Nigeria Grapples with Multiple Taxation Hindering Economic Development – Stakeholders
Nigeria, often hailed as Africa’s most populous nation and its largest economy, is facing a significant obstacle on its path to economic development – multiple taxation. Despite its potential for robust economic growth, the burden of excessive and duplicative taxes, termed ‘nuisance taxes’ by the World Bank, continues to hamper the country’s progress.
To address this issue, a workshop titled “Revisiting Taxation for Economic Growth” was recently held to shed light on the challenges posed by multiple taxation and to chart a path towards more equitable tax policies.
The workshop, attended by government officials, tax experts, and business leaders, aimed to address a critical question: How can a fiscal tool like taxation, designed to promote economic development, become a hindrance to it?
The event sought to debunk misconceptions about taxation, emphasizing its role as a backbone for public finance, providing funding for social programs and public investments.Taxation, when wielded effectively by the government, becomes an instrument for equitable and sustainable growth.
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However, the issue at hand was the proliferation of multiple taxation, which has been counterproductive to economic development. Multiple taxation occurs when the same or similar taxes are imposed on the same income, transaction, or entity by different levels of government.
The National Tax Policy of 2017 recognized the need to eliminate multiple taxation at all levels of government.
In line with this, President Bola Ahmed Tinubu recently signed several Executive Orders to curb arbitrary taxes, demonstrating the government’s commitment to addressing this issue.
The formation of the Committee on Fiscal Policy and Tax Reforms was another step towards harmonizing taxes and creating a conducive environment for both local and foreign investments.
The adverse effects of multiple taxation are multifaceted. Not only does it fail to increase government revenue, but it also cripples otherwise profitable businesses, reduces the ease of doing business, incentivizes tax evasion, and complicates tax compliance.
The World Bank has noted that excessive taxation leads to diminishing tax revenues, as businesses struggle or evade taxes.
Apart from these challenges, the administrative burden of complying with multiple taxes further erodes Nigeria’s attractiveness for business and competitive practices.
This situation weakens the country’s economic foundations, devalues its currency (the Naira), and contracts its gross domestic product (GDP).
The workshop provided a platform to reevaluate the principles of taxation, including neutrality, efficiency, certainty, simplicity, effectiveness, fairness, and flexibility. The federal government’s policy direction is for all tiers of government to align closely with these principles.
