The federal government will soon introduce a law to cut the amount revenue-generating agencies take as cost of collection to one percent.
The move is part of efforts being put in place to significantly grow income to the government for project financing.
The Nigeria Customs Service (NCS) currently deducts about four per cent as cost of revenue collection, while the Federal Inland Revenue Service (FIRS) receives seven per cent on non-oil tax receipts.
Speaking at a public consultation workshop in Abuja, Chairman, Presidential Committee on Tax Policy and Fiscal Reforms, Mr. Taiwo Oyedele, said these costs were too high compared to countries like South Africa, which generated much higher taxes at lower costs of collection.
The benchmark for the cost of collecting revenue globally is one per cent. In South Africa and some other African countries, the cost of collecting revenue by any government agency is less than one per cent.
He said the proposed legislation is part of the about 450 policy recommendations by the Presidential Committee on Fiscal Policy and Tax Reforms to the executive and legislature for amendment of the nation’s old-fashioned tax laws that have catastrophic damage on effective mobilisation.
“What are they collecting? So, we are saying the one per cent will cut across everybody. If you cannot collect revenue with one per cent you should not be collecting it; it means you are not prepared for it,” chairman of the tax committee Taiwo Oyedele said.
He said the agencies that were collecting revenue for the government (outside their mandate) should be made to focus on their core mandate alone.
“They were not set up to collect taxes. They have no competence. They are not efficient at collecting it. We are all better off if everybody plays to their strength. There is a reason why every country has a revenue agency. Not to replicate that function and then hope that (magically) everything will be fine. It will not be fine.”
Oyedele also disclosed that the Tinubu administration has dropped the idea of accompanying the annual budget with a Finance Act.
The budget support mechanism was introduced by the immediate past administration to stimulate inclusive, diversified and sustained economic growth while ensuring macroeconomic stability.
“We are not expecting the Finance Act. We think that the Finance Act was well intended but was abused along the line. We were passing laws that would last minutes. We think once we rewrite the laws, and create a proper framework thing like the Finance Act will be once in five years conversation, not annual,” Oyedele stated.
The committee is also recommending that manufacturers, farmers, and nano and small-scale enterprises be exempted from withholding tax payments. The government prides itself that it does not tax the seed or capital but the fruit or profit from businesses.