Following the rebasing of the country’s Gross Domestic Product, the Federal Government has directed the Federal Inland Revenue Service to increase the country’s tax revenue to GDP ratio from 12 per cent to 20 per cent, which about N16tn.
The Minister of Finance, Dr. Ngozi Okonjo-Iweala, gave the charge on Monday in Abuja during the inauguration of the FIRS multi-disciplinary training centre in Abuja.
The tax to GDP ratio is an economic measurement that compares the amount of taxes collected by a government to the amount of income that the country receives for its products.
By comparing the GDP to the amount that is collected in tax revenue, it helps to provide how much the economy of a specific government is fuelled by tax collection.
Okonjo-Iweala said before the rebasing exercise, the country had a tax to GDP ratio of about 22 per cent, while the non-oil tax revenue to GDP ratio was estimated at seven per cent.
This, according to her, is in the range of emerging market economy.
She, however, said that with the rebasing of the country’s GDP, the tax revenue to GDP ratio had declined to about 12 per cent and four per cent for non-oil tax to revenue.
The minister admitted that Nigeria was still confronted with many constrain when attempting to increase tax revenues, noting that a consultant had been engaged to look at how to tackle the problems.
She said, “Nigeria is confronted with many constraints when attempting to increase tax revenues. We have just celebrated the fact that Nigeria has now become the largest economy in Africa with N80tn ($509.9bn) of GDP, which makes us the 26th largest economy in the world and advances us on our goal to become one of the 20 largest economies in the world.
“But I want to tell you that there is one piece of the news that is not so cheering. With the increase in GDP, all our revenue ratios have been recalculated. As you know, our tax revenue ratio to GDP before was 20 per cent, just about in the middle of the emerging market economy, not as good as the 22 per cent that we want to be.
“But now, with this recalculation, our revenue to GDP ratio is 12 per cent and our non-oil revenue ratio to GDP is four per cent, which means that we live worse than before.”