Federal Inland Revenue Service (FIRS) according to BusinessDay calculations needs N11.1 trillion, a 176.8 percent increase from the N4.0 trillion revenue the service generated at the end of 2017 to achieve 16 percent tax –to- GDP target by 2020 from the current estimated 6 percent.
This was arrived at by multiplying the targeted 16 percent revenue generation by the FIRS to the country’s gross domestic product (GDP) put N69.2 trillion in 2017 which resulted to N11.1 trillion revenue generation pursuit by the service by 2020.
“I think the target is more of an aspiration than actual reality. To grow tax revenue level from the current 6 percent to 16 percent means that there will be about 200 percent jump from where we are. Though something similar was achieved in Lagos but that is different because Lagos is small compare to the whole of Nigeria,” Bismarck Rewane, CEO, Financial Derivatives Company Limited said in a telephone response.
“But it is doable given Fowler pedigree and what he has done in the past; we cannot rule it out completely. So it is possible,” Rewane concluded.
Speaking at a Greenwish Trust limited (GTL) last week, the chairman, FIRS, Babatunde Flower said, “Nigeria’s tax-to-GDP ratio is rising and should hit 16 percent to 20 percent by 2020.”
The highest tax-to-GDP recorded so far between 2003 and 2017 was 6.9 percent which was in 2014; at that time the FIRS revenue was N4.7 trillion and the country’s GDP value was N67.9 trillion.
In 2003, it was 1.5 percent, in 2004 it was 0.9 percent, in 2005 it was 2.9 percent ,in 2006 it was 2.4 percent, in 2007 it was 4.0 percent ,in 2008, it was 5.5 percent, in 2009 it was 5.1 percent and in 2010 it was 2.3 percent,
Subsequently, in 2011 it was 1.8 percent, in 2012 it was 1.6 percent, in 2013 it was 1.5 percent, in 2014 it was 6.9 percent , in 2015 it was 5.3 percent, in 2016, it was 4.8 percent and in 2017 it was 5.8 percent
According to World Bank, Nigeria’s tax to GDP is one of the poorest in Africa which is significantly lower than Kenya which is 15.7 percent and South Africa at 27.0 percent.
“Non-oil tax collection in Nigeria is presently very weak and well below the levels of structural and regional peer countries,” Hafez Ghanem, vice president, World Bank, said in an interview with BBGAfrica
BusinessDay Findings show that FIRS is known to be setting targets but rarely achieving them. In 2017, it projected a target of N4.89 trillion but was only able to achieve N4.0 trillion, in 2016, it netted N3.3 trillion out of a target of N4.9 trillion and in 2015, it was able to get N3.7 trillion out of a target of N4.5 trillion
If FIRS is able to achieve its projected targets, it would improve the country’s poor status of being one of the lowest tax-to-GDP ranked in the world and be able to reach the rank of its peer countries like South Africa which is 27.0 percent, Kenya at 15.7 percent and Ghana at 20.8 percent
Johnson Chukwu, CEO, Cowry Asset Management Limited said,“ The target may be achievable in the long run if we continue to improve our tax collection net, improve our tax effectiveness and sanction those that fail to pay their taxes, then our tax- to- GDP ratio will be increasing. Whether we achieve the 16-20 percent target is debatable.”
The Voluntary Assets and Income Declaration Scheme (VAIDS) is one of the key policies being used by the Federal Government to reposition the Nigerian economy and correct inherited underdevelopment.
In June, the Federal Government said that they had recovered about N30 billion from individuals and corporate establishments through the tax amnesty scheme.
