VAT: Nigeria Needs to Improve Tax Revenue to GDP - Boniface Chizea


Monday, August 16, 2021 / 2:33 PM / Ottoabasi Abasiekong for WebTV / Header Image Credit: Channels TV

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With an improved Value Added Tax (VAT) data of N512.5bn for Q2, 2021  in a recent report published by the National Bureau of Statistics (NBS),  Nigeria needs to improve its tax revenue-to-Gross Domestic Product (GDP) ratio to achieve fiscal sustainability.


Dr. Boniface Chizea, an economist and CEO of BIC Consulting, said this while discussing the role of fiscal policy in sustaining Nigeria's rising VAT revenue.


According to him, Nigeria's fiscal authorities have been grappling with revenue to support socio-economic activities. He noted that it was time to rethink and reimagine the country's tax policies.


He believed that, in principle, taxes should fund the recurrent expenditure parts of the federal budget.

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Speaking further, he stressed the need for Nigeria to improve its tax revenue to GDP ratio, which was very low at 6% compared to peer countries.


He said it was interesting that VAT was more significant than the Company Income Tax (CIT), which grew by N472.02bn in  Q2,2021.


Dr Chizea added that the rising trajectory of the CIT showed improved economic activities in the nation.


On the manufacturing sector's contribution to the VAT, he acknowledged that its contribution to the economy was significant despite the effects of the Covid 19 pandemic.


He pointed out that the manufacturing sector in Nigeria faces challenges like infrastructure issues and an enabling business environment, which needs to be unlocked to spur growth and create jobs.


The economist emphasized the need for Nigeria to effectively mobilize fiscal revenue through a coordinated tax administration plan that the Federal Inland Revenue Service, FIRS, can execute.

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Chizea added that the government should not increase tax but rather broaden the tax net across the country and improve the ease of paying taxes leveraging technology.


He tasked government agencies like the Customs service to drive efficiency in their activities and ensure collaborations amongst other ministries, departments, and agencies.


Following the recent ruling of the Federal High Court that was in favour of Rivers state collecting VAT, he said it has constitutional implications on revenue collection in Nigeria.


He advocated a coordinated approach from fiscal policymakers in growing the nation's revenue base to achieve stability and growth.

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