Following the rebasing of the country’s Gross Domestic Product which had increased the rating of the Nigerian economy to the largest in Africa and 26th globally, the Federal Government has directed the Federal Inland Revenue Service to increase the country’s tax revenue to GDP ratio to 20 per cent (about N16tn).
The Minister of Finance, Dr Ngozi Okonjo-Iweala, gave the charge on Monday in Abuja during the inauguration of the FIRS multi-disciplinary training centre in Abuja.
The tax-to-GDP ratio is an economic measurement that compares the amount of taxes collected by a government to the amount of income that the country receives for its products.
By comparing the GDP to the amount that is collected in tax revenue, it helps to provide how much the economy of a specific government is fueled by its tax collection.
As a result of the rebasing exercise, the Nigeria’s nominal GDP according to the National Bureau of Statistics for 2011, 2012 and 2013, now stands at N63.25tn, N71.18tn and N80.22tn respectively.
The Minister said before the rebasing exercise, the country had a tax to GDP ratio of about 22 per cent, while the non oil tax revenue to GDP ratio was estimated at seven per cent.
This, according to her, was in the range of emerging market economy.
She, however, said that with the rebasing of the country’s GDP, the figure, the tax revenue to GDP ratio had declined to about 12 per cent and four per cent for non oil tax to revenue.
The minister admitted that Nigeria is still confronted with many constrains when attempting to increase tax revenues, noting that a consultant had been engaged to look at how to tackle the problems.
She said, “Nigeria is confronted with many constrains when attempting to increase tax revenues.
“We have just celebrated the fact that Nigeria has now become the largest economy in Africa with N80tn of GDP ($509.9bn), which makes us the 26th largest economy in the world and advances us on our goal to become one of the 20 largest economies in the world.
“But I want to tell you that there is one piece of the news that is not so cheering. With the increase in GDP, all our revenue ratios have been recalculated.
“As you know, our revenue ratio to GDP before was 20 per cent, just about in the middle of the emerging market economy, not as good as the 22 per cent that we want to be.
“But now with this recalculation, our revenue to GDP ratio is 12 per cent and our non-oil revenue ratio to GDP is four per cent, which means that we live worse than before.
“Those who want to think that we just need large GDP to live well, is not true because, by this ratio, it doesn’t look so good.
“For tax revenue to GDP, we now have to redouble our effort to get back to the 20 per cent ratio at least that we were before.
“I want all of us to rise up to the challenge with the continuous improvement on the capacity of tax official through training in the modern method of auditing of companies.”
Also speaking at the event, the Acting Chairman of the FIRS, Alh Kabir Mashi, said the training institute which was built at a cost of N800m would be made a full-fledged department to be headed by a director.
He said since capacity building is an integral part of the tax reforms programmes of government, the training centre would be made available for tax payer education.
This, according to him, has been one of the main platform upon which FIRS was implementing its reforms agenda.
He said the service had made significant progress in this regard noting that the multi-disciplinary centre is another signpost of the progress being made.
He, however, admitted that more work needed to be done as the service had not yet achieved its objective in the area of institutionalizing tax culture among Nigerians.
