ECOWAS decries low VAT contribution to tax revenue

Economic Community of West African States (ECOWAS) has decried the low contribution of Value Added Tax (VAT) to Nigeria’s tax revenue, blaming the development on policy decisions and compliance rate.

ECOWAS Director of Customs Union and Taxation, Salifou Tiemtore, made the submission yesterday in Abuja at a workshop on production of VAT expenditure for Nigeria, organised by ECOWAS Commission under the context of implementation of support Programme for Tax Transition in West Africa (PATF).

PATF is geared at improving management of domestic taxation and ensuring better coordination in ECOWAS and West African Economic and Monetary Union (WAEMU) regions.

Tiemtore commended the Federal Inland Revenue Service (FIRS) for generating N10.1 trillion in 2022, with non-oil taxes contributing 59 per cent of the total collection.

He, however, said VAT contribution of 25 per cent was relatively low, when compared with the 2021 tax collection, which had a VAT input of 47.1 per cent.

The official submitted: “During the regional seminar in Abidjan on the theme: ‘Management of Tax Incentives in West Africa and Definition of the Reference Tax System in Terms of VAT’, it was recommended that member-states should transmit the tax expenditure evaluation reports to ECOWAS and UEMOA Commissions by the end of March. I want to believe that the relevant stakeholders would have put up this report if not for the general elections in Nigeria. But now, you have the opportunity.

“I therefore want to encourage all participants to work assiduously in ensuring that this report is not only ready, but also transmitted to ECOWAS before the end of March 2023.”

In her remarks, Minister of Finance, Budget and National Planning, Zainab Ahmed, regretted that efforts by successive administrations to fund public services, critical infrastructure, security and other programmes have been hampered by over the years by revenue challenge.

Represented by Director, Technical Services in the ministry, Fatima Hayatu, the minister observed that the scenario has forced government to pay special attention to tax expenditures (TEs).

She explained that most of the TEs take the form of preferential tax treatments to specific sectors of the economy or classes of taxpayers expected to provide alternative mechanisms for execution of assigned policy objectives.

Ahmed continued: “Though in the last couple of years, national aggregate tax expenditures have been computed, but the challenges remain. The figures remain contentious and existing data constraints limit the ability of the Federal Government to evaluate the budgetary cost of all tax expenditures.

“In addition, the quest for improvement in revenue generation, transparency and efficient management of public finance has reiterated the need to improve on reporting of TEs by the Federal Government as the first step towards understanding their cost-effectiveness and providing evidence for better policy-making.”