One of the key proposals in the Tax Reform Bills pending before the National Assembly, is to abolish Value Added Tax (VAT) on food, education, healthcare, accommodation and public transportation......Read The Full Article>>.....Read The Full Article>>
This, according to the proponents of the reform bills, would take the tax burden off 82 percent of low and middle level income earners.
The chairman of the Presidential Fiscal Policy and Tax Reform Committee, Mr Taiwo Oyedele, gave a breakdown of the various components of the bills before the Senate in session on Wednesday.
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Oyedele, who was permitted to address the Senate-in-chamber after a mild drama by two senators opposed to the bills, said the average Nigerian household spends 52 percent of their income on food alone.
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He disclosed that Nigeria currently has about 60 taxes in existence nationwide, with additional 140 poorly structured taxes that place unfair burden on low income earners.
Addressing the senators, Oyedele said if the reform bills eventually get the nod of the National Assembly, Nigerians earning N30,000 per month, or N1.5 million per annum would be exclused from paying Personal Income Tax.
The tax reform committee chairman explained that the proposed reforms seek to make wealthy individuals and corporate organisations pay more equitable taxes.
The tax expert lamented that Nigeria has been over taxing its poorest and most vulnerable populations, a situation which he said the reforms seek to reverse.
He told the lawmakers that the current 24 percent top rate tax being paid by the wealthy, would be increased marginally to 25 percent.
Oyedele described Nigeria as one of the top 10 high company tax rate countries in the world, saying that the trend has continued to scare away potential foreign investors.
“When potential investors find out details of our tax system, they quietly withdraw and choose more tax friendly African countries to invest their capital,” Oyedele said.
He observed that the country has continued to attract low foreign exchange from Nigerians in remote employments, unlike their counterparts from other countries.
According to him, unlike what obtains in other countries, the Nigerian tax laws require the remote employers based overseas to pay tax to Nigeria after their remote employees must have done same.
“Businesses in Nigeria are forced to pay tax even when they made losses but even countries like the United States do assist businesses when they record losses so that they can remain in business.
“We want to modernise our tax system. We don’t want to tax businesses when they make losses. We don’t want to tax seeds. We want to be tax the fruits.
“We will only ask for 15 percent tax on profit to be paid to the federal government. We have observed that the present framework does not allow Nigerian companies to grow into multinationals.
“Any business earning N50 million or less in a year would be spared and taxes would be based on the ability to pay. The system would make use of technology in tax administration to enable government make refund where companies overpaid taxes,” Oyedele said.
Oyedele and members of his team argued that the federal government would have adequate funds to finance its budgets and cut down on external borrowings if Nigeria gets its tax system right.
They noted that owing to poor tax administration system, Nigeria has been lagging in tax revenue compared with South Africa, Kenya and other African countries with effective tax system in place.
Oyedele listed other components of the tax reforms as the Tax Appeal Tribunal, All Joint Revenue Board, Tax Ombudsman and the Nigeria Revenue Bill.
The Director General of the Budget Office, Tanimu Yakubu also took his turn to do a run over of Oyedele’s presentation.
Yakubu said the reform bills, if passed into law, would streamline the tax system in ways that would make revenue from taxes available for education, health, security, infrastructure and other priority areas.
He noted that Nigeria’s GDP has been in steady decline by 30 percent from N363 billion to N241 billion and that it may further decline by N2025 if the right measures are not taken.
Yakubu said a further drift in GDP might lead to about 51 percent decline in the economy in the years ahead.
The chairman of the Federal Inland Revenue Service (FIRS), Zach Adedeji said the reforms have the capacity to transform the nation’s economic landscape, adding, however, that broader consultations were still ongoing with key stakeholders.
Adedeji said the reforms are meant to stimulate the economy, stressing, “they won’t tax poverty, they will tax prosperity.”
