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Buhari explains Nigeria’s mounting debt profile

…orders automation of tax processes

President Muhammadu Buhari has explained that the nation’s debt profile rose to N32 trillion as at September last year because his administration resorted to deficit budgeting as a result of declining revenue accruable to government for many years.

The president has consequently ordered the automation of the nation’s tax processes just as he directed the Federal Inland Revenue Services (FIRS) and related government agencies to plug all revenue leakages by ensuring strict compliance with tax payments by foreign companies operating in Nigeria, urging deployment of more digital platforms and seamless connections.

The president gave the orders at the first virtual National Tax Dialogue held at the Conference Hall of the State House, Abuja, yesterday. He instructed all government agencies to automate operations and ensure more synergy in advancing the interest of the nation in revenue generation. According to him, government had “inevitably resorted to deficit budgeting as a result of declining revenues for some years,” resulting to increase in Nigeria’s debt profile.

“As we might expect, this has led to increase in Nigeria’s debt profile, which stood at about N32 trillion in September 2020. This funding gap created by the dwindling government revenue therefore underscores the importance of the national tax dialogue we are holding today. “The devastating effect of COVID-19 on the health and economy of the world is evident across every strata of our society.

It is obvious to every citizen of this country that our economy is not immune from the global economic downturn. As such, we have had to confront the conflicting situations of reflating the economy and, at the same time, raising revenue to meet our budgetary needs. It is within this context that government undertook an expansive budgetary projection of over N13 trillion for 2021,” the president said.

Buhari insisted that despite the downturn in revenues accruable to his administration, government would continue to pursue its mandate of improving lives through investments in infrastructural projects like railways, roads, electricity, healthcare and education, despite dwindling revenues and the challenge of coronavirus.

“Our government has continued to pursue all those projects despite massive decline in government revenues occasioned by a combination of factors among which is the COVID- 19 pandemic,” he said.

On the need to ensure strict compliance to payment of taxes by local and foreign companies and automation of the processes, Buhari said: “It is not enough that our citizens and local businesses pay their fair share of taxes. Equally, foreign businesses must also not be allowed to continue to exploit our markets and economy without paying appropriate taxes.

Accordingly, the FIRS has my mandate to speedily put all measures in place to fully implement programmes to stamp out Base Erosion and Profit Shifting in all their ramifications and generally automate its tax processes. “In line with this, I have directed all government agencies and business enterprises to grant FIRS access to their systems for seamless connection. FIRS must ensure that its deployment of technology for automation is done in line with international best practices.

In particular, FIRS can borrow a leaf from other countries, which have successfully automated their tax processes,” he added. Stressing the need for all to live up to their tax obligations, Buhari noted that “no nation has ever made progress without having to pay for it or make the necessary sacrifice. I, therefore, call on all Nigerians to be alive to their tax obligations.

This government is strategically restructuring the tax revenue mix in favour of indirect taxes in accordance with our national tax policy document. “To this end, FIRS is mandated to do all that is required in order to efficiently collect tax revenue due from transactions carried out using local and foreign online platforms. Government has made relevant statutory amendment to tax laws in the Finance Act 2020.” He allayed the fears of possible increase in taxes, saying that government’s intention was to plug the existing tax loopholes or leakages and to ensure even and equitable application of the tax laws.

President of the African Development Bank (AfDB), Dr. Akinwunmi Adesina, in his comments, projected a rebound of the Nigerian economy from recession, with a 1.5 per cent growth rate in 2021 and two per cent growth in 2022. Adesina said taxes should be employed as instruments for promoting development by encouraging private sector companies to take up responsibilities in infrastructure and attracting Foreign Direct Investments, admonishing that prolonged tax holidays could be counterproductive. Minister of Finance, Zainab Ahmed, assured that government will improve its template for tax collection, especially in the face of dwindling revenues due to the coronavirus crisis, describing 2021 as a year of recovery for the economy. Zainab disclosed that emphasis on tax collection will now be shifted from income to spending and all multinational corporations in the country will be required to fully comply with new directives. FIRS Chairman, Muhammad Mamman Nami, called for a new and comprehensive tax payment culture.

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