According to the Statistician-General of the Federation, Prince Adeyemi Adeniran, Nigeria’s current Tax-to-GDP ratio is higher than the 10.86 percent recorded in 2021.
The Tax-to-GDP ratio is a measure of a nation’s tax revenue relative to the size of its economy, as represented by the Gross Domestic Product (GDP).
This information was conveyed in a letter sent to the Federal Inland Service (FIRS) on May 25, 2023. The revised ratio followed a joint review of data from 2010 to 2021 conducted by the National Bureau of Statistics (NBS), FIRS, and the Federal Ministry of Finance.
The FIRS Chairman, Mr. Muhammad Nami, stated that the revision took into account revenue items that were previously not included in the computations, particularly revenue collected by other government agencies.
Previous estimates, which placed the country’s Tax-to-GDP ratio at around 5% to 6%, did not consider the tax revenue accruing to these other agencies.
To accurately calculate the Tax-to-GDP ratio, the FIRS conducted a review and re-computation of the ratio for the period from 2010 to 2021. This process involved including key indicators that were previously omitted.
As a result, the revised Tax-to-GDP ratio for 2021 was determined to be 10.86%, as opposed to the previously reported 6%.
Mr. Nami also noted that Nigeria’s Tax-to-GDP ratio should ideally be higher than 10.86%, but certain economic and fiscal policy factors contribute to the lower figure.
These factors include tax waivers, leakages in the fragmented tax system, low tax morale, and the impact of the GDP rebasing exercise in 2014.
The FIRS chairman called on the government to consider reviewing its policies on tax waivers, as doing so could lead to increased revenue and help improve the country’s Tax-to-GDP ratio.
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