By Jonah Nwokpoku

Nigeria is lagging behind in tax administration among emerging markets, according to a survey carried out by a finance and account services firm, KPMG.

In the survey, Nigeria recorded a tax burden to GDP ratio of 4.7 percent, one of the lowest in the Sub-Saharan Africa. Nigeria’s tax burden is lower than that of Rwanda, Ghana, South Africa and Botswana which recorded 13.1 percent, 14.6 percent, 27.3 percent and 28.1 percent respectively.

Giving insight on taxation in Nigeria in the survey report, KPMG explained that despite recent successes of the Federal Inland Revenue Service and some State Inland Revenue Services, Nigeria still lags behind other emerging markets in an evaluation of tax revenue as a percentage of gross domestic products, GDP.

“One of the key reasons for this is the fact that a large proportion of economic activity that is generated by small and medium scale enterprises exist in the informal sector and outside tax net. Although these enterprises have experienced growth over the past decade, government has not captured their earnings in tax revenue due to a variety of compliance and enforcement issues,’ the report noted.

Respondents in the survey therefore called for timely conclusion of tax audits and issuance of tax clearance certificates, timely review of self assessments, elimination of multiple taxation, and issuance of guidelines to clarify ambiguous issues, elimination of tax audits and implementation of electronic payment platforms for all taxes in order to improve the tax administration.

They added that while recognising the need to grow tax revenues, there is clearly a need to expand the tax base so as not to over burden the formal sector.

The respondents also alluded to the prevalence of an adversarial atmosphere which forces the hand of tax payer based on the fear of causing disruptions to their businesses. 60 percent of the respondents say that the administration system is inefficient and over 40 percent say it encourages them to pay their taxes.

The report therefore noted that the trend implies that tax systems are reliant on enforcement mechanisms which leave businesses with only the option of complying with the government’s assessment.

At the launch of the survey in Lagos, KPMG Nigeria’s Partner and Head of Audit Division, Tola Adeyemi said the survey sought to feel the pulse of the Nigerian Chief Financial Officers (CFO) on the outlook for their businesses, how far they believe the evolution of the finance function has come vis-à-vis internal audit and risk management and their opinion on the definition of the ideal finance functions and how it can be attained.

“Our findings reveal that CFOs are cautiously optimistic that their businesses will continue to thrive in the year ahead. This is a strong outlook that is driven by expectations of growth and cost containment. However, they have also identified the need for the government, regulators and other stakeholders to address their dominant concerns of power, regulation and tax administration in order to improve the external environment in which their businesses operate,” he said.

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