Does the Tax Policy Say that the Nigerian Government Wants to Stop Imposing Taxes on People?

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The Claim

Mr Ike Odume, a Director in the Federal Inland Revenue Service (FIRS), while speaking at the public presentation of a book titled “Electronic Tax and Revenue Law Companion’’, reportedly said that the government wants to stop imposing taxes on people.

He was quoted by news sources as having said that “At the National level, the tax policy says we don’t want direct taxes anymore, our revenue should come from indirect taxes like consumption and services taxes (VAT). We want to stop imposing taxes on people, they should pay taxes based on what they consume”.

We have not seen any official statement from FIRS in response to these news reports, we therefore decided to fact-check the statements credited to the FIRS Director.

 

The Facts

The National Tax Policy provides guidelines and strategies for simplifying and regulating Nigeria’s tax system, and for improving ease of compliance in order to optimize tax revenue generation by the three tiers of government.

The National Tax Policy (NTP) was published by the Federal Ministry of Finance in 2012, while an updated National Tax Policy was released in 2017 to address the country’s changing business environment.

 

Chapter two of the 2017 NTP provides specific policy guidelines for Nigeria’s tax system. Specifically, sections 2.2.3 and 2.2.4 on page 4 address the claims by Mr. Ike Odume on indirect taxes and Personal Income Tax respectively. The sections are reproduced below:

 

Section 2.2.3: Focus on Indirect Taxation

“The tax system should focus more on indirect taxes which are easier to collect and administer and more difficult to evade. Tax rates should be progressive and should be designed to promote equality. The tax system should gradually seek a convergence of personal income tax and capital gain tax rates with corporate income tax rates to reduce opportunities for tax avoidance.”

 

Section 2.2.4: Convergence of Tax Rates

“Tax rates should be progressive and should be designed to promote equality. The tax system should gradually seek a convergence of the highest marginal rate of personal income tax, capital gains tax rates and the general companies income tax rates to reduce opportunities for tax avoidance.”

 

While the policy stipulates government’s plan to “focus more on indirect taxes”, there is no statement in the documents about a plan to “stop imposing taxes on people” and completely replace same with consumption tax.

Provided as an appendix to the 2017 NTP is a list of laws and regulations recommended for review and amendment by the Honourable Minister of Finance and the National Assembly, and justifications for the recommended reviews. This appendix also contains no recommendation to repeal or amend the extant Personal Income Tax Act.

 

Conclusion

While the National Tax Policy conveys the government’s plan to increase the focus on indirect taxes, and seek a convergence of the highest marginal rate of personal income tax, and other direct income tax rates (as stated in sections 2.2.3 and 2.2.4 reproduced above), it contains no direct statement or any other statement to the effect that “we don’t want direct taxes anymore”.

Therefore, Mr Odume’s claim that the tax policy says “we don’t want direct taxes anymore” is false.

Also, the tax policy and its appendices do not contain any statement, guideline, or plan to “stop imposing taxes on people.


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