Why Nigeria needs to consolidate tax collection

Nigeria is embarking on ambitious plans to overhaul its tax collection system in a bid to enhance ease of doing business, reduce tax leakages, and eliminate multiple taxation from the three tiers of government. The country is considering streamlining the number of revenue collection agencies from 52 to around 10. This move aims to simplify the tax payment process for taxpayers and improve compliance. Theo Emuwa, Partner at Aelex, shared insights on the need for Nigeria to consolidate its tax collection strategies. Emuwa highlighted that reducing the number of agencies would make it more convenient for taxpayers, especially smaller businesses, who currently face challenges navigating the complex system. Consolidating the agencies could lead to a more efficient and transparent tax collection process. Emuwa emphasized that while renaming agencies may not necessarily yield significant changes, it is essential to focus on internal operational improvements. The Federal Inland Revenue Service (FIRS) recently surpassed its revenue collection target for the first half of the year, signaling some progress in tax collection. However, Emuwa pointed out the importance of data gathering to enhance tax compliance, citing the success of Lagos State in tax collection due to its comprehensive data on properties. He stressed the need for investment in data gathering and highlighted the role of well-trained personnel in tax collection. Emuwa also addressed the issue of overlapping tax responsibilities between federal, state, and local governments, underscoring the importance of streamlining and clarifying tax obligations for businesses. The conversation delved into the role of the Presidential Committee on Fiscal Policy and Tax Reforms in driving transformative tax initiatives. Emuwa emphasized the committee's focus on data-driven tax administration and the quality of personnel in charge of tax collection. He suggested incentivizing tax collectors to improve revenue collection. As Nigeria aims to boost its revenue drive through tax reforms, the successful implementation of these initiatives will be crucial for the country's economic growth and development. The consolidation of tax collection agencies, coupled with data-driven strategies and efficient personnel, could pave the way for a more effective and transparent tax system in Nigeria.