Here in this post, we are going to proffer possible solutions on how to improve tax colection in Nigeria. We hope you find this artcile informative.
It is never a news that Nigeria has limited resources, in terms of funds to finance government programmes. It is a fact that even government officials have testified to this.
Nigeria, as a nation has, since when it discovered crude oil, depended solely on oil. It is therefore, unfortunate that, once the oil price falls, its economy will land crashed.
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Most of the times, when oil price falls, the Nigerian government will rather decides to return to taxation in order to be able to fund its programmes.
Having said that however, most of the well run nations today actually depend on an efficient tax administration system.
For instance, when the amount of taxes collected is not equal to the size of the economy, then perhaps, you are not running an efficient tax administration.
Even when I am not an advocate of tax increase, but what I believed Nigeria supposed to do is to improve its tax collection by enlarging its tax net. Therefore, my focus in this article will be how Nigeria can improve its tax collection by tax net enlargement.
What Are The Ways Nigeria Can Improve Its Tax Collection?
Just like I mentioned earlier, my focus in this article will be to explain some of these ways by which, Nigeria can improve its tax collection.
1. Modification and Enforcement of Section 85 of Personal Income Tax Act
One key way Nigeria can increase tax collection is by making sure that, it enforces section 85 of Personal Income Tax Act PITA.
Majority of Nigerians, who pay taxes are government employers, some of the taxpayers are employed by private organizations. All of these persons are under the payroll system, and it is easy for government to enforce tax on them, because their employers, whether government or private employers are serving as the agent, and can deduct payroll taxes, even at source, and then return them over to the tax authorities.
You may ask, what about those other Nigerians, who are not under payroll? Irrespective of your kind of business, whether it is small or big business you are engaging at, since you are dealing with money, your business transactions will definitely lead you to where the law will demand that you should be demanded for a tax clearance certificate. Under normal circumstances, you will be forced to pay your tax.
2. Modification And Enforcement Of Section 101 In Companies Income Tax Act
In Companies Income Tax Act CITA, there are similarities with Personal Income Tax Act. For instance, section 101 of Companies Income Tax Act, in actual sense mirrors the dealings as provided for, in section 85 of Personal Income Tax Act but, but the only difference is that, it does not made any provision for penalty, should someone breach it.
But section 92 does. However, what is important here is that, transaction covered is simply the application for award of contracts.
It could be by Government or government agencies and even, registered organizations. The most important thing here is how much these organizations jostle for the deals.
But this law can be amended, at least to include contracts that are awarded by unincorporated organizations and ordinary individuals.
3. Improvement Of Value Added Tax (Vat) Compliance
Value Added Tax is tax charged on goods supplied and services made. That is why all businesses have to get registered as a Value Added Tax government agent.
When businesses charged Value Added Tax on goods and services supplied, the money will then be remitted to the Federal Inland Revenue Service (FIRS). How to make sure that there is increase Value Added Tax compliance can be a big issue for tax administrators.
However, I will suggest that, there should be investment in technology, where Value Added Tax registration and the Value Added Tax remittance are made easy for persons, who owned businesses.
And there should be provisions adequate enough to make for Value Added Tax refunds. More so, given the rate of growth in tech start-ups in Nigeria, there is need for continuous capacity development for tax officials to go with the trend. Again, Value Added Tax rate of five percent can be increased to say, 10 percent at least.
4. Introduction Of A Net Wealth Tax
Well-to-do Nigerians or Nigerians, who are wealthy are mandatory to pay more taxes. Having said that, this particular tax has nothing to do with revenue generation.
It is simply a levy charged on the total value of a person’s assets, for example, owner occupied housing, and cash, including bank deposits, and savings in insurance plus pension plans. Others are investment in real estate, unincorporated businesses, as well as, corporate stock.
Financial securities, as well as, personal trusts, and luxury cars, plus private jets among others. This is enforced by making sure that all Nigerian citizens residing in Nigeria and who owns assets covered must submit a tax return, disclosing all assets held in Nigeria and foreign countries online, as well as, pay the required tax, according to the assets’ value, provided it meets the tax threshold. But if found undisclosed, and it is reported, that will attracts imprisonment penalty.
To succeed in collecting this tax, the authorities must work effectively and closely with other organizations, such as the Companies Affairs Commission CAC), and Securities and Exchange Commission, including different property registries and banks in order to make sure that there is an establishment of the beneficial owners of assets.
This approach is guarantee to give the tax authorities materials to work with in their quest to increase tax and reduce corruption.
5. Re-Evaluation Of All Tax Incentives
Tax incentives should be reviewed, since it is allowed under different Nigerian laws periodically for the purpose of ascertaining the actual or real cost of all the incentives when compared with the economic benefits gotten from them.
Now for example, if the cost accrued to the government is more than the economic benefits earned, then such incentives should immediately be scrapped.
In subsequent, the government have to regulate the process of issuing tax incentives in order to make sure that, abuse is avoided.
Again, giving of tax incentives to specific companies must be discouraged. Looking closely to the Pioneer Status regime, the abuse that was prevalent, is a good example of what could happen, should there be inconsistent in policy that regulate tax incentives.
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When the amount of taxes collected is not equal to the size of the economy, then perhaps, you are not running an efficient tax administration.Click here to see the latest Jobs opportunities in Nigeria.
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