Nigeria: Zainab Ahmed, Minister for Finance, Budget and National Planning, announced that the people of Nigeria would have to pay more taxes. The minister announced a House of Representatives Committee on Finance public hearing on the bill on Monday.
“While these concerns may necessitate small tax and tariff hikes on particular businesses, sectors, industries, and individuals over the medium term, our administration remains dedicated to ongoing communication and engagement with all stakeholders and interest groups,” she said.
Ahmed stated that Nigeria’s oil revenues must be diversified in order to cover necessary expenditures.
Nigeria, she added, requires additional fiscal reforms.
While some experts believe it is inappropriate to raise taxes at this time, others believe there is nothing wrong with collecting taxes from the appropriate sources.
The most important thing, they argued, was for governments at all levels to account for the money they gathered in taxes and levies by delivering essential infrastructure and services to the people.
FG’s earnings in the previous fiscal year
According to the finance minister, the federal government’s retained revenue was N4.56 trillion as of September 2021, covering 75% of the budget, while its share of oil revenues was N845 billion, reflecting a pro-rated performance of 56.3 percent.
“The federal portion of non-oil revenues was N1.31 trillion,” she said (117.3 percent above budget). Collections of Companies Income Tax (CIT) and Value Added Tax (VAT) totaled N616 billion and N274.4 billion, respectively, reflecting 121 percent and 153 percent of the pro-rata goals. In addition, customs receipts totaled N418.97 billion.”
The current fiscal policy approach, according to the minister, is to let tax incentives with sunset clauses expire naturally rather than automatically renewing them without a full cost-benefit analysis of the incentives’ relative success before extending them further.
She also stated that the planned increase in tariffs and excise charges on tobacco, alcohol, and carbonated beverages, as well as a thorough reform of the outmoded stamp duties and capital gains tax regime, will be accelerated in order to fund important expenditures on health, education, and security.
The Speaker, Femi Gbajabiamila, who was represented by Minority Leader Ndudi Elumelu (PDP, Delta), said in his opening remarks that the 2021 Finance Bill aims to introduce strategic and broadminded, positive reforms that will engender best practise and statutorily check borrowing by local, state, and federal governments.
“It is instructive to emphasise that the essence of the 2021 bill is to further reposition our financial system to plug wastes, reduce corruption loopholes, generate job opportunities, and boost stability and growth in our productive sectors, all while pursuing our country’s economic recovery,” he stated. The committee’s chairman, James Abiodun Faleke (APC, Lagos), stated that the committee will examine the various stakeholders’ submissions on the proposed revisions before submitting its report.
Mukhtar Ahmed (APC, Kaduna), a member of the committee, called on the finance ministry and the Nigeria Customs Service (NCS) to increase the excise duty on carbonated drinks, which he said would help to curb the rising incidence of diabetes.
‘It’s too early to call for tax hikes,’ says one expert.
Mrs Zainab replied it was too early to disclose information on the taxes and levies that would be increased when one of our correspondents asked for clarification from the finance minister.
“That will be too early because we are working to finish the existing one,” she said in a text message to our correspondent.
While the Value Added Tax (VAT) would likely not be increased even after the litigations around it were resolved, a source within the Ministry of Finance who requested anonymity indicated stamp duty might be hiked.
“VAT may remain at 7.5 percent even after the legal cases, but stamp duties may be raised.” I’m not sure what percentage it will be increased to, but it will almost certainly be increased.”
He also stated that excise duties, particularly on alcohol and other luxury items, will be hiked, and that talks were already underway.
He stated that capital gains taxes, corporate income taxes, and other taxes would be raised.
Increasing taxes isn’t a good idea, say experts.
Mr David Akwu, a lecturer at the University of Nigeria, Nsukka, said it would be imprudent for the government to raise taxes at this time, given the severity of the country’s challenges.
He said that many Nigerians were not paying taxes and recommended the government to concentrate on ways to increase tax collections by preventing leakages and bringing more Nigerians, particularly companies, into the tax net.
“How much of the revenue collected by the government is accounted for?” Tax collectors and administrators are still leaking a lot of money. Let’s take care of that. Many Nigerians either do not pay taxes or pay them insufficiently. “Let’s deal with those and not overburden those who are paying now,” he remarked.
“How many people in Abuja, for example, pay tenement rate?” I’m not going to name any states. As a result, the government must be more inventive in tax collecting rather than relying on tax increases, he said.
Mustapha Hussain FCA, a tax expert, agreed that eliminating subsidies would have a negative impact on the economy since food inflation would rise.
As a result, if higher taxes are imposed in 2022, the combined effect of both subsidy withdrawal and additional taxes will worsen the country’s economic predicament, he said.
“Removing all subsidies, such as fuel and electricity, without equivalent increases in income will exacerbate poverty in the country,” he stated. According to Umar Mohammed, a financial expert, the authorities must show Nigerians that the money gathered in the past was effectively used.
“Collecting taxes is not wrong; in fact, several countries rely only on taxes to survive. They always account for such collections, however, by granting basic human rights to the population.
“Our main issue here is that we don’t keep track of what we collect.” Local government chairman, for example, collect millions of naira from markets and vehicle parks but keep the money. Nobody is interested in prosecuting them because they regard the money as theirs.
“At the state level, it’s the same thing. “All levels of government simply pretend to be accountable for what they obtain from FAAC by inventing figures and putting them in front of fictitious projects,” he said.
