‘Tax-to-GDP ratio lower than Africa’s average’

The Nigeria Extractive Industries Transparency Initiative (NEITI) has said the country’s tax-to-Gross Domestic Product (GDP) ratio is below Africa’s average.

This was contained in the Policy Brief the watchdog organization published titled: “Beyond Assent: Pathways for Implementing Nigeria’s New Tax and Revenue Framework.”

The document, which was released to The Nation exclusively yesterday said, “Despite its economic potential and resource wealth, Nigeria’s tax-to-GDP ratio of just 9.4 – 10.86 per cent below the African average of 16.8 per cent and the minimum 15 per cent threshold recommended by the African Union for sustainable development.”

According to NEITI, the result is a chronic revenue shortfall that has undermined public investment, widened the infrastructure gap, exacerbated inequality, and increased Nigeria’s exposure to debt and external vulnerabilities.

The document further noted that at the same time, decades of extractive industry audits and analyses have consistently exposed systemic inefficiencies in revenue assessment, collection, and remittance.

It added that the inefficiencies are compounded by data opacity, un-remitted revenues, arbitrary tax waivers, weak inter-agency coordination, all of which contribute to the loss of billions of Naira annually.

NEITI, however, stressed that the new tax reform offers an opportunity to correct these structural deficiencies, modernize Nigeria’s tax administration, and build a stronger foundation for domestic fiscal sustainability.

On the other hand, the document said while the objectives of the reform are laudable, their realization hinges on how the framework is designed and implemented.

The document also throws light on the features of the tax reform as it relates to designated revenue accounts.

NEITI said in addition to the comprehensive classification of revenues, remittances are required to be into separate accounts designated for each revenue type/stream.

It also said that alternatively payments are required to be separated in bank statements to show, for each payment, the name of the paying entity, the receiving entity, and the purpose of the payment for proper revenue tracing and reconciliation.

On penalties, the document said non-compliance with tax remittances range from fines to revocation of licenses.

It noted that the Petroleum Profit Tax Act (PPTA) requires entities to file and pay their tax within five months of the end of the accounting year.

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Failure to file and pay within the stipulated time, according to NEITI, is to attracts penalty of 10 per cent of the amount due, as well as interest at the prevailing commercial rate.