June 5, 2024.
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The Taiwo Oyedele-led Presidential Committee on Fiscal Policy and Tax Reforms has proposed five executive orders aimed at accelerating fiscal reforms and rejuvenating Nigeria’s economy.
The first order targets inflation control and price stability by suspending import duty and VAT on specific items, permitting millers to import paddy rice, setting the exchange rate for import duty at N800, prioritizing productive expenditure, and settling accumulated ways and means.
A second order focuses on job creation by offering relief for wage increases, subsidizing transport for low-income workers, and allowing Nigerians to work remotely for foreign companies.
To enhance non-oil exports and global trade, the committee recommends tax exemptions for repatriated export earnings from services and intellectual property, zero-rated VAT on all non-oil exports, easing restrictions on the use of export proceeds, and eliminating the Tax Clearance Certificate (TCC) requirement for forex applications.
Another order emphasizes sound financial management and fiscal sustainability. It mandates MDAs to remit operating surpluses exceeding N5 billion, bans foreign trips for domestic events, requires electronic payment of estacode, directs direct payments to MDAs’ contractors, and mandates all fee payments to be in naira with MDAs’ forex held by the CBN.
The final order aims at tax information consolidation and collaboration by mandating the use of NIN and RC numbers and establishing a national tax data governance framework.
These orders are among approximately 450 policy recommendations by the committee to enhance Nigeria’s revenue and create a more competitive business environment.
“Our executive orders have not yet been submitted to the president. We are finalizing our engagement rounds and will seek the finance minister’s approval next,” said Oyedele at a stakeholder exposure and impact assessment session in Abuja. “We are consulting with finance commissioners, local governments, the Joint Tax Board, and other stakeholders to ensure broad agreement.”
The committee also proposes a constitutional amendment requiring MDAs to submit audited accounts of previous years’ budgets as a condition for new budget approvals. This transparency aims to address the issue of unaccounted allocations.
Additionally, the committee recommends that the government allocate a minimum percentage of annual spending to infrastructure and human capital development, replacing broad categories like capital and recurrent expenditure with specific headings such as infrastructure, human capital investment, personnel cost, headcount & productivity, administrative overheads, debt service & sinking funds, and implementing zero-based budgeting.
“We want our budget to clearly detail spending on roads, electricity, ports, and potable water to improve welfare and stimulate economic activities,” Oyedele stated.
Another proposal suggests detailed headings for personnel cost, headcount, and productivity to enable effective planning, requiring MDAs to justify their employee numbers and planned hires.
“We’ve seen politicians hire thousands as personal assistants near elections, which isn’t a good use of resources. We believe productivity per capita for civil servants can be measured and improved,” Oyedele noted.
Administrative overheads should also be categorized, with a dedicated section for debt service and sinking funds. Importantly, infrastructure and human capital development must have a minimum budget percentage, while personnel cost, administrative overheads, and sinking funds should have caps.
The Tinubu administration opposes accompanying the annual budget with a Finance Act, a practice adopted under President Buhari. “The Finance Act was well-intended but became misused. We believe comprehensive reforms should occur every five years, not annually,” Oyedele added.
The committee also recommends reducing the total number of taxes citizens pay to single digits and aims to raise the tax-to-GDP ratio from about 11% to at least 18% over the next two to three years, with a revenue-to-GDP target of 30%.
VAT should be centralized for collection, with states entitled to up to 90% of total collections. The committee also seeks to remove VAT on essentials such as food, health, rent, and education, which account for over 80% of Nigerians’ spending. This removal would result in a 60% drop in VAT revenue, to be offset by increasing VAT on other items.
The committee proposes gradually reducing Company Income Tax (CIT) by about 5% from the current 30% over the next two years. Nigeria’s CIT rate is among the highest globally, effectively up to 40% with other taxes, deterring investment.
To combat corruption, the committee recommends a constitutional amendment barring people convicted of corruption from receiving presidential pardons. It also suggests that tax violators and evaders be ineligible for public office.
The committee is developing a whistle-blowing framework to combat corruption in the tax system and proposes amending the constitution to ensure equal ministerial representation from each political zone to reduce governance costs.
The committee also revealed a new regulation simplifying Withholding Tax (WHT), particularly beneficial for SMEs. It proposes establishing the Nigeria Revenue Service to replace the Federal Inland Revenue Service, consolidating tax and levy collections to curb duplication of tax audits.
Another proposal is to replace the abused pioneer status with priority sector incentives, rewarding companies based on their investments in the economy. Existing exemptions will be honored until they expire.
The committee seeks to cut the collection cost by revenue-generating agencies to 1% to increase government revenue and reduce borrowing. Current fees range from 4% to 35%, which is unsustainable.
Recommendations include transitioning monthly FAAC allocations to daily disbursements and delegating to junior accountants across government tiers. The committee has also developed the first national fiscal policy document addressing tax collection, spending, and borrowing.
Proposals also include a national strategy for taxing the informal sector, potentially exempting up to 95%, and reducing the tax burden on low-income earners. Minimum wage earners would be exempt, with reduced rates for those earning between one and two million.
Lastly, the committee recommends establishing revenue courts to resolve tax disputes promptly, fostering a better business environment. “Simplicity, clarity, certainty, convenience, efficiency, flexibility, sustainability, accountability, and transparency will guide our tax system going forward,” assured Oyedele.(www.naija247news.com).
