EconomyInvestingFG Must Exercise Restraint in Tax Increment Despite Low Tax-to-GDP Ratio – AFDB

ABUJA — President of the African Development Bank (AfDB), Akinwumi Adesina, has said, the fact that the country’s tax to gross domestic product (GDP) ratio is low does not justify the incessant tax increase.

He indicated that although the country’s tax to gross domestic product (GDP) ratio is at 6.1 percent, the FG must exercise restraint in tax increment.

The AfDB boss said this on Tuesday in Abuja while delivering a lecture at the 51st annual conference of the Institute of Chartered Accountants of Nigeria (ICAN) themed ‘Trust in Governance’.

Last year, the government had raised its value-added tax (VAT) rate from five percent to 7.5 percent in an effort to increase tax revenue.

He noted that it will be double jeopardy to overtax citizens who provide basic amenities the government has failed to offer.

“While tax rates are relatively low in Nigeria, it simply is not an excuse to keep increasing taxes.

“Take the case of Norway for example. Its tax-to-GDP ratio is 39 percent. Singapore’s tax-to-GDP ratio is 13.2 percent. And Nigeria’s tax-to-GDP is 6.1 percent. It is easy to make the comparison and say Nigeria needs to raise its taxes to similar levels as in Norway or Singapore.

“But also consider the following – In Norway, education is free through university. Singapore, a country that had only 1/3 of Nigeria’s per capita income at its independence in 1965, today has 100 percent access to electricity and 100 percent access to water.

“While progress is being made the challenge, however, is that in many parts of Nigeria, citizens do not have access to basic services that governments should be providing as part of the social contract.

“People sink their private boreholes to get water. They generate their own electricity oftentimes with diesel. They build roads to their neighbourhoods. They provide security services themselves.

“These are implicit taxes, borne by society due to either inefficient government or government failure. As such, we must distinguish between nominal taxes and implicit taxes — taxes that are borne by the people but are not seen nor recorded.

“It has become so common that we do not even bother to question it. But the fact is governments can simply transfer its responsibility to citizens without being held accountable for its social contract obligations,” he said.

Beloved John (Staff Writer)
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