Firm advocates tax reform to shore up nation’s revenue base
United Capital Plc has stressed the urgent need to expand the nation’s tax base and improve the effectiveness of revenue collection agencies in order to shore up non-oil revenue.
Speaking at the launch of the United Capital 2016 Outlook report held in Lagos at the weekend, the Head, Research, United Capital, Kayode Tinuoye noted that with a bleak outlook for government revenue and the ability to manage shocks being restricted by low fiscal savings and reserves, there would be a continued strain on the fiscal balance sheet in a near future.
This, according to him, implies that fiscal policy rebalancing through tax reform and reprioritisation of spending is urgently needed in order to stimulate growth on a long-term basis.
Tinuoye submitted that the adoption of ‘zero’ based budgeting approach would ensure that resources are aligned with government’s priorities and allocated efficiently.
In addition to broadening the tax base, he also noted that government needed to reduce leakages by improving compliances and enhancing collections, adding that public finances can also be bolstered to meet the huge expenditure needs.
“While we expect to see greater fiscal discipline by the government, there is an urgent need to expand the tax base and improve the effectiveness of revenue collection agencies in order to shore up non-oil revenue.
“For example, the current VAT rate in the country is among the lowest in the world and well below the rates among other ECOWAS members, so some increase should be considered.
“We expect to see efforts in streamlining the cost of governance and improve efficiency of public service delivery across the federal and sub-national government”, he said.
He also added that government should also address issues on transfers and tax expenditures in the country.
“According to the IMF boss, the new reality of low oil prices and low revenues means that the fiscal challenge facing government is no longer about how to divide the proceeds of Nigeria’s oil wealth, but what needed to be done so that Nigeria can deliver to its people the public services they deserve. Be it in education, health or infrastructure.”
Tinuoye added that government needed to take hard decisions on revenue, expenditure, debt and investment going forward to grow the economy.