Bold Tax Reforms: Nigeria Slashes Corporate Tax by 5% to Amplify Fiscal Growth

By Joke Kujenya

FRESH FISCAL Policy unveils sweeping tax reforms as part of extensive measures aimed at overhauling Nigeria’s fiscal landscape, presented by the Presidential Committee through excise modifications.

At a workshop in Lagos on Thursday, Committee Chairman Taiwo Oyedele, presented a strategic plan designed to simplify the tax system, boost investment, and promote sustainable economic growth.

Expatiating on major tax reforms and economic measures; Oyedele said it was needful for him to make journalists understand that, reduction in company income tax, is one of the cornerstone proposals to reduce the Company Income Tax rate from 30% to 25%.

“This significant tax cut aims to enhance Nigeria’s appeal to both domestic and international investors. “By lowering the tax burden, we aim to stimulate business expansion and job creation,” Oyedele, who was the Fiscal Policy Partner and Africa Tax Leader at PriceWaterhouseCoopers(PwC) where he worked for 22 years aside having garnered over 10 years in top leadership positions gaining exhaustive knowledge and diverse experience ranging from Tax Advisory & Policy Advocacy to Business Strategy Consulting, Leadership Development, and Policy Design & Execution; he noted as one knowing well his onions.

Simplifying the tax structure, Oyedele said Nigeria currently has a cumbersome tax system with approximately 60 officially sanctioned taxes and over 200 unofficial levies. And that is the reason the Committee intends to streamline these into a single-digit number to improve compliance and ease the tax burden on businesses. “Our goal is to simplify the tax system, making it easier for businesses and individuals to comply,” said Oyedele.

He also delved into comprehensive fiscal reforms which he explained that the why the Committee’s proposals encompass a broad range of fiscal policies, structured around three main pillars:

• Fiscal Governance: Enhancing the efficiency and transparency of public financial management.
• Revenue Transformation: Broadening the revenue base through improved tax collection and management practices.
• Economic Growth and Competitiveness: Creating a supportive environment for business growth and increased competitiveness.

Oyedele noted that to address diverse economic challenges bedeviling Nigeria which includes slow Gross Domestic Product (GDP) growth, high inflation, rising public debt, and widespread poverty; the Committee’s proposals are designed to correct these issues by:

1. Encouraging Investment: Lowering the Company Income Tax rate is expected to attract more investment and drive economic growth.
2. Improving Tax Compliance: Simplifying the tax system and developing a tax intelligence system, “Data4Tax,” to broaden the tax base and ensure better compliance.
3. Supporting Small Businesses and Manufacturers: Providing exemptions from withholding tax for manufacturers and suppliers of manufacturing inputs to reduce their tax burden and promote competitiveness.
4. Tackling Low Tax Morale: Surveys reveal that a significant portion of Nigerians do not view tax evasion as wrong.

He noted that to address this, the Committee is proposing measures to improve the trust in government and simplify the tax process and enhancing public communication and ensuring proper fiscal governance are key strategies to increase tax morale.

Also, towards enhancing public financial management, he said the Committee emphasizes the need for prudent financial management, which includes, but not limited to:

• Optimizing Non-Tax Revenue Sources: Leveraging government assets and natural resources to generate revenue.
• Restructuring the Budget: Implementing zero-based budgeting and focusing on long-term appropriations.
• Combating Corruption: Tackling systemic corruption and ensuring that public spending addresses basic needs to reduce poverty.
• Leveraging Technology: Using technology to manage revenue, debt, and expenditure more effectively.

And talking about stability in Customs Exchange Rates, Oyedele posits that the frequent changes in taxes burdens and rates have been detrimental to business operations. For this reason, they are recommending pegging the customs duties exchange rate at N800/$ for the remainder of the year to facilitate better planning for businesses reliant on imports.

Asked what would be the implementation roadmap by one of the journalists in attendance, Oyedele responded that his Committee’s work is expected to reach a critical stage in Q3 2024, with the proposed National Fiscal Policy awaiting approval from the National Assembly and subsequent signing into law by President Bola Tinubu. He adds that this timeline reflects the urgency and importance of the reforms in addressing Nigeria’s economic challenges.

For all these to become lasting realities towards boosting Nigeria’s economy, Oyedele suggested that there are measures for what he labeled Quick Wins which involved several immediate measures to improve public financial management and efficiency. These, he notes, include:

• Eliminating Informal Taxes: By reducing the prevalence of informal and implicit taxes to simplify compliance.
• Optimizing Resources: By modernizing customs administration and leveraging technology to streamline tax administration.
• Public Procurement: Via enhancing the effectiveness of public procurement to ensure value for money.

But first, there must be support for businesses, Oyedele stressed, noting that the Committee is currently proposing various measures to cushion economic hardships on industries, such as:

• Increasing Personal Relief Allowances: Through providing tax deductions for employers regarding salary increases and transport subsidies.
• Export Promotion: By promoting the export of goods, services, and intellectual property.
• Addressing Multiple Taxes: In suspending multiple taxes that burden the poor and small businesses, and compensating with revenue from specific agencies.

According to the tax reforms expert, Oyedele, these proposed reforms by the Presidential Committee on Fiscal Policy and Tax Reforms, are measures he believes, are aimed at revitalizing Nigeria’s economic woes.

“The good thing,” he remarked, “is that Nigeria’s President Tinubu has already bought into the ideas and given his nod because as a professional accountant; he also believes that by simplifying the tax system, enhancing fiscal governance, and supporting business growth, these measures are designed to create a more favourable environment for investment, ultimately benefiting all Nigerians.”

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