Presidential Tax Reforms Committee Proposes Reduction of Revenue Collection Costs to 1%

Chairman, Presidential Committee on Tax Policy and Fiscal Reforms, Mr. Taiwo Oyedele, on Monday, said the committee had proposed the reduction of revenue collection costs to one percent or below.

The Nigeria Customs Service (NCS) currently deducts about four per cent as cost of revenue collection, while the Federal Inland Revenue Service (FIRS) receives seven per cent on non-oil tax receipts.

However, speaking at a public consultation workshop for journalists and public analysts in Abuja, Oyedele said these costs were too high compared to countries like South Africa, which generated much higher taxes at lower costs of collection.

He also said the committee’s draft regulations sought to exempt food, education, health and security spending from Value Added Tax (VAT) because these affected vulnerable Nigerians, who lacked the capacity to comply – and given that the sectors remained crucial indices for poverty assessment.

The committee, however, called for upward adjustment in consumption tax, as the proposed exemptions were expected to result in about 60 per cent drop in revenues.

He said the committee was also working to alter the existing VAT sharing formula between the federal and state governments.

Oyedele said under the proposed tax regime, the states would be entitled to 90 per cent VAT revenues, while the federal government would receive 10 per cent.

He added, however, that the federal government would have the sole constitutional right to collect VAT in the country. He said this was to further dissuade the states from collecting consumption tax.

Oyedele said the committee was also working to transfer the VAT function to the exclusive legislative list through constitutional amendments. 

He explained that part of the efforts of the committee was to ensure that Nano businesses, low income earners were exempted from taxes, adding that people who currently carry the burden of tax should have been exempted.

He said rather than taxing poverty, the focus should be to create prosperity and share. He said the assumption that the informal sector held the country’s wealth was erroneous, adding that players in the sector lack the capacity to pay.

Among other things, Oyedele stressed the need to address challenges within the export processes, stating that it is currently difficult for businesses to export.

He said the draft also proposed the abolition of the pioneer status incentive regime, which granted tax waivers and holidays to start-ups and other categories of businesses.

But he clarified that existing incentives would be allowed to elapse from the day the new regulations became law.

Oyedele said the various reforms and initiatives so far proposed in the draft fiscal and tax regulations, if adopted, would lead to about 90 per cent compliance rate compared to the current 30 percent.

He said the committee’s recommendations would also contribute to reducing inflationary pressures in the economy.

The tax committee chairman said part of the ongoing works was to also deal with corruption in the tax system by utilising data for critical intelligence.

Oyedele said there was a recommendation to rebase the country’s tax to Gross Domestic Product (GDP) to accommodate taxes that were not previously included in the current computation.

He said the National Draft Fiscal Policy sought to streamline all taxes into eight, adding that there are currently over 60 approved taxes in the country, including over 200 taxes, which are unofficial.

He said the intention was to do away with nuisance taxes.

Oyedele said there were plans to change the FIRS to Nigeria Revenue Service (NRS), where the boards will be constituted by states. The NRS will become the only revenue agency in the country, in a bid to achieve fiscal federalism, Oyedele stated.

James Emejo

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