‘Rebasing of Nigerian Economy Creates Huge Gap in Tax to GDP Ratio’

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While the federal government and other operators in the country celebrate the gains of rebasing of the Nigerian economy, tax experts and administrators have observed that the exercise has created a huge gap in the ratio of tax revenues to the gross domestic product (GDP) of the country.
 
They observed that with the rebasing of the economy the contribution of tax revenue to the national economy fell by as much as 45.45 per cent, warning that unless government stops selective enforcement of tax laws and do away with the regime of unnecessary tax concessions, this gap would widen subsequently.
 
The President of the Chartered Institute of Taxation of Nigeria (CITN), Mr. Mark Anthony Dike, made this observation on behalf of his colleagues in Lagos recently.
 
According to him, the rebasing of the economy has resulted to a shortfall in the ratio of tax revenue to gross domestic product from 22 per cent to 12 per cent, painting a different picture of the standard of living of Nigerians.
 
“The recent rebasing of our gross domestic product (GDP) suggests that the tax revenue to GDP ratio of revenue has reduced significantly from 22 per cent to 12 per cent. What this means is that there is still a lot to be done to increase revenue generation to reach the required threshold.
 
“This has to be addressed as a matter of urgency for the statistics to reflect in the living conditions of Nigerians,” he said.
 
Suggesting ways out of this problem, Dike said problems relating to government funding would be positively addressed when government gets it right with taxation by bringing in more taxable Nigerians into the tax net.
 
He also urged the three tiers of government to stop selective enforcement of tax laws and stop granting waivers and other tax incentives indiscriminately.
 
“This can be achieved if governments at all levels desist from unwholesome practice of selective application and enforcement of tax laws or the selective and discriminatory granting of waivers and incentives which are diametrically against the cannons of national tax policy.
 
“A situation where persons who have not demonstrated any fidelity as good taxpayers wine and dine with the innermost sanctum of governments or occupy sensitive positions, nay any position at all that involves disbursement of public funds cannot edify our nation or encourage and engender a proper culture of tax compliance in the country,” Dike warned.
 
He said there was room for increased revenue generation which he said should be tapped to bring all taxable citizens into the tax net especially operators in the informal sector.
 
The CITN boss noted that the National Policy provides a direction for the Nigerian tax system, adding that it is now left for government to ensure that the document does not remain a mere article that is rarely referred to.
 
“As a matter of concern and urgency, every policy as it relates to the Nigerian tax system should flow from the National Tax Policy document. The NTP covers a whole lot of pertinent issues including; addressing the hydra-headed issue of multiple taxations, increasing tax compliance, taxation of the informal sector, and creating a reliable database of tax payers,” he said.
 
“Until governments of Nigeria begin to work the talk of enforcement of tax laws, any drive for enhanced tax revenue in the country will continue to be a moon shine,” he added.
 
Nigeria’s GDP base was recently reviewed from a mostly assumed and poorly measured 1990 figure to a more accurate and broad-based 2010 figure, an exercise that catapulted the country to the position of 26th biggest economy in the world and Africa’s largest economy.
 
The GDP of the country was estimated to be $509.9 billion (N80.2 trillion) for 2013, overtaking South Africa’s $372 billion for the same period.
 
Nigeria with over 170 million peopke is the 7th most populous in the world. Young people make up 33.30 per cent of this number, thus making the country home to a large labour force and a large market for consumer goods and services.
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