Finance Committee Proposes 1% Revenue Collection Cost

Finance Committee Proposes 1% Revenue Collection Cost

The Presidential Fiscal and Tax Reforms (PFTR) Committee has proposed a substantial reduction in the cost of revenue collection to 1%………..CONTINUE READING

At a stakeholder consultation in Abuja, Dr. Taiwo Oyedele, Chairman of the committee, highlighted the current collection costs in the country, which range between 4% and 35%. He deemed this range unacceptable, noting that global best practices average around 1%. Even South Africa, which leads in revenue collection in Sub-Saharan Africa, spends less than 1% on this process.

Dr. Oyedele outlined the committee’s goals, which include ensuring fair taxation, responsible borrowing, and sustainable spending. He praised Angola’s recent tax reform, which exempts individuals earning less than the equivalent of N180,000 per month from taxes. He indicated that the PFTR Committee would recommend similar exemptions for the very poor in Nigeria, while focusing on efficient tax administration for wealthier individuals.

He stated, “No country has ever earned prosperity by taxing poverty. Angola recently announced a tax reform. If you earn less than the equivalent of N180,000 monthly, you are tax-exempt. I don’t mean $180,000. I mean equivalent of N180,000.”

Dr. Oyedele stressed the importance of improving tax collection methods, eliminating informal taxes, and harmonizing tax administration. He revealed that there are currently 60 official taxes in Nigeria, but unofficially, the number exceeds 200. For instance, truck drivers budget N450,000 for various taxes and illegal collections when transporting goods across the country.

“We have to stop the insanity around taxes in this country. This is chaotic. We must do away with nuisance taxes and focus on high-yielding taxes,” he said.

To reduce the tax burden on businesses and individuals, Dr. Oyedele announced that the Minister of Finance, Mr. Wale Edun, has signed a regulation to reduce Withholding Tax. This regulation will take effect once gazetted and will exempt small businesses from Withholding Tax while reducing the rate for larger corporations and exempting manufacturers and input producers like farmers.

As part of the reform efforts, the Federal Inland Revenue Service (FIRS) will be renamed the Nigeria Revenue Service (NRS) to reflect its role in collecting revenue for the entire federation, not just the Federal Government

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