Nigeria’s tax system dates back to 1939 under the Company Tax Revenue. Today the operating tax bodies include the Federal Inland Revenue Service (FIRS) and the State Boards of Internal Revenue (SBIR).
Almost every Nigerian sector is riddled with tales of underfunding and inefficiency. By 2019, the nation had incurred $11.54 billion worth of debt. About 13 percent of roads nationwide remain unpaved, creating an extra convenience for bandits to target travelers. Only 19 percent of Nigerians have access to clean water supply, according to the World Health Organization, and access to electricity remains far-fetched for about 60 percent of the population. Academic and labour unions have continued to stage strikes over overdue salaries and poor infrastructures.
The drop in crude oil prices further burdened the heavily oil-dependent economy. With the growing debt and overflowing needs, an efficient multi-sector tax system could provide a significant revenue source for the Nigerian government.
What is Tax
Tax is simply a form of revenue generated by the government from individual residents or groups of residents to finance public officers and provide the amenities and services needed to run the country.
Federal and state governments have a record of improperly delegating power down to the local government. This ingenious problem leads to cases of public looting and harassment of the citizens since there is no clear distinction between which taxes are collectable and which ones aren’t. According to Transparency International’s Corruption Perception Index (CPI), Nigeria ranks as the second most corrupt nation in West Africa. The National Bureau of Statistics in 2020 said that of the 35.5 million employed Nigerians, 28.8 million are not qualified.
Despite the existing issues, the Nigerian government has made some efforts to track tax payments. These include mobilizing tax collection bodies across the country, issuing tax clearance certificates to businesses, implementing laws and penalties for tax evasion, legalizing tax avoidance, which serves as a way to cut cutting down expenses for citizens saddled with dependents (This is protected under PITA, the Personal Income Tax Act).
Part of the government’s renewed tax effort ought to involve public outreach. A sense of apathy has filled many people, as the track record of corruption and inconsistency has led many to embody the common phrase that “nothing works in Nigeria.” It has made it hard for people to believe any deduction from their salaries or additional fees to the government would yield any social impact. Tax evasion is now a common occurrence, and corruption and the lack of proper systems make it difficult to correct the growing problem.
Taxes (in whatever shade or hue), remain the only significant best alternative source of revenue to the government.Deloitte
The tax management system has so far focused more on trade-related taxes, and lack of proper coordination has blindsided the government to the fact that it is highly susceptible to external shock because prices of commodities that are traded are dependent on the world market.
In a 2020 report, Deloitte noted the Nigerian government must rewire its existing tax system if it wants to generate a sustainable revenue source away from an overdependence on oil tax revenue. The report highlighted, among other things, that the government must improve operational efficiency, simplify the compliance princess and eliminate bureaucracy in remitting taxes, and tackle the problem of double taxation.
It also pushed tax institutions to expand access to electronic systems such as the Integrated Tax Administration System (ITAS) and the Automated Systems for Customs Data used by the Nigerian Customs Service. “Taxes (in whatever shade or hue), remain the only significant best alternative source of revenue to the government,” the report said.