Driving Tax Revenue Growth

Tuesday, March 10, 2020  01:05 PM / by CSL Research / Header Image Credit: Putnam County

Yesterday, the Executive chairman of the Federal Inland Revenue Service (FIRS) appeared before the National Assembly to discuss and provide updates on the activities of the service. During this meeting, he discussed some loopholes which according to him have been identified and will be addressed to boost tax revenue collection.

According to the tax chief, several multinationals within the country have failed to remit the required tax payment to the service by lying on their pioneer status to get tax exemption from the government for five years instead of the three years prescribed by the constitution. According to him, these companies resort to retooling their factories and applying for additional two-year tax holiday in addition to the initial three. To combat the this, the tax chief requested the National Assembly to assist the service by reviewing the laws relating to the pioneer status of companies which would remove any ambiguity as to qualification for tax holiday.

Another highlighted loophole is in contracts awarded by the Ministries, Departments & Agencies (MDAs). According to the tax chief, these MDAs have refused to comply with the new 7.5% VAT on contracts awarded and continue to remit VAT at the old 5.0% rate. However, the MDAs insist that those contracts were awarded based on the old 5.0% rate. To monitor this, the service is seeking advanced technology to aid proper monitoring of activities within the MDAs.

Nigeria's tax to GDP ratio remains one of the poorest globally. We view improving the tax collection protocols as a major need to support the vulnerable revenue profile of the Federal government. With oil revenue under severe threat from weaker prices, we think it is imperative for the government to ensure tax collection processes are effective and efficient.

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