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FG loses N1trn annual tax revenue to grants, inadequate salaries

By on June 3, 2014

Grants, tax holidays to corporates by the federal government and failure by many Nigerians to pay their taxes are costing the government about N1 trillion in valuable tax revenue annually, THISDAY findings have revealed.

As a result, Nigeria has consistently ranked along with countries with the lowest tax to gross domestic product (GDP) in the world.

Analysis of numbers released by the Federal Inland Revenue Service (FIRS) showed that gross collections totalled just 12.1 per cent of GDP in 2013 (8.5 per cent  for oil and 3.6 per cent  for non-oil). In Brazil the ratio is 32 per cent, and for Organisation for Economic Co-operation and Development (OECD) countries the average is closer to 35 per cent.

Experts believe Nigeria’s poor record of tax collection for the non-oil economy reflects the award of generous tax exemptions, inadequate salaries and overlapping responsibilities.

“There is a broader explanation. The ratio for the OECD impresses because collection is generally efficient with the help of computerisation. Additionally, taxpayers are more willing to meet their obligations if they can identify some reciprocal benefits such as a welfare system.

“It is no coincidence in our view that those states in the federation such as Lagos which provide some basic services for the population and channel resources into collection tend to achieve far higher rates of internal revenue generation,” said analysts at FBN Capital.

The FIRS had last week reminded corporate Nigeria that firms whose financial years ended in December (2013) are required to meet their tax obligations by the end of June this year.

The warning came against the background of the service’s underperformance. For instance, the FIRS gathered N418 billion in the second quarter of 2014 against a target of N558 billion.

The Coordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala had set the FIRS a new target of N700 billion for April and May combined, including at least N400 billion from the non-oil sector.
President Francois Hollande of France had in an attempt to cut France’s budget deficit last year raised the country’s tax despite economic downturn.

THISDAY investigation revealed that French tax receipts amounted to284 billion euros ($387 billion) in 2013, up 15.6 billion euros on 2012, though 14.6 billion euros less than the finance ministry had predicted.

 

 

[This Day]