NESG release report as stakeholders chart new path for non-oil revenue

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Nigeria Economic Summit Group’s Fiscal Policy Roundtable (NESG) has launched its Citizen Perception Report, a first of several research pieces to be published in support of its tax reform and advocacy vehicle “Better Tax”.
Better Tax seeks to close knowledge gaps in fiscal policy and create a sustainable framework to actualise the Federal Government’s inclusive economic agenda.
Launched in Lagos Wednesday, the citizens perceptions report, which is the product of a nationwide perception survey cutting across households and small businesses in the tax value chain, tasked government to establish an Office of Tax Simplification (OTS) among other recommendations targeted at demystifying complex provisions in the nation’s tax laws and boosting dwindling revenues from the non-oil sector of the economy.
Sarah Alade, chairman, NESG Fiscal Policy Roundtable, said, “The core concept of the Roundtable was to reflect the needs and objectives that forms the basis of a robust fiscal reform platform focused on mobilising and growing the country’s tax revenue.”
The IMF estimates that revenue collected in 2016 across all tiers of Government was only about 6% of GDP. Historically, more than 70% of those revenues have come from the oil sector while the non-oil sectors, which account for more than 90% of GDP, have historically contributed about 30% to revenues.
“This limits Nigeria’s ability to credibly execute its development plan and fund critical social sector programmes. It also leaves Nigeria very vulnerable to macro-economic shocks from low oil prices. The most recent fall in oil prices threw Nigeria into a fiscal crisis with spillover effects on the economy resulting in a recession in 2016.
“Building a strong revenue base that is balanced between the oil and non-oil sector is therefore critical to sustainably financing Nigeria’s development programme and long-term macro-economic stability.”
According to Alade, data

A decent case for presumptive tax

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Luigi Einaudi was the president of the Italian republic shortly after the Second World War and a prominent economist best known for his advocacy of presumptive taxation. He argued that tax should be levied on average, and not actual incomes. One advantage of such a system would be that all taxpayers have the incentive to work hard since above-average income would be free of tax. Another would be administrative simplicity.

Presumptive income tax (PIT) is applied in different forms in many jurisdictions. The authorities could assume that individuals and companies enjoy income equivalent to a set percentage of their net worth. Alternatively, they could assess a company’s tax liability as a set proportion of its gross receipts, making adjustments for the specific industry. In developed economies, the collection agency could assess the PIT due from a large landowner on the basis that he/she made the full productive use of the land. For other taxpayers, the agency could make a demand based upon visible signs of wealth. The permutations are numerous yet they share the advantage for the authorities that the taxpayer has to challenge the assumptions underpinning the demand.

In Nigeria the Federal Inland Revenue Service (FIRS) has expressed an interest in the principle of PIT. It is not difficult to see why. Federally collected revenue amounted to 7.4 per cent of GDP in 2018 according to provisional data from the CBN.This is less than half the rate achieved in Kenya and about one third of what is posted in South Africa. Some numbers quoted in January by Zainab Ahmed, the federal finance minister, are revealing. The gross oil revenue/oil GDP ratio stood at 39.0 per cent, and that for the non-oil economy at just 4.2 per cent. We may conclude that the oil industry … Read More...