In a surprising twist, Nigeria’s tax-to-Gross Domestic Product (GDP) ratio has skyrocketed to an impressive 10.86%, marking a significant turning point for the nation’s tax system. This remarkable feat was recently revealed through a collaborative analysis conducted by the Nigerian Bureau of Statistics (NBS), the Federal Ministry of Finance, and the Federal Inland Revenue Service (FIRS), utilizing data from 2010 to 2021.
Unleashing the Power of Taxation
The revised ratio takes into account previously overlooked revenue elements, particularly significant collections by other governmental agencies. This inclusive approach provides a more accurate representation of Nigeria’s tax revenue in relation to its thriving economy.
A Benchmark for Success
A country’s tax-to-GDP ratio serves as a crucial metric to assess the strength of its tax system and measure its potential within the broader economic landscape. It offers an essential benchmark to evaluate the effectiveness of a nation’s tax structure in comparison to other countries.
Cracking the Code of Nigeria’s Tax Reality
Chairman of the FIRS, Mr. Muhammad Nami, shed light on the previous miscalculations of Nigeria’s Tax-to-GDP ratio, which ranged from 5% to 6%. These estimations failed to account for tax revenue collected by various government bodies. Due to Nigeria’s unique tax system, where multiple agencies independently collect taxes, a fragmented approach was necessary to accurately compute the Tax-to-GDP ratio.
Revolutionizing the Calculation
To rectify this oversight and present an accurate picture of the nation’s tax landscape, the FIRS spearheaded a meticulous review and recalibration of the ratio for the period spanning 2010 to 2021. This comprehensive reassessment incorporated vital indicators that were previously neglected, resulting in a remarkable revision that showcases a new Tax-to-GDP ratio of 10.86% for 2021, debunking the previously reported 6%.
Unleashing the Full Potential
Mr. Nami emphasized that Nigeria’s Tax-to-GDP ratio has the potential to surpass the current figures if certain economic and fiscal factors are addressed. These include reevaluating tax waivers, tackling leakage issues caused by the fragmented tax system, boosting tax morale, and considering the impact of GDP rebasing in 2014.
A Bright Future Ahead
Prince Adeyemi Adeniran, the statistician-general of the federation, praised the revised ratio as a substantial improvement for Nigeria in comparison to other nations. He highlighted the meticulous scrutiny and incorporation of additional elements in the new computation, ensuring a more accurate reflection of the country’s tax landscape. Consequently, the NBS officially adopted the new tax-to-GDP computation following thorough review and consultations with the FIRS.
Unleashing the power of taxation, Nigeria embarks on a transformative journey, unlocking new opportunities for growth, development, and a financially stable future.
