By Ebere Nwoji
The federal government has been urged to adopt a more comprehensive tax reform that is comparable to what obtains in other countries where a higher Value Added Tax (VAT) rate is matched with input VAT recovery and lower income tax rate.
A director at the Chartered Institute of Taxation (CITN), Dr. Teju Somorin, who gave the charge while speaking at the Business Luncheon organised by the Business Club Ikeja (BCI), said this has become necessary at this stage of Nigeria’s economic development and is consistent with the shift from direct to indirect taxes enshrined in the National Tax Policy.
She said compliance of the Federal Inland Revenue Service (FIRS) with this direction, will likely increase the revenue yield from the VAT.
Somorin, who spoke on review of the 2017 budget from the perspective of revenue from taxation at the luncheon, said Nigerians expect the implementation of the revised National Tax Policy, which the Federal Executive Council (FEC) has already approved.
According to her, the National Tax Policy (NTP) establishes fundamental principles to guide an orderly development of the Nigeria tax system and reinforces the need for tax laws and administrative practices to promote economic development.
“The NTP has introduced some initiatives, which are in tandem with the objectives of the 2017 Budget”, she said, adding there is need for both National and State Houses of Assembly to establish a Taxation Committee to focus on tax matters and collaborate with the Tax Policy Implementation Committee.
She noted that the 2017 budget did not propose increase in taxation but provides for expansion of tax horizon so that more people will start paying tax.
The budget, she further noted, did not recommend increase in VAT but increase in VAT payable on luxury goods like Champaign among others.
She recommended that since small and medium scale businesses are the engine of growth of every economy, especially in Nigeria where over 90 percent of employers of labour, fall within this category, the qualification for the lower income tax rate applicable to small businesses should be reviewed in line with current economic realities.
“The income tax rate for small businesses should be further reduced as an incentive to encourage compliance and promote Micro, Small and Medium Enterprises (MSMEs)”, she stated.
She further recommended that a minimum threshold for VAT registration and compliance should be put in place in order to protect micro-businesses.
Also speaking at the event, President of Association of Professional Bodies of Nigeria (APBN), Dr. Omede Idris, noted that going by the year’s budget estimates, Nigeria will spend substantial part of its revenue for the year on debt servicing .
He said the above scenario creates a fiscal time bomb that will diffuse in the medium term, if not addressed.
Idris, who was guest speaker at the luncheon, advised that government should much more look inwards than outwards in sourcing funds for its expenses.
“Drawing from these estimates, Nigeria will be spending as much as ₦33 of every ₦100 earned in debt servicing in 2017.
This scenario creates a fiscal time bomb that will diffuse in the medium term. At the moment, it also crimps the country’s capacity to plunge on infrastructure and also undertake other investments in social overheads”, he stated.
Idris, said as government intends to use the agricultural sector to diversify the economy, its policies, should focus on the integrated development of the agricultural sector through facilitation of access to inputs, improving market access, providing equipment and storage as well as supporting the development of commodity exchanges.
According to him, investment into railway is one of the most important business/economic structures that will help stimulate productivity, adding that in aviation, it is expected that ongoing intervention in some airports – Abuja, Kaduna, Port Harcourt, would improve much to the satisfaction of its users and rake in more revenue through private sector investment in aircraft businesses and possibly concession the airports.
On health, Idris, noted that the budget, should expand healthcare coverage through support to primary healthcare centers and expanding the National Health Insurance Scheme.
On his part, BCI president, Dr. Rotimi Oladele, said Nigerians should concern themselves with yearly budget.
He noted that annually, Nigerians, don’t concern themselves with government budget but later turn back to complain about effects of budget on their businesses.
He advised that people should try to know the content of government’s budgets and identify areas of concern for adjustment to be made in a way that will grow businesses.
Oladele said many businesses in Nigeria are dead before they were set up because of effects of budget.
“It is the major elimination platform, budget can be adjusted and realigned to realities as they are unfolding; it is an assumption, it is a guess of what will happen and if it does not happen, we adjust.”
He said this is why people in their various groups should be concerned about budgets; make inputs to enable government make necessary adjustments before implementation starts.
