Nigeria's Finance Acts: Analysing the pros & cons

Nigeria's approach to tax administration and revenue generation has been a topic of discussion following the introduction of the Finance Act in 2019. The Act, seen as a key component of the government's revenue generation strategy, has aimed to provide clarity on tax laws, introduce incentives, and address government deficits. Adeyemi Adediran, a Partner at Andersen Nigeria, shared insights on the progress made since the Act's inception and the challenges that need to be addressed moving forward. Adediran acknowledged the positive impact of the Finance Act, stating that it has been a welcome development for taxpayers. However, he raised concerns about the shift towards increasing taxes to fund deficits and the introduction of new taxes. He highlighted the need for harmonization and simplification of the tax system, citing the multiplicity of taxes administered at various levels of government as a key area of concern. Adediran emphasized the importance of assessing Nigeria's tax competitiveness on a global scale to attract foreign investment. The discussion also touched on the recent changes in the 2023 Finance Act, including the imposition of a 0.5% import levy on goods. Adediran expressed caution regarding the potential impact on foreign trade and revenue generation, noting that such levies could deter investors. He highlighted the government's challenge of funding a significant budget deficit amid declining crude oil production, emphasizing the need to explore alternative revenue sources. Comparisons with neighbouring countries and regional tax policies shed light on Nigeria's tax-to-GDP ratio and VAT rates. Adediran underscored the importance of expanding the tax net, particularly by formalizing taxes in the informal sector. He emphasized the role of technology in enhancing tax collection and taxpayer education to improve compliance. The delay in signing the 2023 Finance Act was also discussed, posing a challenge for the new administration in aligning fiscal policies with economic goals. Adediran emphasized the need for a comprehensive review of existing tax laws to ensure they support the country's economic objectives and attract investment. As Nigeria navigates its tax landscape, addressing concerns around tax harmonization, simplification, and revenue diversification will be crucial. Balancing the need for revenue generation with an attractive investment climate remains a key challenge for policymakers. The evolution of Nigeria's tax regime will require strategic reforms and a proactive approach to drive economic growth and development.