Beginning July 1, 2017, all unpaid taxes will attract a five percent interest, according to federal government new policy announced by finance ministry on Monday.
Nigeria’s Minister of finance, Kemi Adeosun has already directed Babatunde Flowler, the Executive Chairman of the Federal Inland Revenue Service (FIRS) to commence the implementation of the new policy on the set date.
Adeosun who approved the new policy rate said on Monday that the new interest rate would be 5 percent over the Central Bank of Nigeria’s Minimum Re-Discount Rate (MRR) for the year 2017.
She explained that Section 32(1b) of the Federal Inland Revenue Service (Establishment) Act 2007 empowers her to approve the new rate.
The new policy is now one of the aggressive measures the government is deploying to expand tax collections and subsequently revenues in the face of low government incomes.
At the moment, Nigeria has tax to GDP ratio of six percent, the lowest in the world and has only 13 million tax payers. Out of this number, 12.5 million are P.A.Y.E.
But the country’s economic recovery blueprint launched recently by President Buhari targets 15 percent tax to GDP of 15 percent by 2020.
Adesoun had at different recent meetings announced of government plans to intensify effort at tax collection in order to build a sustainable revenue base that will deliver inclusive growth. According to her effort would focus in 2017 on improving tax revenue through ensuring voluntary compliance with tax laws.
The Minister said the review of the interest rates on unpaid taxes was one of the necessary measures adopted by the Federal Government to enhance tax compliance, minimize tax evasion and deter late payments.
“Majority of Nigerian tax payers (PAYE) have taxes deducted automatically. However, those who do not and are required to file their taxes like companies and business enterprises, must understand that there are financial consequences for late payments,” the minister stated.
“We believe that this will support our efforts to ensure that people pay their taxes promptly, thus providing a sustainable source of revenue to the government to finance infrastructure and other projects”, the Minister said.
Onyinye Nwachukwu, Abuja
