I said it yesterday: Nigeria needs to spend more efforts on Growth-innovation than Tax-innovation. It is unfortunate to have a dedicated website for stamp duty collection (paying for stamps for electronic transactions) when people continue to spend months to get Certificate of Occupancy on lands. Today, the IMF has joined the chorus, making it clear that Nigeria is making a mistake on the “aggressive” tax policy: “This is not the time to be aggressively introducing new tax measures”.
The International Monetary Fund (IMF) has urged the Nigerian government to exercise caution in its aggressive tax drive due to the impact of the COVID-19 on businesses and households in the country….
“It will be very important to have very nimble policy response to ensure that the hit to the economy is not compounded by policy challenges.
“This is not the time to be aggressively introducing new tax measures but there is a long-standing challenge on the fiscal side of needing to have sufficient resources generated by the government from non-oil sources to provide investments in health, education, and infrastructure. So, there is that long-term agenda that needs to be addressed. Right now, fiscal policy can be supportive and needs to be supportive.
Of course, the IMF does not need to tell us that; we ought to know that. It is offensive when we focus on tools to extract fees instead of making business processes easier. This is not to say that we do not need to improve our tax system. My point is that we need to innovate on business processes that would grow the economy. If Nigeria has put the energies and efforts we have put in automating tax processes on electricity, we will have 24/7 electricity by now. The most advanced process in the Nigerian private-public daily (formalized) business contact is tax: they now issue tax clearance via emails. But check every other thing: broken system!
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Since our government has refused to be responsible, we now need international agency to counsel and lecture the government on why it’s immoral to steal from the citizens. For no good reason, the government invented collecting money from anywhere it passes; there’s something wrong with such mindset.
Fatten the cows, breed new ones at scale, then come back with drums for milk collection. How difficult is it to understand that?
God bless Nigeria.
What the government has failed to understand is that tax comes from the principle of sowing and reaping.
If the land is not well-tilled and the plantation not well-nurtured, it means the harvest will be sub-optimal and once that happens, the tax will be nothing to write home about. It will end up mostly in loss and you can’t collect tax when there is no harvest.
In fiscal economic management, government should spend more and reduce times in times of economic doom. The Covid-19 impact on the economy is a doom for businesses as there is paralysis from supply chain to demand chain. The implication is that there is a general freeze on economic activities and the circular flow of income is seriously encumbered. There is therefore the need to inject more through financial interventions at business and family levels to balance the economic leakage caused by Covid-19 rather than collect more from the system.
According to Francis Oguaju, how is it difficult to understand that you have to wait till the time of economic boom to collect more taxes? It is a shame Nigeria would really wait for the IMF whip her into economic sanity!
We need to ask if the new economic advisory team is working at all.
Anyway, maybe their advice was dumped in this respect!