The innovators are back – and Nigeria has the finest in the world when it comes to finding how to collect money from its citizens and companies: stamp duty on electronic transfer, multiple levies, etc. Yes, when it comes to taxes, fines, levies, etc, Nigeria is innovating just fine. What we have struggled with is how to boost the economy with growth policies.
Now, the latest conversation is to tax Nigerians in diasporas. I must confess that it is not a bad idea provided the money would not be managed by politicians. I prefer we channel the tax money to venture funds, private equity funds or investing ecosystems to build a new economic architecture of Nigeria. Of course, if you do it that way, it is no more a tax since politicians will not be deciding how the funds are used!
Nonetheless, if they have a tax treaty where other governments would recognize the Nigerian diaspora tax, to avoid double taxation, it is a slam dunk. Simply, instead of sending $1,000 to the American government as tax, you can send $100 to Nigeria and keep $900 in the US. The payer cannot and should not pay more than $1,000 to avoid double taxation. If you do not make it that way, it would be challenging to expect the diasporas to respond.
Yet, I expect Nigeria to have a remittance tax since taxing diasporas via the typical tax legal ordinance has no chance. Government can simply have a regulation: if you send $1,000 from the US to Nigeria, the Central Bank of Nigeria will keep 3% of that money as a remittance tax.
Yes, once we are done with pension funds, then dividends & dormant account balances, and finish selling some campuses (other assets like power, etc are already gone), there would be nothing left. The only remaining option then would be remittance taxation. So, Nigeria will tax remittance but via a different protocol within this decade unless something changes in our economic system.
Simply, we cannot use 60% of our revenue to service debts and expect to have a future as a nation.
In 2014, the ratio was about 28%; then it rose close to 80% during the recession and now we are at 60%. When 2020 data comes out, it may be close to 90% considering that revenue was severely affected during the lockdown.
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