The Federal Inland Revenue Service (FIRS) says Nigeria’s tax-to-GDP ratio rose from six per cent to 10.86 per cent by the end of 2021, according to a statement by FIRS.
Mr Nami said the new ratio was communicated to FIRS by the Statistician-General of the Federation, Adeyemi Adeniran, on May 25.
Mr Nami said the figure followed a joint review by the Nigerian Bureau of Statistics (NBS), in collaboration with the finance ministry and the FIRS, using data from 2010 to 2021.
Tax-to-GDP ratio measures a nation’s tax revenue relative to the size of its economy as measured by gross domestic product (GDP).
The ratio is a useful tool for assessing a country’s tax system and highlighting its tax potential relative to the size of the economy.
Mr Nami explained that sources which previously computed Nigeria’s tax-to-GDP ratio at between five per cent and six per cent did not consider tax revenue accruing to other government agencies.
“Particularly, revenues collected by agencies other than the FIRS, Customs and States Internal Revenue Service were excluded. This situation was peculiar to Nigeria as most other countries operate a harmonised tax system with single-point tax revenue reporting,” stated the FIRS chief. “As such, all relevant tax revenues are included in the computation of the tax-to-GDP ratio.”
It is important to note that the tax-to-GDP ratio for Nigeria should be higher but for the impact of tax waivers contained in our various tax laws, including exemptions to micro, small and medium enterprises brought in by the Finance Act, 2019.
Nigeria’s tax-to-GDP ratio, which in the last 12 years, hovered between five per cent to six per cent, rose to 10.86 per cent by the end of 2021, and Mr Nami noted that the revision took into account revenue items hitherto not previously included in the computations; particularly, relevant revenue collected by other agencies of government.
He said to state the tax-to-GDP ratio correctly, the FIRS initiated a review and re-computation of the ratio for 2010 to 2021, and in recomputing the ratio, key indicators that were previously left out were taken into account, resulting in a revised tax-to-GDP ratio of 10.86 per cent for 2021 as against six per cent hitherto reported.
He said Nigeria’s tax-to-GDP ratio should be higher than 10.86 per cent but for certain economic and fiscal policy factors, including tax waivers and leakages occasioned by the country’s fragmented tax system.
“It is important to note that the tax-to-GDP ratio for Nigeria should be higher but for the impact of tax waivers contained in our various tax laws, including exemptions to micro, small and medium enterprises brought in by Finance Act, 2019,” explained the FIRS head. “Others are low tax morale, leakages occasioned by the country’s fragmented tax system and the impact of the rebasing of the GDP in 2014.”
Mr Nami urged President Bola Tinubu’s government to consider reviewing its tax waiver policies, guaranteeing increased revenue to prosecute its programmes and positively move the needle of the country’s tax-to-GDP ratio. (NAN)
