CITN identifies taxation as a tool for promoting macroeconomic and devt.

By Olusegun Obisanya

The President and Chairman of Council, Chartered Institute of Taxation of Nigeria, Dame Olajumoke Simplice has advanced taxation as an essential tool for promoting macroeconomic goals of achieving full employment, income redistribution, competitive environment for businesses.

She stated this in her address she delivered at the 22nd annual tax conference last week in Lagos involving tax professional delegates from the federation including federal and state government as well as tax administrators. The theme of the conference was “Taxation and economic competitiveness: Imperative for national development”.

The CITN president explained that the theme was borne out of the Institute’s desire to advance taxation as an essential tool for promoting macroeconomic goals of achieving full employment, income redistribution, competitive environment for businesses, among others.

She said, “The role of taxation in the development and sustenance discourse cannot be overemphasized. Therefore, we are happy to engage this subject every time an opportunity presents itself, more so as we believe in its vast potential to deliver economic prosperity for our great country.

“It is equally important that as we advance towards the future, we should also review past events to avoid pitfalls of the past as well as discern how far we have gone in addressing the issues.

Addressing the broader role of taxation as an essential tool for promoting economic growth and development, the CITN president urged the executive arm of government to set the tone from the top by making political leaders pay their fair share of taxes and ensure Ministries, Departments and Agencies account for taxes collected as part of galvanizing prospective and existing taxpayers.

“Ensure government economic policies in generating revenue are matched with tax reforms that encourage growth through Executive orders and sponsorship of legislative bills capable of promoting entrepreneurial development. Work with Business Enabling Environment Secretariat to simplify taxes on businesses to attract foreign direct investments.”

In his keynote address, the governor of Kaduna State, Malam Nasir El-Rufai said only a minority of Nigerians pay income tax, and a majority of this tiny minority are persons whose taxes are deducted at source – formal sector employees, public servants and the like. He observed that payment of taxes is seen in the country as an “illegitimate imposition,” tracing this to colonial period.

The Governor said, “Therefore, it is hardly surprising that many of our state governments and the Federal Government are not collecting as much tax as they should. According to the International Monetary Fund, Nigeria’s tax revenue mobilization is one of the lowest in the world, reflecting weaknesses in tax administration and systemic non-compliance, with less than 6 percent compliance by corporate taxpayers and 2 percent compliance by individuals.

“Even the more successful VAT administration was observed to be below par, and its design defective in some ways. Estimates of VAT compliance according to the IMF vary between 15 and 40 percent, and VAT revenue accounts for less than one percent of GDP, compared to almost 4 percent among ECOWAS peers.

“The current VAT system suffers from a number of challenges, including a low rate (7.5 percent, less than half of the regional average) and the absence of many features of a modern consumption tax. For example, the system does not allow credit for most capital goods and services, making it a turnover tax that penalizes investment and makes our domestic manufacturing and related sectors uncompetitive. Further, the lack of a VAT registration threshold, coupled with the presence of a large informal sector and limited input tax credits, impedes effective monitoring and control. There are also extensive exemptions, such as on commercial vehicles; farming inputs, including capital equipment; which all serve to narrow the VAT base.”

Kaduna state governor stated further that the low rate of internal revenue collection depresses public finances, hampers the ability to deliver social goods, services and physical infrastructure. According to him, this in turn limits competitiveness, shrinks the ability to promote the sort of enabling environment and economic dynamism that can create jobs, expand public revenues and improve public welfare.

While he enumerated strategic options to eliminate the significant tax gap and boost revenue generation for Nigeria and its subnationals, El-Rufai observed that leakages in the tax system constitute a significant drain on government collection and utilization of revenue.

The tax conference attracted officials Lagos State executive, Ministry of Finance, representative of the National Assembly, officials Lagos State Internal Revenue Service, state governors while others participated live through the webinar.