The House of Representatives Committee on Finance revealed that just 9% of Nigerian companies pay taxes, with the country facing a significant infrastructure funding gap. Chairman James Faleke emphasized the need for tax reforms to enhance revenue collection and reduce reliance on borrowing. The proposed reforms will repeal outdated laws and aim to improve Nigeria’s low tax-to-GDP ratio.
The House of Representatives Committee on Finance has expressed alarm that only 9% of registered companies in Nigeria contribute to tax revenues, with an estimated 35 million Nigerians paying taxes. James Faleke, the committee chairman, voiced these concerns at a public hearing regarding proposed tax reform bills, emphasizing the necessity for reforms to better incorporate companies into the tax system and ultimately improve revenue generation.
Faleke highlighted that Nigeria needs to invest $3 trillion (₦1.8 quadrillion) over the next 30 years to address its infrastructure deficit, requiring an annual funding target of about $100 billion. The current income generation from taxes is insufficient, forcing the government to rely on borrowing. This situation underscores the urgent need for an overhaul of tax regulations to facilitate revenue collection and reduce borrowing dependence.
The proposed reform bills intend to modernize Nigeria’s outdated tax framework, which has remained largely unchanged for decades. Faleke noted that existing tax laws must adapt to contemporary economic conditions as they no longer align with the current business landscape. The reform will repeal 11 existing laws, such as the Companies Income Tax Act and the Value Added Tax Act, among others.
Nigeria’s low tax-to-GDP ratio highlights the importance of these reforms; it stands at approximately 9.4%, significantly lower than that of South Africa (21.6%) and Senegal (19.1%). The chairman stressed that the reforms present a unique opportunity to establish a more effective tax system. He urged stakeholders to participate actively in the public hearing, emphasizing their insights as vital for shaping future tax policies.
The House of Representatives Committee on Finance’s findings about Nigeria’s taxation system reveal an urgent need for reform, as only 9% of registered companies contribute to tax revenues. With a pressing infrastructure deficit requiring significant funding, the proposed bills aim to modernize tax laws to enhance revenue generation and reduce the government’s dependency on borrowing. Stakeholder engagement in these reforms is essential for creating a sustainable tax framework.
Original Source: businessday.ng
