Nigeria is facing a significant challenge in generating enough revenue to fund public expenditures hence the need for tax and fiscal reforms balancing.
The country has the fourth lowest revenue-to-GDP ratio in the world, and the International Monetary Fund has called for tax increases to address the present challenges. However, manufacturers and other stakeholders advocate for tax and fiscal reforms that promote economic growth and development.
There are concerns over the incoming administration led by President-elect Bola Ahmed Tinubu’s history of aggressive tax collection policies. While tax mobilisation is important for revenue generation, it must be done in a way that expands the tax net and does not overburden existing taxpayers. The government needs to balance revenue generation with promoting economic growth and development, without harming the economy or specific sectors.
Balancing Tax and Fiscal Reforms
Expanding the tax net would help generate more revenue, which must be utilised productively through transparent and accountable means. Tinubu’s preference for using consultants could increase revenue potential, but this approach must be transparent and not harm the economy or specific sectors. The government needs to ensure that the tax collection process is efficient, transparent, and accountable to promote trust and confidence in the system.
The president of the Chartered Institute of Taxation of Nigeria emphasises the need to expand the tax net rather than increasing taxation. Tax education could have a significant effect on voluntary tax compliance, improving tax administration and policies that enhance Revenue generation. By promoting awareness and understanding of tax laws, the government can increase tax compliance and prevent tax evasion.
The chief executive of the Centre of the Promotion of Private Enterprise highlights the need for fiscal policies that balance multiple objectives, such as revenue generation, boosting domestic production, enhancing citizens’ welfare, promoting economic growth, deepening economic inclusion, facilitating job creation, and recognising societal ethos, beliefs, and values. Fiscal policy measures must be designed to ensure transparency, accountability, and effective communication. The government needs to balance these objectives to achieve optimal outcomes and prevent unintended consequences.
In conclusion, Nigeria needs tax and fiscal reforms that promote economic growth and development, without overburdening existing taxpayers or harming the economy or specific sectors. Expanding the tax net, promoting tax education, and using consultants could increase revenue potential, but the government needs to ensure that the process is transparent and accountable. Fiscal policy measures must balance multiple objectives to ensure transparency, accountability, and effective communication, while promoting economic growth and development.
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Olatunji Abdulrazaq CNA,ACTI