75% of SMEs not in tax systemThe Nigerian tax revenue at 7 percent of Gross Domestic Product (GDP) lags behind emerging market with an average of 20 percent.
A breakdown of tax revenue from the World Bank/Heritage Foundation shows that Ghana tax revenue is 24 percent of GDP, South Africa 23 percent of GDP, Vietnam 22 percent of GDP, and Kenya 21 percent of GDP.
Others are Mexico 18 percent of GDP, Chile 16 percent, Egypt 15 percent, Indonesia 11 percent, Angola 9 percent, and Nigeria 7 percent of GDP.
Nigeria’s tax revenue is made up of oil revenue 5 percent of GDP and non-oil revenue 2 percent of GDP ($10bn).
A study by the Federal Inland Revenue Service (FIRS) shows there is a potential non-oil tax gap of $11 billion or 2.2 percent of GDP that can be captured.
Meanwhile, 75 percent of Small and Medium Enterprises (SMEs) are not in the tax system. The report also shows that 30 percent of companies abuse their tax exemption status.
Outmaneuver Dore, director, African Development Bank, Nigeria country office, says non-oil to GDP is very low in Nigeria by 4.6 percent compared with 15 percent low income economies and 19 percent emerging economies.
Making a presentation on “Diversifying Revenue Base of Nigerian Economy,” at the 2015 Investiture of Chartered Institute of Bankers of Nigeria (CIBN) in Lagos, he outlined causes for low non-oil revenue to include low tax efficiency, low VAT collection efficiency and the need for improved tax administration and tax reform for non-oil revenue mobilisation.
According to him, challenges of revenue diversification in Nigeria include discovery and ascendancy of crude oil, leading to the Dutch disease syndrome, limited or non-oil consultation in crafting previous policies, and weak physical and social infrastructure mainly electricity, roads, housing and education.
Other challenges are limited expertise and capacity in specialised non-oil activities such as manufacturing services, among others, and inappropriate revenue diversification strategy based on capital and energy-intensive industries.
Also included in the challenges are weak business environment, lack of national strategy for long run sustainability of diversification policies, and lack of adequate information on taxpayers, among others.
Dore recommend added improve tax-filling compliance by the Chartered Institute of Taxation and VAT as a report showed that 65 percent of registered taxpayers had not filled their tax returns.
He also recommended improve control/monitoring to minimise tax exemption abuses and expanding tax net to potential additional taxpayers, among others.
Meanwhile, Adelabu Adebayo Adekola, deputy governor, corporate service, CBN, was at the occasion conferred with honorary fellow award by the CIBN.
The award is in recognition of his previous and current services to the banking industry, he said.
He sees the award as a call to more and better service to the financial services sector. “It is a challenge to me to contribute more to the industry which I regulate,” he told journalist immediately after the award in Lagos.
