The contribution of corporate and trade taxes to Nigeria’s treasury will decline in the years ahead as the country aims to respect international trade treaties, the Director-General, Budget Office, Dr. Bright Okogu, has said.

Last year, tax revenues dropped from about N1.86tn in 2006 to N1.7tn in 2007, after Nigeria began the implementation of a Common External Tariff, a new trade agreement that sought to slash and harmonise tariffs in the West African block.

“The contribution of corporate and trade taxes is bound to decline in response to the pressures of international tax competition and the implementation of multilateral trade agreements,” Okogu said at a conference on fiscal federalism that ended on Wednesday. Nigeria has been criticised for not honouring trade pacts, especially within the Economic Community of West African States.

The country, last year, backed out of the Economic Partnership Agreements, otherwise known as free trade agreements, that aimed to remove trade barriers, citing infrastructure bottlenecks.
Okogu said the implementation of multilateral trade agreements would definitely impact negatively on revenues accruing to the Federation Account.

He, however, said that Value Added Tax would play an increasingly more important role in the country’s fiscal profile. The budget chief said contemporary fiscal federalism must not only address traditional revenue allocation issues, but also how to strengthen tax administration in order to guarantee better revenue collection.

Currently, oil remains the mainstay of Nigeria’s economy contributing more than 90 per cent of the country’s revenue. But the natural distribution of oil is skewed to the South-South geopolitical zone, a region that remains poverty stricken in spite of oil wealth. Okogu said while oil remained a major source of revenue for decades, there was an enormous potential in the gas sector.

He further said that the transformation of agriculture from basic subsistence farming to lucrative export horticulture, international marketing of environmental resources through ecotourism, the resurgence of the moribund solid minerals sector and greater trade in services would in the future boost Nigeria’s earnings.

He asked, “But what criteria will determine allocation of revenues derived from these sectors in the future?”

According to him, the time has come for the country to fashion out principles of fiscal federalism that will remain valid for all time in the face of changing realities.

Source: Punch