Global tax deal: Is Nigeria really missing out?

Nigeria's stance on the global tax landscape has been a topic of discussion as the OECD pushes for a two-pillar tax solution that Nigeria initially opted out of. The importance of this conversation was highlighted by Abiodun Kayode-Alli, an Economist and Tax Manager at PwC Nigeria, who joined CNBC Africa to shed light on the implications and considerations at play. The two-pillar tax solution, adopted in 2021 by 300 countries excluding Nigeria, aims at ensuring taxes are paid by multinational entities where value is created. The first pillar, focused on setting thresholds before countries can tax multinational profits, posed concerns for Nigeria's revenue projections. Kayode-Alli emphasized the need for modifications to address Nigeria's apprehensions and align the solution with the interests of developing nations. Despite Nigeria's initial reluctance, it remains part of the inclusive framework, prompting discussions with the OECD to tailor the solution to better suit Nigeria's concerns. While the second pillar may not directly impact Nigeria's revenues immediately, the country stands to benefit from implementing the necessary fiscal measures. Kayode-Alli acknowledged Nigeria's engagement in dialogue to navigate the evolving tax landscape to maximize benefits. In assessing Nigeria's revenue generation efforts, Kayode-Alli commended the Federal Inland Revenue Service's initiatives to bring digital companies into the tax net, emphasizing the need to build taxpayers' trust and confidence for sustained compliance. While Nigeria works towards enhancing revenue streams, recommendations from institutions like the Bretton Woods Institution underscore the importance of strategic tax planning and streamlined tax processes. One key area of focus is Nigeria's Value Added Tax (VAT) rate in comparison to its West African counterparts. While Nigeria currently maintains a 7.5% VAT rate, suggestions to increase this rate to 10% have surfaced. Kayode-Alli highlighted the potential for improved VAT collection through a redefined VAT system design rather than immediate rate hikes, considering the economic challenges businesses face. Navigating the global tax landscape requires Nigeria to strike a balance between revenue optimization and taxpayer compliance, with a tailored approach to tax policies that resonate with the country's economic context. As Nigeria continues to develop its tax framework, collaboration with global bodies like the OECD presents an opportunity to leverage international best practices while safeguarding domestic revenue interests.