The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, Monday said the federal government was working to address issues bordering on the uncertainty in the tax environment in order to create a transparent process that makes it easy for people to know what taxes and levies to pay and to harmonise the activities across the country.
She said the roadmap for the historic amendments had already been designed.
Speaking at the inaugural meeting of the Ministerial Implementation Committee on National Economic Council (NEC) Resolutions on the Harmonisation of Taxes and Levies across the federation, Okonjo-Iweala said resolving the problem of multiple taxes would attract foreign investment, diversify the economy and create more jobs. The minister said for the country to become one the top 20 economies of the world by 2020, the tax system must be made right.
Specifically, she noted that multiple taxes had been known to be harmful to the economy as it increases the cost of doing business, discourages local trade and investment as well as gives a negative perception of the Nigerian business environment to foreign investors.
Quoting statistics from the Manufacturers Association of Nigeria (MAN), she said there were as many as 97 different taxes, levies and charges that are imposed on businesses in some states, adding that the trend was not economically viable.
She said: "The costs to the government of administering these various taxes and the costs to business of paying these taxes outweigh their benefits to both the private businesses and the government."
Okonjo-Iweala also said a recent World Bank Report had indicated that for every N100 which businesses had to pay in taxes, they have had to pay about N35 in compliance costs.
She said: "This is a waste of capital that could be reinvested in these businesses to grow them and create more jobs for our economy. By streamlining and harmonising taxes across the federation, we would increase Nigeria's productive potential. In addition, the multiplicity of taxes on the transportation of goods impairs the integration of internal markets and the establishment of a fully integrated economic space within Nigeria. By impairing the integration of the national market, these mobile levies also reduce competition between companies located in different States in Nigeria. With increased competition, we could bring down prices for consumer goods produced by these companies and make our local companies and exports more competitive in the global market."
The present historic effort to harmonise taxes followed the constitution of an ad hoc committee to review the presentation made by MAN to NEC on multiple taxation and other challenges facing businesses in the country.
Part of the key requests and recommendations by MAN was the review and amendment of taxes and levies; stop the use of unorthodox means to collect taxes and levies; automate tax operations by relevant tax authorities to eliminate leakages and ensure ease of collection as well as publish the approved list of taxes and levies within the states and local governments to educate the public and facilitate compliance. However, the minister said the implementation of the various recommendations would increase economic efficiency and make tax enforcement simpler by reducing the total number of taxes paid, increasing transparency as to how and what to pay, and facilitating procedures for filing taxes.
She said the move could offer great reduction in high compliance costs and increase Nigeria's tax compliance rate and revenue base.
Okonjo-Iweala also said the Federal Inland Revenue Service (FIRS) is currently re-drafting the existing tax laws in simple and plain English to make them easily understandable by taxpayers without the need to engage expert opinion, thereby reducing the cost of compliance.
She said the FIRS had partnered McKinsey & Company to carry out a diagnostic of our tax system and to plug all leakages in our revenue collections.
Okonjo-Iweala, who also chairs the Ministerial Implementation Committee on the proposed tax review, said government would do everything to ensure that the roadmap is faithfully implemented as well as provide support and assistance towards implementing the roadmap.