Tax exemptions represent a huge loss of income, says FG

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Despite its efforts to reap the benefits of tax exemptions and concessions, the incentive has instead resulted in a huge loss of revenue for Nigeria, the federal government said on Monday.

The government said that despite pledging to cut tax expenditures, the nation’s current revenue to gross domestic product ratio of about 7% was low and unsatisfactory.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, represented by the Director of Technical Services of the Ministry, Fatima Hayatu, said the latter in Abuja during a workshop on tax expenditures organized by the ECOWAS within the framework of the implementation of the Tax Transition Support Program in West Africa.

The PATF aimed to improve the management of domestic taxation and ensure better coordination of taxation in the regions of ECOWAS and the West African Economic and Monetary Union.

The minister observed that Nigeria’s low revenue generation capacity had been a persistent challenge for past and current governments.

She said that although Nigeria is celebrated as the country in Africa with the largest economy, translating wealth into income generation has remained a serious challenge.

According to her, Nigeria was facing challenges in mobilizing domestic funds needed for human capital development and infrastructure, both of which were drivers of sustainable economic growth and development.

Ahmed said, “Our current revenue-to-GDP ratio of around 7% is unsatisfactory and we are keen to improve it by implementing various initiatives.

“The case remains the same with our current contribution between oil and non-oil GDP, for which our analysis of oil revenue to oil GDP found to be 39%, while non-oil revenue to non-oil GDP was 4.2 %. Our value added tax revenue to GDP in Nigeria, for example, stands at less than 1% (0.8%), which compares unfavorably to the ECOWAS average of 3.4%.

“The same goes for our excise revenue which is 4.1% compared to 15.3% in Ghana or 19.5% in Kenya. It is important to recall that although tax exemptions and concessions have long been used by successive Nigerian governments to attract domestic and foreign direct investment into the country, in the hope that the revenue lost will lead to commensurate benefits in the economy in the form of job creation, capital formation, wealth creation and poverty alleviation, income generation, technology transfer, among others, they constitute huge tax expenditures and losses revenue for the government.

The minister assured that the current regime of the President, Major General Muhammadu Buhari (Retired), will continue to emphasize the need to look at the tax expenditure component of overall federal government spending.

The minister said the government had recently issued an appeal circular on reporting tax expenditures to relevant government agencies outlining guidelines and instructions for strict adherence, compliance and reporting.

While commending the timing of the workshop, given the country’s revenue challenge, she pointed out that ECOWAS’ intervention in the area of ​​revamping tax generation and blocking leakages through the implementation of the PATF in Nigeria was commendable.

Customs Union and Taxation Director Salifou Tiemtore said the PATF program will strengthen the regional fight against fraud, tax evasion, illicit financial flows and other forms of corruption.

He said the event was the start of a series of workshops aimed at disseminating the content of the Tax Expenditure Guide to specific countries including Nigeria, Liberia, Guinea Bissau and Mauritania.

Tiemtore said the successful implementation of the PATF tools would also improve the management of domestic taxation in member states through effective control of VAT and tax expenditures.

He congratulated the Delegation of the European Union for its support and funding while assuring him of the Committee’s willingness to continue implementing the program for the benefit of the Member States.

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All rights reserved. This material and any other digital content on this website may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without the prior express written permission of PUNCH.

Contact: [email protected]

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