Tax evasion in Nigeria could be costing government billions of naira - CNBC Africa

Tax evasion in Nigeria could be costing government billions of naira

Western Africa

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“Because the big global companies know how to manage their taxes efficiently, they know where the tax savings are, where the tax holidays are and they have reciprocal treaties, so that’s one level,” Financial Derivatives CEO Bismarck Rewane told CNBC Africa.

“The second level is actual tax avoidance, where you engage the services of experts who will advise you on taxes, capital gains or income taxes. Finally there’s tax evasion where you just actually make yourself not liable, and that becomes criminal.”

Over 75 per cent of registered companies have also failed to remit taxes, and according to Rewane, and 90 billion naira was lost in tax revenue from tax evasion in the automobile in the last four years.  

“For every one car that is brought in officially, there are four cars that are brought in in the grey market unofficially. That is significant because cars that are brought into the grey market are sub-standard, but even the government of Nigeria are buying cars from the grey market. So the government as a whole says we are against tax evasion but they are actually patronising and buying cars from the grey market,” Rewane explained.

“The reality is that people are beginning to question what tax is used for and what the moral justification of paying taxes is. The incentive to actually avoid taxes become higher if the governments are not delivering on their mandate.”

Rewane added that global reports show that where the tax rate is lower, compliance is higher.

Taxes are however vital for certain allocations such as subsidies. Tax evasion therefore directly affects the allocation of government funding for certain sectors.

Because of a decline in revenue from oil theft and vandalism, the Nigerian government is looking to focus on other government agencies such as customs and the Federal Inland Revenue Service (FIRS) to remedy the situation.

“First and foremost let’s review comprehensively our tax policies and our loopholes, bring down the tax rate and increase the compliance. Secondly, be more effective in ensuring that the tax liabilities are met,” said Rewane.