The federal government lost about 5.16 billion naira due to tax breaks on value added tax, corporate income tax and oil profit tax in 2020.
This figure was obtained after analyzing data from the report on the medium-term expenditure framework and the 2022-2024 fiscal policy strategy.
The report states that Nigeria lost 4.3 billion naira due to VAT relief, mainly comprising relief granted by the legislature and the burden of compliance.
The report said that if all products in the Nigerian VAT system were fully taxable, the country would generate around 6 billion naira from the existing tax structure.
The Nigerian Bureau of Statistics recently said that VAT only brought in about 1.8 billion naira in 2020, resulting in a tax gap of about 4.3 billion naira.
According to the MTEF / FSP report, out of the 4.3 billion naira tax gap, around 900 billion naira is attributable to the exemptions provided for in the legislation, while the remaining 3.4 billion naira is attributable to the gap. of compliance.
He said: “In most countries, compliance gaps are caused by several factors, including underground economic activity in the informal sector, aggressive tax planning and tax administration issues.
“However, in Nigeria, some businesses, especially in the financial sector, are exempt from VAT. As this relief is not provided for in the VAT law, it is not counted as a tax expenditure in current estimates. ”
The report states that as a result, the current estimated loss due to the policy gap could be too low and the compliance gap too high.
He said the country lost 457 billion naira due to CIT exemptions from large and middle tax offices, compared to 1.1 billion naira in 2019, which is a decrease of 634 billion. of nairas.
A breakdown of CIT exemptions of 457 billion naira shows that “manufacturing accounted for 65% of tax expenditure (297 billion naira), LTO finance contributed 15.8 percent of TE (72 billion naira) while that 440 million naira was from the exemption of profits under Article 23 of the CIT Act “.
According to the report, Nigeria compares poorly with its regional peers and the Organization for Economic Co-operation and Development benchmark when it comes to the efficiency of income tax collection.
Regarding the petroleum profit tax, the report indicates that the sum of 307 billion naira was lost due to the waivers granted by the federal government during the period under review.
He pointed out that the losses due to TPP waivers could have been higher, as only a partial calculation was done due to the limited availability of data.
The chairman of the Federal Inland Revenue Service, Muhammad Nami, recently put the number of taxpayers in the country at 41 million.
He lamented that despite having 41 million taxpayers in the country, compared to South Africa’s four million taxpayers, Nigeria earned far less than what South Africa generated from l personal income tax.
The FIRS boss said: “Our total taxpayer today is around 41 million people and the total personal income tax paid last year was less than N1tn by 40 million people. people.
“If you also compare that with South Africa where they have a total population of around 60 million people, with just four million taxpayers, the total personal income taxes paid in South Africa in the year last is about N13tn. You can now see that these things do not add up.
“The number of billionaires in Lagos alone is greater than the number of billionaires in South Africa as a whole, but what we have generated as personal income tax by the state government of Lagos is just under 400 billion naira. ”
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