Financial experts have thrown their weight behind the Federal Government’s proposal to tax wealthy Nigerians. They described it as a progressive measure that can promote income redistribution and boost the country’s fiscal revenues. In separate interviews, the experts lauded the government’s initiative, saying it was a step in the right direction towards ensuring a more equitable tax system. Dr. Muda Yusuf, Chief Executive Officer of the Center for the Promotion of Private Enterprise (CPPE), said the proposal was a welcome development.
According to him, the approach is a form of progressive collection because high net-worth individuals are expected to pay more taxes. He said it is a means of income redistribution and a common practice in most civilized countries where there is economic development. He also condemned a situation where wealthy citizens do not remit the right percentages of taxes to the government authorities. “Their tax remittance is not commensurate with their net worth and affluent lifestyle. They often short-change the government,” Yusuf said.
Rich Nigerians deny government revenue to provide utilities, says Dike.
In the same vein, the former President of the Chartered Institute of Taxation of Nigeria (CITAN), Dr. Mc-Antony Dike, described the government proposal to wealthier citizens as constitutional. He said that Nigerian tax laws dictate that every Nigerian who earns an income whether legitimately or otherwise must pay their correct amount. In his words, “Indeed, the Personal Income Tax Act 2011, as amended, removed the exemptions it granted to the president of the Federal Republic of Nigeria.” He added anybody who earns an income must pay the appropriate amount.
He noted that rich Nigerians who do not pay taxes were denying the government the revenue to provide public utilities for the citizens. He revealed that matter-of-factly, a country like South Africa has demonstrated a greater tax compliance culture than citizens have in Nigeria. “Indeed, before the advent of Value Added Tax in South Africa in the late 1990s, personal income tax contributed close to 60 percent of total tax collection in that country,” Dike said.
FG plans to achieve an 18% tax-GDP ratio through the policy.
Also, the President Standard Shareholders Association of Nigeria, Mr. Godwin Anono, said that the Federal Government’s proposal to charge more to wealthy Nigerians was a novel initiative. He said that the planned policy is a sort of reduction of economic inequality in Nigerian society. This kind of society would be where the elite are expected to take care of the economically vulnerable citizens through its taxes. He advised that the Federal Government should employ technology to bring more eligible taxpayers into the tax net.
Meanwhile, the Federal Government has stated its plan to begin taxing wealthy Nigerians to achieve its 18-percent Tax-GDP ratio revenue target. This was disclosed by Mr. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax reforms. Mr. Taiwo noted that the move was part of President Bola Tinubu’s reforms as the Federal Government aims to achieve an 18-percent tax-to-GDP ratio within three years. According to him, the plan is to enable the rich to pay more in favour of the less privileged. The chairman envisages a reduction in the corporate income tax rate below the current rate of more than 40 percent to help boost business.
To what extent will this policy affect the middle-class people?
While this policy may be seen as a welcome idea, the main focus for Nigerians should be the criteria for determining who a wealthy Nigerian is. Someone who has at least a billion naira or who has just over N100,000 in his or her account. Will the tax be on property and other assets or liquid cash? How does the Federal Government plan to implement this policy if taxing the credit in someone’s account is not in question, especially since Nigeria is not known for having enough or even accurate data? If there is selective implementation, the middle class may also find themselves being affected.