The Revolution of Tax Administrative System in Nigeria

Recently, The Federal Government of Nigeria introduced new tax system to check evasion. In view of this, hard times await treasury looters and tax evaders as the Federal Government on Monday in Abuja said it was planning to evolve a new tax system to curtail fraud in the country.

The system, which was designed to expose public officers who steal public funds, will compel every Nigerian in the working group to pay taxes without the possibility of evasion. It was also linked to every bank in the country through a comprehensive computerisation process in which every bank account will be monitored in tax offices across the country.

As a result of this, all Nigerian citizens of working age will now compulsorily pay tax, following the launch of the new national tax policy and the new Tax Identification Number (TIN) by President Goodluck Jonathan.

TIN is an electronic database system for the registration and storage of data of tax payers in Nigeria.

The new policy is aimed at creating an economy that is self sufficient and not wholly dependent on resource wealth to bring development to the people.

According to The President, "TIN is a revolutionary poll of tax administration and holds immense potential not just for expanding the nationwide tax base with consequent increase in revenue collection accruable to all tiers of government but it is also a big step in the modernisation of the Nigerian tax system in line with global best practices and expectations.

"The idea of national tax policy first arose from the report of the presidential study and a private sector working group set up in the year 2002, which examined the Nigerian tax system and made recommendations towards entrenching a better tax policy and improved tax administration in our dear country," he said.

The policy, he added, will lay the foundation for the complete transformation of the Nigerian tax system, sets parameters for taxation and other auxiliary matters and provides clear principles governing tax administration and revenue collection.

He said the unique nationwide tax identification number is a collaborative project between federal and state governments and is a key deliverable under the national tax policy.

The president also commended state Governors and the joint tax board for their collaboration in ensuring the successful implementation of the tax payer identification number.

The Outgoing Chairman of the Federal Inland Revenue Service, Mrs Ifueko Omoigui-Okauru, recently shed light on the new tax regime in Nigeria, product of the Personal Income Tax (Amendment) Act, which came into effect on June 14, last year, compelling the president and his deputy, as well as governors and their deputies to pay tax on their earnings.

According to the FIRS boss, the law was conceived to bridge the gaps identified in the old Act, especially with respect to its impact on the take home earnings of low and middle income earners, which is the band within which most of us fall.

The tax, agency, by this singular action, is lending weight to opinion shared by several tax experts that “productivity declines as the tax rate increases, as people choose to work less.

The higher the tax rate, the more time people spend evading taxes and the less time they spend on more productive activities. So, the lower the tax rate, the higher the value of all the goods and services produced.”

As if the FIRS management had seen in advance the many burdens Nigerians would bear this year like higher petrol cost resulting from the partial removal of petrol subsidy and the attendant higher cost of goods and services, hence the repeal of the Personal Income Tax Act which was last reviewed in 1993.

With the new Act, Dr Ifueko Omoigui-Okauru said the government had demonstrated it had listening ears and had reduced the overall burden on low and middle income earners, while recouping the reduction from high net worth individuals, who could bear higher burden given their level of earnings.

Not a few commentators have described the action of the FIRS boss as courageous, given the calibre of persons the new law is targeting.

With this, the new law will put more money in the hands of those in the middle class and the poor which is similar to the Tax Policy System of President Barack Obama of United State of America. Observers of trends in Nigeria have often wondered why in the past, Nigeria could not attempt to bridge the gap between the super rich, by making them pay higher taxes as it is done in other developed and emerging economies.