People & Money

Tinubu Gives Oyedele’s Tax Reforms Committee 18% Tax to GDP Ratio Target

On Tuesday, President Bola Tinubu inaugurated the Presidential Fiscal Policy and Tax Reforms Committee. This committee, led by Taiwo Oyedele, has been tasked with the mission of attaining an 18% tax-to-GDP ratio within the upcoming 12 months. 

During the committee’s inauguration, Tinubu expressed concern over Nigeria’s tax-to-GDP ratio, emphasizing that it is notably lower than Africa’s average. He assured that his administration’s approach would be to “tax the fruits and not the seed.” 

Also Read: Finding a Way Out of Nigeria’s High Debt Costs

He outlined the primary responsibilities of the Committee, which encompass tasks such as tax harmonization, enhancing revenue generation, revamping the tax structure, and attaining a tax-to-GDP ratio of at least 18%.

The President highlighted that his administration has initiated measures to rejuvenate the economy, including the elimination of fuel subsidies and the adjustment of the dual foreign exchange policy. He additionally affirmed his resolve to enhance the populace’s quality of life. Nevertheless, he emphasized that effective governance hinges on the government’s ability to fulfil its duties, underscoring that adequate revenue is imperative for meeting these obligations. 

He noted, “Nigeria ranks very low on ease of doing business and tax to GDP is the lowest in the world and falls below Africa’s average. Multiple exchange rate systems won’t happen under my watch.

“The committee is to address gross fiscal challenges, Fiscal governance, tax reforms and growth facilitation. They shall address the issues of multiple revenue collection, poor accountability in applying government revenue.” 

In July, the president appointed Taiwo Oyedele, an accomplished tax specialist holding the position of Fiscal Policy Partner and Africa Tax Leader at PwC, to serve as the Chairman of the newly established tax reform Committee.

Earlier this year, the FIRS noted that Nigeria’s tax-to-GDP ratio hit 10.86% in 2021, a significant improvement from 5.5% recorded in 2020, albeit a far cry from the African average of 16% recorded in 2020. Also, Nigeria is still miles off the 15% tax-to-GDP ratio recommended by the World Bank for economic growth and poverty reduction. 

Before the inauguration of the committee, the 153rd meeting of the Joint Tax Board (JTB) was held in Abuja. The meeting had in attendance all the tax administrators from all 36 states, the Federal Capital Territory, and members of the Presidential Committee on Fiscal Policy and Tax Reform. It was chaired by the FIRS boss and JTB Chairman, Muhammad Nami

One of the outcomes of the meeting is the agreement that both the federal and state governments will initiate the process of harmonizing and standardizing taxes at both the national and sub-national levels. The Board’s Chairman, Nami indicated that the government intends to decrease the existing array of taxes, close gaps in the tax system, and enhance revenue generation for all three levels of government. He emphasized that for Nigeria to achieve its highest potential in tax revenue collection across federal, state, and local government tax bodies, the nation must undertake demanding yet essential reforms that will result in enduring advantages. 

Also Read: The Lunch Hour – Taiwo Oyedele, West Africa Tax Leader, PWC

Nami noted, “The implication is that, what we call informal taxes, black taxes, whatever name you call it, at both local government, state and the centre, the government intends to eliminate those multiple taxations to encourage investment, to raise adequate revenue because the irony of everything is that the more of these taxes that we have, the less of the revenue we generate. 

“By the grace of God, this is not another promise that will not be fulfilled. The government has already announced the constitution of a presidential committee and recently, I was at NEC to speak to governors, to solicit their support so we realise this in good time. And we are very confident that the inauguration of the committee by the President means that we are going to start work immediately, promises made in the past which were not kept would be kept this time around.” 

David Olujinmi

David Olujinmi studies Engineering but his true passion is research and analysis. He writes about finance, particularly the capital market, investment banking, and asset management. More »

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