Nigeria loses billions in local, foreign tax evasions – Oxfam

Naira notes
Naira notes

Nigeria’s tax system is fraught with crippling challenges of weak enforcement, corruption, and outright evasion. This is costing the country losses amounting to billions of naira, both locally and internationally, said Oxfam, an international development organisation.

Oxfam also said about 30 per cent of companies in Nigeria are involved in tax evasion. It said records from the country’s Federal Inland Revenue Service (FIRS), showed that 25 per cent of registered companies in Nigeria do not pay tax.

On the global level, Nigeria loses N580 billion through unnecessary tax incentives annually, a 2015 report by the United Nations Organisation said.

Regressive tax system

The 2017 Oxfam Inequality Index showed that the Nigerian tax system is largely regressive, with the burden of taxation falling on poorer companies and individuals.

Meanwhile, big multinationals receive questionable tax waivers and tax holidays, making use of loopholes in the tax laws to shift huge profits generated in the country to low tax jurisdictions, the report noted.

Oxfam’s Country Director, Constant Tchona, on Wednesday called on the National Assembly to enact a law that will punish enablers of tax evasion to face fines of up to 100 per cent of the sum evaded.

Mr Tchona made the call at the public presentation of the “Fair Tax Monitor Index Report and the Commitment to Reducing Inequality Index Report” in Abuja.

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“The National Assembly should enact a law that will criminalise the actions of banks, auditors, accountants, and lawyers that facilitates illicit financial flows,” the official said.

“When such professionals act contrary to existing regulations, they should be held accountable in Nigeria. This can be enforced through strengthened professional association bodies.

“There is also need for the Nigerian government to fast-forward action on the new National Tax Policy and clamp down on corporate crimes. New legislation and rules to cope with current realities should be enacted along with the introduction to cutting-edge technology.”

Mr Tchona recommended that the government should make tax laws gender-friendly and equitable to women “as they are the drivers of micro and small businesses in Nigeria.

He said Value Added Tax (VAT) could be made less regressive by applying different rates on luxury goods and service items, noting that this would reduce wealth inequality in Nigeria.

“VAT exemption for building materials will have a direct positive bearing on middle and poor class segments of the population and make rent cheaper, thereby reducing housing deficit.

“It is also important to increase the direct tax net rather than the increasing burden of indirect taxes like VAT. Establishing a more progressive tax system will make it possible for the government to deliver on essential public services like education, health, and social protection, among others.”

The Country Director, PLAN International, Hussiein Abdul, in his remark said inequality is the root cause of poverty because it allows a segment of the society to accumulate so much wealth at the expense of the majority.

“We can’t have a conversation about the development of the country without talking about inequality. We need to come to the reality that inequality is bad for development. Tax is not only about income for government but it is one of the best ways to address inequality.”

According to the Oxfam Commitment to Reducing Inequality (CRI) Index, governments in West Africa are the least committed to reducing inequality on the continent.

Cacophony of Tax evasion in Africa

PREMIUM TIMES in 2014 reported how the bulk of Africa’s losses to illicit financial flows annually were through various schemes by multinational companies to evade and avoid the payment of corporate tax in their areas of operations.

The 2015 Oxfam index said Nigeria, Ghana and Senegal had a combined loss of over $5.8 billion every year. The report further showed that tax incentives were not the priority for investors but infrastructure, education and the quality of the workforce.

About $138 billion is given away annually by governments in developing countries in corporate income tax exemptions, findings by the African Union high-level panel on illicit financial flows showed.

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