THE International Monetary Fund’s recent warning to the Federal Government to avoid undue aggression in tax collection amid what is predicted as the country’s worst ever recession is timely. Nigeri...
THE International Monetary Fund’s recent warning to the Federal Government to avoid undue aggression in tax collection amid what is predicted as the country’s worst ever recession is timely. Nigeria’s governments – federal and state – often lunge hastily to heap additional burdens on the narrow tax net at the first sign of revenue shortfalls. The times however call for ingenious policies to stimulate production, save jobs and keep businesses afloat.
The pressure to reverse the country’s poor tax-to-GDP ratio is enormous. At just below six per cent, compared to the African average of 17.2 per cent, and 34.3 per cent in the OECD countries, it is compounded by a low compliance rate and lack of institutional capacity to enforce, especially among the elite. Only 914 persons paid N10 million and above, 214 of them N20 million or more, the government said in 2017; this, in a country of 200 million persons and many billionaires, is scandalous.
The Central Bank of Nigeria has put together a package that includes N1 trillion for the manufacturing sector, N100 billion for the SMEs and N50 billion for households. In addition, it has slashed interest rates on previous intervention funds from nine to five per cent and suspended interest payment on some loans. This is in addition to cash payouts to the very poor by the central government and similar palliative measures by several state governments.
The UNDP suggests “tax policies designed to raise revenue while minimising their negative impact on investment” and can lessen the impact of downturns on both revenue losses, help businesses to grow and workers to earn more once the crisis subsides. It adds that “businesses that incur losses during a recession should be eligible for tax rebates when they firms recover.” KPMG, a global audit firm, tracked such tax relief measures adopted in many countries to cope with the pandemic.
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