledged to cut tax expenditures, the country’s current revenue-to-gross domestic product ratio of around 7% was poor and unsatisfactory.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, represented by the Ministry’s Director of Technical Services, Fatima Hayatu, said these in Abuja during a workshop on tax expenditures, organized by the Economic Community of West African States, under the as part of the implementation of the Tax Transition Support Program in West Africa.
The PATF aimed to improve the management of domestic taxation and ensure better coordination of taxation in the regions of ECOWAS and the West African Economic and Monetary Union.
The minister observed that Nigeria’s weak revenue generation capacities had been a persistent challenge for past and current governments.
She said that although Nigeria is celebrated as the country in Africa with the largest economy, the translation of wealth into income generation has remained a serious problem.
According to her, Nigeria faces challenges in mobilizing domestic funds needed for human capital development and infrastructure which are both drivers of sustainable economic growth and development.
Ahmed said, “Our current revenue to GDP ratio of around 7% is unsatisfactory and we are keen to improve it by implementing various initiatives.
“The case remains the same with our current contribution between oil and non-oil GDP, for which our analysis of oil revenue to oil GDP reveals 39%, while non-oil revenue to non-oil GDP is 4.2%. Our Value added tax revenue to GDP in Nigeria, for example, stands at less than 1% (0.8%), which compares unfavorably with the ECOWAS average of 3.4%.
“The same goes for our excise revenue which is 4.1% compared to Ghana at 15.3% or Kenya at 19.5%. It is important to reiterate that although tax exemptions and concessions have long been used by successive Nigerian governments to attract domestic and foreign direct investment into the country, in the expectation that the revenue forgone will result in commensurate benefits in the economy in the form of job creation, capital formation, wealth creation and poverty alleviation, income generation, technology transfer, among others, they constitute huge tax expenditures and loss of revenue for the government.
The minister assured that the current regime of the President, Major General Muhammadu Buhari (Retired), will continue to emphasize the need to look at the tax expenditure component of overall federal government spending.
The minister said the government had recently issued an appeal circular on tax expenditure reporting to relevant government agencies outlining guidelines and instructions for strict adherence, compliance and reporting.
While commending the timing of the workshop, given the country’s revenue challenge, she pointed out that ECOWAS’ intervention in the area of revamping tax generation and blocking leakages through the implementation of the PATF in Nigeria was commendable.
Customs Union and Taxation Director Salifou Tiemtore said the PATF program will strengthen the regional fight against fraud, tax evasion, illicit financial flows and other forms of corruption.
He said the event was the start of a series of workshops aimed at disseminating the content of the Tax Expenditure Guide to specific countries including Nigeria, Liberia, Guinea Bissau and Mauritania.
Tiemtore said the successful implementation of the PATF tools would also improve the management of domestic taxation in member states through effective VAT management and control of tax expenditures.
He congratulated the Delegation of the European Union for its support and funding while assuring him of the Committee’s willingness to continue to implement the program for the benefit of Member States.
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