As Nigerians prepare for the inauguration of a new president in May 2023, Stransact (Chartered Accountants), the correspondent firm of RSM, the sixth largest Accounting and Auditing firm in the world, has set an agenda for the incoming administration on tax reforms.
In a recent media briefing, the firm’s Partners recommended tax related reforms for the government to improve and sustain Africa’s largest economy.
An accountant by profession, Asiwaju Bola Ahmed Tinubu emerged winner in Nigeria’s February presidential election. Whilst a litigation battle continues at the election tribunal, Tinubu is set to be sworn in as Nigeria’s new president on May 29 2023. In addition to a battered economy, the incoming president faces a complex array of socio-economic issues that require immediate attention.
Addressing the media, the Stransact Partners noted that the middle class in Nigeria is fast disappearing due to the collapse and relocation of companies that would have employed this skilled and educated workforce. According to the Partners, Nigeria has one of the highest multiplicities of tax in the world. With inflation rate rising to 22.04 percent in March 2023, the multiple taxes imposed on businesses and individuals have become a heavy burden on Nigerians and have become impediments to the ease of doing business. They therefore, advised the government to widen the tax net i.e. bringing in more people from the informal sector into the tax bracket rather than increasing tax rates or introducing new forms of taxes.
“To ease pressure on genuine businesses bringing investments into the country and ensure compliance, government must be fair and concise in regulation, allowing market forces to freely set the terms for a healthy competition in the economy,” said Eben Joels, General Partner at Stransact.
Mr. Joels also noted that the multiple currency rates policy is giving influential people undue advantage to make excess profit whilst stifling the growth of genuine businesses.
“For instance, a politician can use his influence to get dollars at the official rate of N460 and sell at the black-market rate of around N750, taking advantage of the arbitrage difference, whereas a fully compliant business person may find it challenging to recoup their investments because they are required to purchase dollars at the open market rate, which is not stable enough to ensure consistent profits”
Victor Athe, Partner, Tax Services, called for the ‘formalization’ of the informal sector of the Nigerian economy, where a large portion of transactions are done outside the banking system.
“Introducing facilities and regulations that will formalize the unregulated sectors of the economy will widen the tax net and increase the tax revenue available for government,” said Athe.
The Partners canvassed for the deployment of homegrown innovations, technologies and tailored solutions to Nigeria’s tax problems. One example of such indigenous innovations is the TaxPro-Max introduced by the Federal Inland Revenue Services (FIRS), which enables seamless registration, filing, payment of taxes and automatic credit of withholding tax. They also challenged Nigerians to demand accountability from government representatives at all levels on the use of tax funds.
