Tax experts and participants in the First Annual National Tax Dialogue have called on the Federal Government to leverage on the advantages of technology, data and intelligence in tax administration to ensure full compliance and improved revenue base.
The tax dialogue session held in Abuja was organized by the Federal Inland Revenue Service (FIRS) on the theme: “Taxation in a Post-COVID Economy”.
Participants highlighted the impact of COVID-19 on the global economy, particularly the pressure on commodities producing countries like Nigeria by the declining crude oil prices at the international market.
With declining oil revenues, as a result of low oil prices, participants said the most realistic option to realize revenues for the government was through taxation.
But, they underscored the importance of deploying automation systems and technology in the management of the tax systems to ensure full compliance.
President, African Development Bank (AfDB), Akinwunmi Adesina, highlighted the pandemic’s impact on Africa’s economy and the various interventions by the bank and national governments.
Nigeria’s economy, he said, shrank by 3 percent in 2020 on account of falling crude oil prices and the effects of the lockdowns on economic activities in the country.
With the drop in oil revenues, he said debt service payments pose the greatest risk to Nigeria, adding that for the country to overcome the impact of the pandemic “taxes must form a significant percentage of government revenue.”
To build back the economy, the AfDB President said Nigeria would need huge resources, with taxation expected to constitute a significant part of government revenue.
“It is crucial to ensure that the tax base expands. Given that over 60% of Nigerians are in the informal sector, priority should be to support measures to move a large part of this from informal to formal sectors,” Mr Adesina said.
“Digitalization of tax collection and tax administration is critical to ensure greater transparency of the tax system, widening of the tax base, while mitigating compliance risks and encouraging voluntary tax compliance,” he added.
He suggested that the government should make the country’s tax codes simpler as well as reduce administrative burdens and formalities to make the transition from informality to formality simple.
The transition, he pointed out, would allow people to be able to better assess their tax obligations and fulfill them.
He urged the government to focus a lot more on corporate taxes, and ensure full compliance, adding that steps must be taken to ensure such taxes did not discourage investments.
Ekiti State Governor, Kayode Fayemi, who was the chairman of the Dialogue, urged the FIRS to continue to build on its performance in the 2020 fiscal year.
Mr Fayemi who is also the chairman of the Nigerian Governors’ Forum, said despite operating in the most challenging period, the FIRS was able to realize about N4.9 trillion collection in taxes or 98 percent of its target.
Of the total tax revenue receipt by the FIRS, the governor said only 30.6 percent came from the Petroleum Profits Tax (PPT), from the usual figure of over 50 percent of total revenue.
On ways to improve tax revenue, the governor urged participants at the dialogue to “interrogate how Nigeria can further deepen the use of technology to improve tax compliance nationally and across sub-nationals.”
He said the deployment of technology and automated systems in tax administration was crucial as a significant proportion of the country’s population would soon join the growing workforce in the economy.
“This is a golden opportunity to introduce first-time taxpayers to their civic responsibility, by adopting technology,” Mr Fayemi said.
The Executive Secretary, African Tax Administration Forum (ATAF), Logan Wort, also underlined the crucial role of technology in generating revenue for the country in a post-COVID economy.
Mr. Wort, who joined the Dialogue virtually from South Africa, said “Domestic Resource Mobilization (DRM) is expected to contribute at least 75% to 90% on average per country” in the post-COVID era.
Nigeria and other African countries, he said, should note that “improved tax revenue will have to take prime position” in the scheme of things going forward.
Nigeria, he said, should pay serious attention to e-commerce and the digital economy sector where big, trans-national digital conglomerates like Google, Netflix and Uber operate and make huge, tax-free profits as a possible way of increasing tax revenue generation.
He said Nigeria should borrow a leaf from Ghana in e-commerce taxation, which is projected to fetch Ghana about $450 million in tax revenue this year.
Lagos State Governor, Babajide Sanwo-Olu, who was the Chairman of the first-panel session, urged the AfDB president to support Lagos State to grapple with the challenges posed by its status as the former capital city of Nigeria as well as the issues foisted upon it by the pandemic.
Minister for Communications and Digital Economy, Ali Isa Pantami, who chaired the second-panel session, who stressed the need for taxpayers to be treated as kings, canvassed better funding of the FIRS.
The consensus among the panelists was that tax administration should leverage on technology across the entire taxpayer identification, registration and filing process to ease compliance and administration.
Discussants made a strong case for the linking of the National Identification Number (NIN) with the taxation processes.
Besides, they observed that the funding threshold established for the FIRS in 2007 was no longer adequate for the Service to discharge its functions optimally.
Consequently, they urged the Federal Government to increase funding support for the FIRS to assist it in completing some of its projects, including a data centre based on proprietary technology.