‘States’ revenue crisis will persist over recession’
Revenue-induced economic setbacks among Nigeria’s federating states may be far from over, as federal allocations remain low, while businesses face the challenge of recession, leading to failing tax earnings for government.
The situation would sustain and aggravate development challenges in majority of the states, where physical infrastructure and provision of social services are near non-existent, as well as non-payment of salaries.
The Partner, Tax and Regulatory Services at Deloitte Nigeria, Lagos, Abayomi Olugbenro, warned that the troubling operating environment would reflect in the revenue of state governments and the Value Added Tax (VAT).
Speaking on recessionary impact on states’ budgets and taxation, at the 2017 Tax Week, organised by the Lagos District Society of the Chartered Institute of Taxation of Nigeria (LDS-CITN), he expressed concern that their inability to meet recurrent obligations may continue, especially with their internal revenue generation nearly non-existent.
Going forward, he called for a restructuring of the federation, to ensure states collect revenues available within their domain and make contributions to running the centre, a reverse of the current trend, while Nigeria must begin to see itself as a non-oil producing nation and become more prudent.
Olugbenro frowned at the situation in the 2017 budget where oil is still expected to contribute 40 per cent of projected revenue, at a time when U.S. which produces more crude than so many countries does not see itself as an oil producing nation.
Rather than increasing the rates, which would be “suicidal”, he added: “If we don’t expand the tax net, it may impede national recovery.” He called for a reduction in tax rate to boost disposable income in the hands of Nigerians, thereby boosting spending, and in the process growing VAT revenue, which impact would more than compensate for the reduced tax rate.
The expert also suggested that government could focus on “very important personalities” and non-government organisations (NGOs), particularly their associated individuals and vendors, as they are not tax exempt, but are oftentimes overlooked.
Also, Mrs. Titilayo Fowokan, urged government to look into the area of luxury goods/lifestyle tax, urging that the proposed tax amnesty should be in good faith and should not be used as bait, just as there should be a lot of enlightenment around it.
She also called for plugging of existing leakages in the tax system, just as government should mine available data to identify previously overlooked but possible sources of tax.