Despite its efforts to leverage on the benefits of tax exemptions and concessions, the incentive has rather led to huge revenue loss to Nigeria, the Federal Government said on Monday.
The government said that although it was committed to reducing tax expenditure, the nation’s current revenue to Gross Domestic Product (GDP) ratio of about seven per cent was poor and unsatisfactory.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, represented by the Director, Technical Services in the Ministry, Fatima Hayatu, said these in Abuja during a workshop on Tax Expenditure organised by the ECOWAS Commission under the context of the implementation of the support Programme for Tax Transition in West Africa.
The PATF aimed to improve the management of domestic taxation and ensure better coordination of taxation in the ECOWAS and West African Economic and Monetary Union regions.
The Minister observed that Nigeria’s low revenue generation capability had been an enduring challenge to past and present governments.
She said that although Nigeria was celebrated as the country in Africa with the largest economy, translating the wealth into revenue generation had remained a serious challenge.
According to her, Nigeria was faced with challenges in mobilising domestic funds necessary for human capital development and infrastructure that were both drivers of sustainable economic growth and development.
Ahmed said: “Our current revenue to GDP ratio of about seven per cent is unsatisfactory and we are keen on improving this by implementing various initiatives
“The case remains the same with our current contribution between oil and non-oil GDP, for which our analysis on oil revenue to oil GDP revealed as 39 per cent while non-oil revenue to non-oil GDP was 4.2 per cent. Our Value Added Tax revenue to GDP in Nigeria for example stands at less than one per cent (0.8 per cent) which compares unfavourably to ECOWAS average of 3.4 per cent.
“So also is our excise revenue which is 4.1 per cent, compared to Ghana at 15.3 per cent or Kenya at 19.5 per cent. It is important to reiterate that though tax exemptions and concessions have for long been used by successive governments in Nigeria to attract both domestic and foreign direct investments in the country with the expectation that the revenue foregone will lead to commensurate benefits in the economy in the form of employment generation, capital formation, wealth creation and poverty alleviation, revenue generation, technology transfer, amongst others, they constitute huge tax expenditures and revenue leakages to government.”
The minister promised that the administration of the President Muhammadu Buhari would continue to emphasise the need to examine tax expenditure component of the Federal Government aggregate spending.
She said that the government had recently issued a tax expenditure statement call circular to relevant agencies of government indicating guidelines and instructions for strict adherence, compliance, and reporting.
While commending the timing of the workshop, given the foregoing revenue challenge of the country, she stressed that ECOWAS intervention in the area of revamping tax generation and blocking leakages through Implementation of the PATF in Nigeria was a laudable one.
The Director of the Customs Union and Taxation, Salifou Tiemtore, said the PATF programme would strengthen regional fight against fraud, tax evasion, illicit financial flows and other forms of corruption.
He said the event was the beginning of series of workshops to disseminate the contents of the Tax Expenditure Guide to specific countries, notably Nigeria, Liberia, Guinea Bissau and Mauritania.
Tiemtore said the successful implementation of PATF tools would also improve the management of domestic taxation in member states through efficient control of VAT and tax expenditures.
He commended the European Union Delegation for the support and funding while assuring them of the commission’s willingness to continue implementing the programme for the benefit of member states.