The Chairman of the Presidential Fiscal Policy and Tax Reform Committee, Mr. Taiwo Oyedele, has counseled States to target the wealthiest 10 per cent of the Nigerian population to widen their tax nets.
He decried the focus by the State governments on the poor majority for tax implementation instead of the high net-worth Nigerians.
He insisted that the issue of poor tax administration in the country lies with governments failing to collect taxes from high-income earners, which the ongoing Tax Reform Bills seek to address.
Highlighting the revenue generated from personal income tax (PIT), Oyedele said in 2023, the total PIT collected nationwide amounted to N1.5 trillion.
The Tax Reform panel chair, who compared the figure to the N10 trillion generated from the removal of fuel subsidies and foreign exchange (FX) subsidies, noted that the substantial revenue comes from the same Nigerians who now face financial difficulties.
On supporting small businesses, Oyedele announced that the Reform Bills propose to raise the tax exemption threshold for businesses from N25 million to N50 million in annual turnover.
Regarding Value Added Tax (VAT), Oyedele noted that three per cent of taxpayers account for 97 per cent of the VAT revenue in the country.
He listed MTN, Dangote, Access Bank, Transcorp Hotel and large corporations, as some of the top taxpayers in the land.
According to him, small businesses rarely pay VAT and even when they collect it, they often do not remit it.
He added that this reallocation of VAT would benefit states, with an additional incentive for them to encourage formalisation.
Noting the significant revenue potential at the subnational level, Oyedele said that 85 per cent of major revenue sources belong to the state and local governments.
These, he said, include personal income tax, property tax, stamp duties, and VAT (excluding the Federal Capital Territory).
Corporate income tax, customs duties, and petroleum revenues are shared among the federal, state and local governments, with the subnational governments receiving the largest share, he said.
He pointed out that the PIT accounts for less than 10 per cent of Nigeria’s total tax revenue, compared to a global average of 30 per cent.
The proposed tax reforms, Oyedele said, are designed to stimulate economic growth, improve competitiveness, and ensure shared prosperity.
For businesses, the reforms will reduce business risks, lower tax rates, and provide tax refunds.
They will also enhance the ability of companies to deduct interest expenses, benefit from input VAT credits, and receive tax relief and economic development incentives.
Households will benefit from economic relief measures, lower tax burdens, and exemptions for low-income earners.
The reforms will also reduce VAT rates for the masses and introduce zero rates on essential goods and services. It will also encourage the growth of small businesses and startups, promote remote jobs, and ensure fair taxation of investment income.
For the government, the reforms will enhance macroeconomic stability, boost revenue mobilization, and improve the tax-to-GDP ratio.
By raising its credit rating and lowering the cost of debt, the government will create a healthier fiscal balance, ensuring sustainable economic growth for the nation.
Oyedele stressed that optimising revenue collection across all levels of government is crucial for Nigeria’s economic development.
By shifting the focus away from taxing low income earners and struggling businesses, the government can generate more revenue while reducing the financial burden on the poor and small businesses.
