In a stark revelation, Dr. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, disclosed that Nigerians paid just N1.5 trillion in personal income taxes in 2023, despite declaring a total income of N15 trillion.
This massive discrepancy between declared income and tax collection exposes a critical failure in the country’s tax system. Oyedele made the comments during his speech at the 2024 National Tax Conference in Abuja, which was organized by prominent civil society groups, including the Civil Society Legislative Advocacy Centre (CISLAC), ActionAid Nigeria, and Oxfam in Nigeria.
According to Oyedele, Nigeria collects only about 30% of its potential tax revenue, leaving a staggering 70% uncollected. This shortfall has significant consequences for the country’s development, as it hampers the government’s ability to fund essential services like education, healthcare, and infrastructure.
“The gap is unbelievable,” Oyedele said. “Despite the declared incomes totaling N15 trillion, personal income tax revenue for 2023 amounted to just N1.5 trillion. This points to serious issues of tax avoidance and a system that fails to capture revenue effectively.”
A Tax System in Crisis
Nigeria’s tax collection system has long been a topic of concern. The country is heavily reliant on oil revenue, but as global oil prices fluctuate and production faces challenges, the government has increasingly looked to taxation as a means of diversifying revenue streams.
However, the reality of tax collection remains grim. Oyedele highlighted that many Nigerians evade taxes through various means, including aggressive tax avoidance strategies. He called out the “ineffective incentives” in the system, which encourage tax evasion and create a culture of non-compliance.
The inefficiency of the tax system is not just about collecting taxes but also about how the tax revenue is utilized. For many Nigerians, there is a growing sense that taxes are not being used to improve their lives. This lack of public trust only exacerbates the problem of low tax compliance.
Debate Over Tax Reforms
Tax reform has been at the center of national debates, with deep divides emerging over the proposed changes. Many governors and political leaders, particularly from the northern states, have voiced strong opposition to the reform bills, fearing they could disproportionately benefit wealthier regions like Lagos while sidelining the northern states.
In the face of this division, Oyedele believes the ongoing controversies surrounding the reforms are counterproductive. He urged Nigerians to look beyond the disagreements over specific details of the bills and focus on the larger goal of transforming the country’s outdated tax system.
“We have a once-in-a-lifetime opportunity to reform what has been wrong with our tax system for decades,” he said. “If we miss this opportunity, I don’t think we will have it again in my lifetime.”
Despite these challenges, Oyedele expressed optimism about the current administration’s commitment to tax reform. He praised President Bola Tinubu for his understanding of the issue and his administration’s resolve to tackle it head-on.
Focus on Education, Health, and Security
During his speech, Oyedele stressed that tax reforms should go hand in hand with increased spending on critical sectors like education, health, and security. He argued that addressing multidimensional poverty in Nigeria would be impossible without improving these areas.
“The government needs to prioritize these sectors to alleviate poverty and create a fairer society,” he said. “A tax system is not just about collecting revenue; it’s about using that revenue to make life better for Nigerians.”
Oyedele also addressed the contentious issue of Value Added Tax (VAT). The debate over VAT has become one of the most heated aspects of the reform discussions. Some have argued that raising the VAT rate would hurt ordinary Nigerians, particularly in the current economic climate. Oyedele warned that such debates should not distract from the more pressing need to overhaul the tax system as a whole.
He also pointed out that free zones, originally designed to encourage exports, have been exploited by businesses selling into the domestic market without proper taxation. This has further eroded the country’s ability to collect tax revenue.
