Stransact (Chartered Accountants) canvasses for homegrown solutions to Nigeria’s tax problems

As Nigerians prepare for the inauguration of a new president in May 2023, Stransact (Chartered Accountants), the correspondent firm of RSM, the sixth largest Accounting and Auditing firm in the world, has called for the development of homegrown and tailored solutions to Nigeria’s tax problems.

In a recent media briefing, the company’s Partners recommended tax-related reforms for the government to improve and protect Africa’s largest economy.

Nigeria’s tax system is confronted with many issues and challenges such as bad administration, lack of a central taxpayers’ database, tax touting, complex nature of the Nigerian tax laws, and non-payment of tax refunds. 

Meanwhile, the IMF has advised the Nigerian government to reduce its debt by increasing its tax basket.

Addressing the media, the Stransact Partners noted that Nigeria has one of the highest multiplicities of tax in the world. With the inflation rate rising to 22.04 per cent in March 2023, the multiple taxes imposed on businesses and individuals have become a heavy burden on Nigerians and have become impediments to the ease of doing business. 

They therefore, advised the government to widen the tax net, bringing in more people from the informal sector into the tax regime rather than increasing tax rates or introducing new forms of taxes.

Despite the commendable performance of the Federal Inland Revenue Service (FIRS) in tax collection for the year 2022, which saw a historic peak of Ten Trillion naira in revenue generated, the agency remains challenged in its efforts to formalize the informal sector, thereby further enhancing revenue collection, curbing the need for excessive borrowing by the government, and ultimately mitigating the increasing debt profile of the country.

“All economic initiatives should be customised to the policies and realities of the country. The issue is not with the debt but the terms of borrowing and how we use the borrowed funds,” said Eben Joels, General Partner at Stransact. 

“It is dangerous to borrow more whilst the economy is shrinking. With increased credit ratings, we will borrow at a lower cost,” Joels added.

The General Partner commended the Federal Inland Revenue Services (FIRS), for the introduction of the TaxPro-Max, an indigenous software that enables seamless registration, filing, payment of taxes and automatic credit of withholding tax.

However, he noted that the multiple currency rates policy is giving influential people an undue advantage to make an excess profit whilst stifling the growth of genuine businesses.

“For instance, a politician can use his influence to get dollars at the official rate of N460 and sell at the black-market rate of around N750, taking advantage of the arbitrage difference, whereas a fully compliant business person may find it challenging to recoup their investments because they are required to purchase dollars at the open market rate, which is not stable enough to ensure consistent profits.”

Victor Athe, Partner, Tax Services, canvassed for the ‘formalisation’ of the informal sector of the Nigerian economy, where a large portion of transactions is done outside the banking system.

“Introducing facilities and regulations that will formalize the unregulated sectors of the economy will widen the tax net and increase the tax revenue available for government,” said Athe.

Lastly, the Stransact Partners challenged Nigerians to demand accountability from government representatives at all levels on the use of tax funds.