…Adeosun says 6% Tax to GDP abysmally low
Nigerian government is working out a new revenue strategy which, amongst other things, would ensure that funds which have been stashed away abroad through tax avoidance and illicit financial flows are recovered, according to finance minister, Kemi Adeosun.
Adeosun said in Washington that there were concerns that while government revenues remain low and borrowings expand, the country still has so much cash taken abroad illicitly, which must be repatriated to aid development.
“Of course, we need these monies back in Nigeria and what we are working on is a revenue initiative that will bring a lot of these monies back so that we can fund our infrastructure with the money that is due to Nigeria,” the minister said, though declining BusinessDay question on how much the expected funds could amount to.
“We have a tax to GDP ratio of 6 percent, one of the lowest in the world, suggesting that a large number of Nigerians are not paying enough tax. Now, with all the cooperation around automatic exchange of information, base shifting, that is where companies move profits, they avoid tax, there is a lot of compact around stopping that and we believe that that would support what we are doing on revenue mobilisation,” she said.
Nigeria’s federal government is proposing to borrow some N2.32 trillion to partly fund the 2017 budget deficit estimated at N2.36 trillion and about 2.18 percent of the country’s Gross Domestic Product (GDP).
The Federal Government proposed a record N7.298 trillion budget for the fiscal year 2017, some 20.8 percent rise from N6.8 trillion budgeted for 2016. At the moment, the budget is before the parliament.
As contained in the appropriation bill, the government intends to source N1.067 trillion – about 46 percent from external sources while, N1.254 trillion will hopefully come from the domestic market.
Buhari intends to use the 2017 expansionary budget to spend the country out of biting economic recession and has just launched an Economic Recovery and Growth Plan (ERGP) which targets to restore growth significantly to 2.19 percent in 2017, and 7 per cent at the end of 2020 and deliver single digit.
“That would reduce the amount of debt that we need to take and improve our ability to fund our infrastructure projects and get our economy going,” Adeosun maintained.
“It is fundamental. Now the problem is not our debt service, our revenue is too low, not that our debt is high, we are only at 10 percent, so we have to do something very very fundamental about our public revenue and that’s the way we are going to be working,” the minister said, speaking to journalists immediately after the G24 finance ministers and governors’ conference which she attended at the ongoing spring meetings of the International Monetary Fund (IMF) and the World Bank.”
The World Bank and IMF have been advising countries, including Nigeria on fiscal consolidation particularly to expanding revenues through tax as the world recovers from long years slow growth.
During discussions with her fellow Finance Ministers at the G24 group meeting, Adeosun said talks centred around strategies to drive non-oil revenue growth and achieve inclusive growth.
Speaking after the meetings, the Minister said: “Revenue mobilization is critical to the success of Nigeria’s economic reform agenda. We have an unacceptably low level of non-oil revenue, and much of that is driven by a failure to collect tax revenues.
“Just like some of our contemporaries in the G24 have done successfully, we are going to focus on tax in 2017 through an asset an income declaration scheme to address our low tax revenue collection and ensure improved compliance, a broader tax base and more sustainable revenue. This is fundamental to delivering on our reform plans.”
Speaking at the G24, the Minister also highlighted the need for strong budget implementation and transparency to create trust and accountability in government:
“While we focus on raising revenue’s and bringing people into the tax system, we must be equally aggressive in our approach to budget implementation and transparency. Our people must know where their hard earned tax contributions are being spent and the impact that they are having on national development, and the daily lives of citizens. This will be a core focus for us.”
The Minister also met with the ratings agencies Moody’s and Fitch to update them on progress towards economic reform objectives, and met with the World Bank Country team to discuss the status of on-going projects in Nigeria, and the pipeline of projects for 2018.
The Minister has already held a number of bilateral meetings with specific agencies like the World Bank and Africa development Bank to review meeting to review their portfolio in Nigeria, and how disbursements can be improved going forward.
“We have met also with the African Development Bank on similar type of review, looking at projects, what’s working, what’s not working, what do we need to improve on. We have also been meeting with the rating agencies, talking to them about how Nigeria’s economy is performing and how the economic recovery and growth plan is expected to make this growth threat we expect in 2017 sustainable,” Adeosun also noted.
The minister will be attending meetings on Closing the financing gap for water, affordable housing finance food security and nutrition over the coming days as part of the government’s focus on sustainable solutions to some of Nigeria’s most pressing social challenges.
She said, “While the infrastructure that we build to facilitate power and transportation is vital to our economic growth, we are equally focused on addressing the challenges we face to deliver services to our people. Water quality and nutrition are fundamental to quality of life, but also deliver economic benefits. We must do more to improve living standards for our people and so addressing food security, water and nutrition are central to our reform agenda. This isn’t just about economics, these are the basic responsibilities of government, we need to redouble our efforts and show people that their tax revenue can deliver real change in their daily lives.”