In recognition of the importance of a sound fiscal policy environment and an effective taxation system for the functioning of the government and growth of the economy, the FGN had established the Presidential Committee on Fiscal Policy and Tax Reforms in Q3 2023, with the responsibility for streamlining the chaotic tax system through harmonization of taxes, removing barriers impeding the ease of doing business, and restructuring revenue administration and fiscal policy design and coordination.
Nigeria ranks very low on the global ease of paying taxes while the country’s Tax-to-GDP ratio is one of the lowest in the world and well below the African average, according to the World Bank Group. In its Doing Business series, the World Bank states that governments need tax revenues “to foster economic growth, fund social programmes and fund investments in infrastructure, education, health, and security”. It also highlights taxation as “a key ingredient in the social contract between citizens and the economy”.
Nigeria’s anarchic tax regime has contributed to high rates of tax evasion among taxpayers and has also led to several disputes many of which have resulted in litigation. Multiple taxation and harassment of businesses by government officials stifle investment and discourage voluntary compliance. Many corporates, and small and nano businesses, have been negatively impacted by numerous uncoordinated taxes by agencies of federal, state, and local governments. According to Nigeria’s National Bureau of Statistics, SMEs contribute over 48 per cent of GDP and account for 96 per cent of businesses. The tax system should therefore not stifle but incentivize them by seamlessly bringing many of such businesses into the tax net.
While Nigeria’s National Tax Policy 2017 seeks to correct the low tax-to-GDP ratio, erase multiple taxation, and ensure investment-enhancing rates, inefficiency, abuse, and chaos pervade the system. The country now looks to removing the misalignment between its extant tax policy and the stifling tax administration.
In Q4 2023, the Presidential Committee on Fiscal Policy and Tax Reforms, in its ‘Quick Win Report’, made far reaching recommendations to the Nigerian President which included stoppage of about 190 multiple taxes; issuance of Presidential Executive Orders to halt duplication of functions by diverse public agencies; and tax incentives for start-ups and small enterprises that are currently closing up shop due to high cost of doing business.
As Nigerian businesses and interested foreign entities navigate the tax system, seeking to understand the thrusts of the policy reform and changing regulations, and taking advantage of the incentives offered, Banwo & Ighodalo appears poised to take them through the evolving tax landscape well guided. As the first Nigerian law firm ever to win the “Nigeria Tax Firm of the Year” award on the ITR EMEA Tax Awards platform, the firm, no doubt, has won the confidence of many entities around the globe looking to invest in Nigeria and requiring good legal and professional guidance around the tax regime.
Nigeria’s full-service law firm, Banwo & Ighodalo, is looking to guide its numerous clients through the tax reforms recently embarked upon by the Federal Government of Nigeria (FGN). The firm, which won the “Nigeria Tax Firm of the Year 2023” at the International Tax Review (ITR) Europe, Middle East, and Africa (EMEA) Tax Awards 2023, offers a bouquet of services including legal advisory on transactional tax and dispute to Nigerian entities, as well as foreign entities with operations in Nigeria.
