AfDB cautions Fed Govt against tax increase

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By Favour Nnabugwu


African Development Bank (AfDB) President Dr.  Akinwunmi Adesina has cautioned the Federal Government to pull the brake on tax increment.

He said the fact that Nigeria taxes are relatively lower cannot be justification for incessant tax raise.

According to him, it will be double jeopardy to over tax citizens who provide basic amenities the government has failed to offer.

The AfDB boss gave the advice yesterday in Abuja while delivering a lecture at the annual conference of the Institute of Chartered Accountants of Nigeria (ICAN).

He listed such facilities as portable water, electricity, security and neighbourhood roads among others.

Dr. Adesina said: “Low tax to Gross Domestic Product (GDP) rate in the country is not an excuse for the Federal Government to keep increasing taxes.

“While other countries with high tax rates have functional free education and free health care system among others, such cannot be said for Nigeria.”

“In Nigeria, the inefficient system has imposed an implicit tax on the Nigerians as the people are made to provide basic essential facilities that should have been made available by government.

“While tax rates are relatively low in Nigeria, it simply is not an excuse to keep increasing taxes.

“Take the case of Norway for example. Its tax-to-GDP ratio is 39 per cent. Singapore’s tax-to-GDP ratio is 13.2 per cent. And Nigeria’s tax-to-GDP is 6.1 per cent. It is easy to make the comparison and say Nigeria needs to raise its taxes to similar levels as in Norway or Singapore.

“But, also consider the following: In Norway, education is free through university. In Singapore, a country that had only 1/3 of Nigeria’s per capita income at its independence in 1965; today has 100 per cent access to electricity and 100 per cent access to water.

“While progress is being made the challenge, however, is that in many parts of Nigeria, citizens do not have access to basic services that governments should be providing as part of the social contract.

“People sink their own private boreholes to get water. They generate their own electricity often times with diesel. They build roads to their neighbourhoods. They provide security services themselves.

“These are implicit taxes, borne by society due to either inefficient government or government failure. As such, we must distinguish between nominal taxes and implicit taxes — taxes that are borne by the people but neither seen nor recorded.

“It has become so common that we do not even bother to question it. But the fact is governments can simply transfer its responsibility to citizens without being held accountable for its social contract obligations.”

In an attempt to boost tax revenue in February last year, the federal government raised VAT from five per cent to 7.5 per cent.

The International Monetary Fund (IMF) has been persistent in encouraging Nigeria to increase its value-added tax (VAT) rate to at least 10 per cent by 2022 and 15 per cent by 2025 to boost revenues after its recovery from a recession.

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