Governor Nasir El-Rufai of Kaduna state has decried the inability of the Federal Government to maximize tax potentials, especially as it relates to tax collection and revenue.
The disclosure was made on Thursday by the Governor in a keynote address he delivered at the 22nd Annual Tax Conference of the Chartered Institute of Taxation of Nigeria (CITN), held in Lagos, with the theme: “Taxation and Economic Competitiveness: Imperatives for National Development – a Nigerian Subnational Perspective.”
In the view of Gov. El-Rufai, this untapped tax potential is the bane of a flawed provision of social goods and physical infrastructure, which largely depends on revenue generated through taxes and other sources.
The Governor noted the considerable resistance to the hike in VAT from 5% to 7.5%, and opines that Nigeria’s rates are still much lower than other neighbouring countries.
He also emphasized the need to block tax leakages which drains government revenue, noting that leakages may occur at the stage of revenue generation, by wrong assessment or no assessment of taxpayers. He further lamented that only a minority of taxing citizens pay income tax in Nigeria.
What they are saying
Buttressing his points further, the Governor said, “With national tax revenues (oil and non-oil) still less than 7 percent of GDP, Nigeria is way behind the average of comparator nations of about 20% of GDP. As the world goes green, and crude oil loses its primacy as a leading source of energy, Nigeria must look inwards and compel every adult to pay tax as part of our citizenship obligation.
“In light of the situation that we are, we have very few options other than to develop our capacity to collect to broaden the tax net, assess and collect taxes from individuals and companies to levels of our comparator nations – at least 20% of GDP within the shortest possible timeframe. As political leaders and tax professionals, we must put our collective heads together to ensure this national objective is achieved as soon as possible.”
Commenting on what his regime is presently doing about Tax in Kaduna state, the Governor said, “There has been a steady rise in revenue collection in Kaduna State within the last four years. We have increased our revenues from N23bn in 2016 to N44.9b in 2019, an increase of N21.9bn.
“To appreciate this journey, it is important to recall that revenue collection in 2015 was N13.55bn. Our government had nearly doubled this by 2017, prior to the great leap forward in 2019, all this without hiking tax rates.”
What you should Know
Nairametrics had earlier reported that the increase in VAT collection increased by a decent 22.9% y/y to N1.1tn in 9M 2020 from N876.1bn in 9M 2019.
Why it matters
The role of tax in national development cannot be over-emphasized, as it acts as a major source of government revenue. The revenue will be used to provide basic amenities to the people. Empirical studies have also shown that the use of a fiscal tool such as tax is imperative in building national competitiveness, as lower tax rates attracts more foreign investment and boosts national production.