Nigeria’s President Bola Tinubu said he will end the country’s over-reliance on borrowing to finance public spending through efficient revenue generation.
Tinubu spoke on Tuesday during the inauguration of the presidential committee on fiscal policy and tax reforms.
Made up of specialists from both the private and public domains, the committee assumes the responsibility for diverse facets of tax law reform, the design and coordination of fiscal policies, the alignment of taxes, and the management of revenue administration.
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According to the president, the committee, which was set up on July 7, 2023, and is chaired by Taiwo Oyedele, a tax and fiscal policy expert, is expected to deliver quick reforms that can be achieved within 30 days.
“The consequences of the ongoing failure of our tax regime are real and significant. The inability of the government to efficiently raise revenue has led directly to an overreliance on borrowing to finance public spending,” Tinubu said.
“A government that cannot properly fund itself will also lack the flexibility or fiscal scope to sensibly manage the economy or respond to external shocks.
“Instead, debt service begins to consume an ever greater portion of the government’s already meager revenues.
“This traps the economy in a vicious cycle of borrowing simply to service previous debt and leaves almost no scope for socio-economic development.
“As President, I am determined to end this cycle. On the day of my inauguration, I promised that my administration would address all of the issues impeding investment and economic growth in Nigeria. This promise is why I saw an end to the fuel subsidy. It is the reason the Central Bank has called an end to its multiple exchange rate system under my watch.
“It is for the same reason we gather here today to inaugurate the Presidential Committee on Fiscal Policy and Tax Reforms.”
Recognizing Nigeria’s current global position in the realm of taxation, Tinubu noted that the nation is still grappling with challenges, particularly in aspects such as simplifying tax payment procedures and augmenting the tax-to-gross domestic product (GDP) ratio.
He said his administration aims to transform the tax system to support sustainable development while achieving a minimum of 18% tax-to-GDP ratio within the next three years.
“Without revenue, government cannot provide adequate social services to the people it is entrusted to serve,” he said.
“The Committee, in the first instance, is expected to deliver a schedule of quick reforms that can be implemented within thirty days.
“Critical reform measures should be recommended within six months, and full implementation will take place within one calendar year.”
While speaking at the event, Oyedele, who had earlier described tax as a social contract, noted that Nigerians are willing to pay tax if they see what it translates to.
“Public willingness to pay taxes is strained because of a lack of trust in government, both among individuals and businesses, irrespective of size,” he said.
He however indicated that there is a need for consequences for tax evasion for effective implementation of the needed reforms.
However, considering the current economic situation of the country, experts have warned that imposing more taxes may compound the struggle of businesses.
“I would love a situation where the government reduces personal income tax. The government cannot guarantee the salaries of private companies, but it can lower personal and company income taxes. So that companies and individuals can breathe”, an accounting and financial development Don at Lead City University, Ibadan, Prof Godwin Oyedokun said.
The removal of fuel subsidy and the floating of the forex market orchestrated a significant jump in the cost of living, with inflation rising to 22.79% as of June. This is against the backdrop of a meager monthly minimum wage of N30,000.
Besides the calls for tax breaks, the government has also been urged to cut the cost of governance. The Tinubu administration has not taken any step in that direction.