Bridging the Gap Between Tax Policy and Implementation in Nigeria
Taxation is a fundamental pillar of economic development. It provides governments with the revenue needed to fund public services, build infrastructure, and support social programs. In Nigeria, the 2017 National Tax Policy (NTP) was introduced as a strategic framework to reform and guide the country’s tax system, aligning it with national economic goals. The policy envisions a system that encourages voluntary compliance, guarantees consistent revenue, and drives sustainable development. However, the lofty ambitions of the NTP have not translated into reality. There remains a troubling disconnect between policy formulation and its actual implementation, undermining the role taxation should play in Nigeria’s development journey. Without addressing this gap, the potential of the tax system to significantly contribute to national progress will remain largely untapped. One of the primary challenges is the fragmented distribution of taxing powers across different levels of government. While some are clearly outlined in the constitution, others remain vague, leading to conflicts and legal battles—most notably over the administration of Value Added Tax (VAT). This confusion, combined with a proliferation of taxes across states, has made the system inefficient and burdensome. The proliferation of taxes stems from states grappling with an imbalance between their fiscal responsibilities and taxing authority. To make up for this, many introduce overlapping taxes, especially on property and income, further complicating compliance. As a result, taxpayers often seek ways to legally minimize (avoidance) or completely evade taxes—shifting the burden onto more compliant citizens and weakening the tax base. Compounding the issue is the absence of reliable demographic data. How can the government tax people it cannot identify? Despite over a century of organized taxation in Nigeria, there’s still a major gap in citizen data collection, analysis, and management. This lack of accurate information makes effective tax planning and implementation nearly impossible. Political interference only worsens the situation. Many public officials and lawmakers lack a deep understanding of the tax system and often prioritize political interests over technical efficiency. This, coupled with entrenched corruption, weakens enforcement and erodes public trust. A system riddled with political favoritism and vested interests can never function at its full potential. Another major barrier is the complexity of the tax laws themselves. Many are outdated, ambiguous, or too technical for the average citizen to understand. This not only creates confusion but also fuels resistance and non-compliance. The lack of public awareness campaigns and tax education further alienates taxpayers, leading to widespread reliance on arbitrary assessments rather than structured compliance. There’s also little incentive for subnational governments to improve tax collection. The formula for revenue allocation in Nigeria places minimal emphasis on internal revenue generation, instead focusing on criteria like landmass, population, and social needs. This discourages innovation and effort in improving local tax systems and leaves governments dependent on unstable oil revenues. To move forward, Nigeria must implement real and lasting reforms. A constitutional amendment to clearly delineate taxing powers and grant more fiscal autonomy to states and local governments is essential. This will not only reduce friction but also foster accountability at all levels. Updating and simplifying tax laws is another crucial step. The recent establishment of the Fiscal Policy and Tax Reforms Committee by President Tinubu, under the leadership of Taiwo Oyedele, is a commendable move. The committee’s mandate to propose reforms aimed at streamlining tax administration and aligning it with current realities is a necessary intervention. The modernization of the tax system is long overdue. Leveraging technology, training tax officials, and adopting global best practices will significantly improve efficiency. Initiatives like the Integrated Tax Administration System (ITAS), which digitizes tax processes, are steps in the right direction and should be expanded. Widening the tax net through mandatory registration—such as requiring Tax Identification Numbers (TIN) for specific transactions—has already begun to yield results. This strategy not only increases transparency but also brings more individuals and businesses into the formal economy, ensuring they contribute their fair share. Finally, the government must demonstrate that taxes are being put to good use. When citizens see tangible improvements in infrastructure, education, healthcare, and security, they are more likely to comply voluntarily. Transparency, accountability, and visible impact are the strongest tools for encouraging compliance and building trust. In conclusion, Nigeria’s economic potential is immense—like a forest full of ripe fruit. But without a tax system that works, this potential remains largely unharvested. The time has come for the country to close the gap between tax policy and implementation and unlock the full power of taxation as a driver of national development. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.
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