Nigeria is aiming to reduce the number of taxes levied by federal and state governments from more than 60 to fewer than 10, Taiwo Oyedele, the head of a tax reform committee has recommended this to the president in a presentation delivered a month ago. This effort is part of a larger initiative to create a more business-friendly environment and boost economic growth.
This new policy is a strategic move that will reform the nation’s fiscal policies and remove obstacles to companies in Nigeria. It is also aimed at the reduction of tax burden on poor Nigerians.
Oyedele revealed that the Committee has already begun the process of rewriting the nation’s tax laws, a crucial step to establish a more standardized and efficient tax administration.
Africa’s biggest economy, Nigeria, has a tax-to-GDP ratio of 10.8%, one of the world’s lowest, forcing the government to rely on borrowing to fund its national budget.
Investors often cite Nigeria’s many taxes and multiple revenue collection agencies for adding to the cost of doing business and discouraging investment.
Taiwo Oyedele, President Bola Tinubu’s advisor on tax reform, explained that Nigeria has over 60 official taxes and levies collected by federal and state governments and local authorities, mandated by law.
Over 200 taxes
Including unofficial taxes – taxes that agencies legally or illegally levy without the backing of law – Nigeria has more than 200 taxes, Oyedele said, adding that the large number was “making life difficult for our people.”
“The more taxes you have, actually, the less revenue you collect because it just creates the opportunity for leakages and some non-state actors collecting money and keeping it to themselves,” he said.
Oyedele said part of the reforms would see changes to the constitution to clarify which level of government should collect certain taxes.
Some states like Lagos, which generates the most tax revenue, passed laws last year designed to allow state governments to collect value-added tax rather than a federal agency, causing a dispute with the federal government that is before the courts.
It’s still unclear which specific taxes will be eliminated, but the goal is to streamline the system and make it easier for taxpayers to comply. This could have a positive impact on the country’s economy and help spur investment and job creation.
