Nigeria’s VAT Collection, Lowest In Africa – Tajudeen Abbas

The Speaker of the House of Representatives, Tajudeen Abbas, has described Nigeria’s Value Added Tax collection as the lowest in the African continent.

This was as the Speaker attributed the development to what he referred to as significant inefficiencies in the nation’s tax system. According to the Speaker, the House would continue to do its part to assist the Federal Government’s drive to reposition the nation’s economy.

Mr Abbas stated this on Tuesday in Abuja, while delivering a keynote address at the opening of a two-day retreat for members of the House. The legislative retreat on economic transformation and development was organised by the House in collaboration with the Federal Inland Revenue Service and the Konrad Adenauer-Stiftung Foundation.

Speaking on the theme, “Navigating change: Legislative strategies for economic transformation”, Abbas noted that the House made a deliberate decision to focus on tax reforms and modernisation as well as a review of the implementation of the Petroleum Industry Reform Act (2021).

He said, ”Comparatively, Nigeria’s efficiency in collecting Value Added Tax is the lowest among its African peers, indicating significant inefficiencies in its tax system.

“This trend of low tax revenue, coupled with a continued dependency on the increasingly unstable oil revenue, presents a major risk to Nigeria’s fiscal sustainability. It also highlights an important area for potential reform to boost revenue and stabilise the country’s economic framework.

“The lack of growth in non-oil revenue sources and the volatile nature of oil income underscore the urgent need for Nigeria to diversify its revenue base and enhance its fiscal management to ensure economic stability and growth.”

The Speaker also expressed delight that the legislative retreat was taking place “at a point in our nation’s economic landscape when the current administration is diligently implementing policies and initiatives to steer our economy towards recovery, growth, and sustainable development.”

He continued, “As a critical arm of government, the legislature has a crucial role in shaping our nation’s economic transformation and development.

“Part of our law-making powers is the authority to enact tax reforms and strengthen resource governance mechanisms. By designing and implementing progressive tax policies, we strive to ensure a fair and efficient tax system that boosts revenue while fostering economic growth and equity.

“This involves not only broadening the tax base and simplifying tax codes but also enhancing compliance and minimising loopholes that benefit only the wealthy.

“Furthermore, the legislature’s oversight function is central in the governance of natural and financial resources. It ensures transparency and accountability in the exploitation and management of resources, which is essential for sustainable development. By holding government and private sectors accountable, the legislature helps prevent the mismanagement and corruption that can often undermine economic progress.”

While stating that Nigeria’s tax revenue struggles are primarily due to narrow bases for indirect taxes, low compliance rates among taxpayers, substantial tax exemptions, and generally low tax rates, the Speaker maintained that the situation was compounded by “a lack of enthusiasm and morale for tax compliance, contributing to the nation’s underwhelming fiscal performance.”

Speaker Abbas noted that several empirical studies had shown that Nigeria has the potential to further increase revenue if priority tax reforms are implemented. He stated that “the House stands ready to support the Executive to achieve its overall goal of reversing the negative trend.”

Another area of focus at the retreat, Speaker Abbas said, was the potential of digitalisation and technology to transform tax administrations by enhancing the efficiency, transparency, and fairness of tax systems. He said these advancements enable tax authorities to collect, process, and utilise information more effectively, leading to improved operational capacities.

For taxpayers, he stressed that integrating digital tools could simplify compliance, making it a more seamless part of everyday personal and business activities, thereby reducing friction and increasing ease of engagement with tax systems.

Punchng.