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Since the approval of the revised National Tax Policy, a new air of expectations of a simplified tax compliance regime has been awaited with baited breath. Such expectations has not happened by accident but is rather a culmination of fervent yearnings for a systemic shift to a saner tax regime at all tiers of government if only to blunt the backward slide in Nigeria’s ease of doing business as well as ease of paying taxes.
The urgency to birth such a tax system also finds its voice in incidences of multiple taxation as well as the impact of disruptive technologies and advanced innovations which has redefined how commerce and other related activities are undertaken for taxation purposes.
The exigency of the current situation and the need to address same provides fodder for identifying the issues that continue to plague the tax system and the likelihood of recommendations that could mitigate or out rightly tackle the identified issues.
Some Challenges
A lack of robust framework for the taxation of informal sector and high networth individuals continue to limit the revenue base creation. This is in spite of the fact that the informal sector is quite large and its activities are largely uncaptured for tax purposes.
Secondly, the inordinate drive by all tiers of Government to grow internally generated revenue has led to the arbitrary exercise of regulatory powers for revenue under various guise. This drive, in itself, leads to increased cost of tax compliance and administration without necessarily bringing about commensurate increase in revenue. This also provides fodder for stakeholders that are under the yoke of multiple taxation.
Another protracted issue is that of database fragmentation of taxpayers and weak structure for exchange of information by the Tax Authorities, resulting in revenue leakages and inefficiencies. The taxpayer is therefore able to skirt around the system with little or no risk of detection.
A lack of clarity on taxing powers of each level of Government and encroachment on the powers of one level of Government by the another is also a subsisting challenge. This is despite the best of efforts by government through the enactment of the taxes and levies (Approved list for Collections), Laws of Federation of Nigeria, Cap. T2, 2004, as amended.
Another challenge is the case of insufficient information to taxpayers on tax compliance requirements thus creating uncertainty and increasing non-compliance for policy action for the tax system.
Conditions of insufficiency in, capacity with respect to personnel and training have led to delegation of powers of revenue officials to third parties by some tiers of government, thereby creating complications for the tax system;
Other issues include:
Use of Aggressive and Unorthodox Methods of tax collection
Failure by Government to appropriate funds to honour tax refund obligations to taxpayers; The non-regular review of Tax Laws to reflect economic realities; Lack of strict adherence to tax policy direction and procedural guidelines for the operation of various tax authorities.
Way Forward
Addressing the issue of a robust framework for the taxation of informal sector and high net worth individuals require that all relevant Tax Authorities create efficient taxpayers’ database which can be integrated for a robust database in the country. Sources of initial data for such identified data base include trade associations, market associations, commercial banks, and Ministries, Departments and Agencies (MDAs) of Government. Another means of building taxpayers’ data base is the strict implementation of the Tax Identification Number, Act, 2014 through the rendition of returns by MDAs on business transactions to various Tax Authorities.
…By research and technical department of Chartered Institute of Taxation of Nigeria (CITN)
