The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr. Taiwo Oyedele, has called for enhanced tax compliance and broadening of the nation’s tax base as key pathways to achieving faster economic growth in 2025.
He made the recommendation on Friday during the ‘2024 End of the Year Economic Review Technical Workshop’ at the Banquet Hall in Abuja, which was attended by Nairametrics analyst.
He stated that achieving “faster economic growth in 2025 and beyond” is a possibility if stakeholders build on the groundwork being laid in 2024.
He noted that the ongoing tax reforms offer a pathway to accelerate growth and development and have the potential to contribute to shared prosperity, especially if the nation’s tax base is broadened and tax compliance is enhanced by relevant authorities and stakeholders.
“Revenue mobilization for development through broadening the tax base and enhancing compliance is projected to significantly increase government revenues. This will not come from imposing more burdens on the people but by ensuring that everyone complies. Allowing tax evasion to continue is itself a disincentive to the honest people who are doing their business and paying their taxes,” he said.
Projections for 2025
Oyedele explained that funds generated from taxes will provide the resources necessary for greater government investment in critical infrastructure, healthcare, education, and will form the pillars of economic growth going forward.
- Furthermore, he advised “incentivizing entrepreneurship,” stating that exempting small businesses from Company Income Tax (CIT) will alleviate financial pressure and encourage the growth of SMEs, which are vital for job creation and innovation.
- He also emphasized that boosting investor confidence is crucial in 2025 and beyond.
“A transparent and simplified tax regime will position Nigeria as a more attractive destination for both domestic and foreign investment, fostering industrial expansion and technological advancement,” he added.
- He also highlighted that the proposed tax structure will reduce inequality by ensuring that high-income earners contribute their fair share while providing incentives and exemptions to support vulnerable groups and small enterprises.
More Insights
Addressing recent concerns raised about the tax reform bills by certain members of the public and politicians, particularly regarding the “distribution of VAT revenue among states,” Oyedele responded: “We have been engaging and will continue to engage with our key stakeholders in this regard to ensure that all concerns are satisfactorily addressed in our collective interest.”
- On the alleged impact of reforms on the cost of living, Oyedele stated, “Actually, those concerns are not supported by data.”
According to him, the contents of the tax reform bills are specifically designed to reduce the burden on the Nigerian people.
- He added that suggestions have already been incorporated into the reforms to cushion the effects of, for example, VAT increases on low-income households, including targeted tax reliefs and exemptions.
- He stressed that the tax reforms are not merely a technical exercise but a declaration of commitment to equity, efficiency, and economic transformation.
He urged all stakeholders, Nigerians, and friends of Nigeria to support the reforms, engage constructively, and collaborate to refine their implementation as the Committee lays a robust fiscal foundation that will empower Nigeria to achieve faster growth, greater inclusivity, and lasting prosperity.
What You Should Know
The new tax bills under consideration in the National Assembly propose adopting a derivation principle in the allocation of VAT revenues between the federal government and sub-national entities.
- These proposals have sparked controversy, with northern elites openly rejecting them, arguing that the changes may not favor their region.
- Under the current Section 40 of the VAT Act, VAT revenue is allocated as follows: 15% to the Federal Government, 50% to the States and Federal Capital Territory (FCT), and 35% to Local Governments. The allocation to states and local governments incorporates a derivation principle of at least 20%.
- Although not explicitly detailed in the VAT Act, other factors influencing the distribution include 50% based on equality and 30% based on population.
Additionally, 4% of collections are allocated to the Federal Inland Revenue Service (FIRS) as a collection fee, while 2% goes to the Nigeria Customs Service (NCS) for import VAT.
