Why corporates should adopt responsible taxation in Nigeria

In recent times, the Nigerian government has been grappling with limited revenue, leading to increased borrowing. This situation has sparked discussions around responsible taxation, urging corporate entities to contribute their fair share through taxes. Martin Arogie, Partner at KPMG Nigeria, sheds light on the importance of tax transparency and responsible taxation, especially in a time where tax revenues are crucial due to the significant pressures on government finances. Arogie emphasizes the need for incentives to drive this agenda forward, stressing that transparency and responsible taxation are integral aspects of the global conversation on Environmental, Social, and Governance (ESG) criteria. As the world focuses on issues like climate change and corporate governance, the concept of responsible taxation and transparency reporting gains prominence. Arogie highlights that the key goal is to ensure companies are contributing positively to the communities they operate in and are paying their fair share of taxes. He raises questions about the current level of tax compliance among companies in Nigeria, pointing out the discrepancies between reported taxes, profitability, and industry standards. Arogie notes that while tax contributions to Nigeria's GDP are around 60%, there are concerns about equitable distribution and tax compliance among different sectors. He calls for greater transparency in financial reporting, advocating for enhanced disclosures to provide a clearer picture of companies' tax obligations and contributions. Arogie acknowledges the challenges faced by tax authorities in auditing every company in Nigeria and suggests that mandatory regulations and laws may be necessary in the long term to improve tax transparency. In the short term, he urges companies to voluntarily enhance their transparency levels by providing detailed tax information in their financial statements. By doing so, companies can demonstrate their commitment to responsible taxation and accountability to stakeholders. Arogie emphasizes the mutual benefits of increased transparency for both companies and government tax authorities, as it enables targeted compliance efforts and fosters public trust in the tax system. Ultimately, the path to driving responsible taxation in Nigeria lies in a collective effort from companies and policymakers to embrace transparency, accountability, and fair tax practices.