The House of Representatives Committee on Finance has raised serious concerns about Nigeria’s tax system, revealing that a staggering 91 per cent of registered companies are not captured in the country’s tax net. This situation has led to a concerning imbalance in tax contributions, with only about 35 million Nigerians actively paying taxes.
James Faleke, the Chairman of the House Committee on Finance, made the alarming revelations during a public hearing on four significant tax reform bills. The bills discussed were the Nigeria Tax Bill, the Joint Revenue Tax Board Bill, the Tax Administration Bill, and the Nigeria Revenue Service Bill. These proposed reforms aim to overhaul Nigeria’s outdated tax system to enhance efficiency and boost revenue generation.
Speaking at the public hearing on Wednesday, Faleke highlighted that the current state of tax compliance in Nigeria is not only unsustainable but also detrimental to the country’s economic development. He highlighted the stark reality that Nigeria requires $3 trillion (approximately N1.8 quadrillion) over the next 30 years to address its massive infrastructure deficit. This amounts to roughly $100 billion annually. However, he pointed out that the country’s Internally Generated Revenue (IGR) falls far short of this amount, forcing the government to borrow heavily to fill the funding gap.
“This reality highlights the urgency of implementing tax reforms that will simplify and enhance revenue collection, reduce reliance on borrowing, and drive sustainable development,” Faleke stated. His comments stress the critical need for an efficient tax system that can generate adequate revenue to fund the country’s infrastructure needs and support long-term economic growth.
The situation is dire, according to the House committee chairman. He stated that only nine per cent of registered companies in Nigeria are captured in the tax net, leaving a significant portion of businesses out of the tax system. This represents a major problem in a country where the government relies heavily on taxes to fund public services and infrastructure.
Further, Faleke noted that while there are approximately 35 million Nigerians who are paying taxes, this figure represents only a small portion of the country’s population, which is estimated to be over 200 million. The low number of tax contributors means that the tax base is too narrow to sustain the level of public services and infrastructure required to support economic development.
In his address, Faleke also pointed out that Nigeria’s tax laws, which have remained largely unchanged for several decades, are no longer suited to the current economic and business landscape. While the laws may have served their purpose when they were first enacted, they now need to be updated to reflect the modern realities of the Nigerian economy.
Faleke’s remarks came as the House of Representatives opened discussions on four proposed tax reform bills, which aim to address some of the structural issues in the country’s tax system. These bills are intended to create a more efficient and equitable tax system, which would help Nigeria increase its revenue base and reduce its dependence on borrowing.
The Nigeria Tax Bill, one of the key pieces of legislation, is expected to simplify the tax process for individuals and businesses, making it easier for taxpayers to comply. The Joint Revenue Tax Board Bill aims to enhance cooperation between federal and state governments in revenue collection, while the Tax Administration Bill seeks to streamline the administration of taxes across the country. The Nigeria Revenue Service Bill aims to improve the efficiency and transparency of the country’s tax collection efforts.
The proposed reforms are seen as critical to ensuring that Nigeria can generate the revenue needed to fund its infrastructure projects and reduce the country’s reliance on external borrowing. However, the success of these reforms will depend on their timely implementation and the political will to enforce them.
The lack of adequate infrastructure has long been a major challenge for Nigeria’s economic development. Poor roads, unreliable electricity supply, and inadequate healthcare and education systems have hindered growth and limited the country’s potential. To address these issues, Nigeria needs to increase its tax base and ensure that taxes are collected efficiently and fairly.
