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FACT CHECK: Do Nigeria’s multiple tax channels reflect its tax to GDP ratio?

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Claim

Nigeria’s tax to GDP is amongst the lowest in the world. Tax channels are mostly multiple illegal extortions.

Conclusion

YES. Nigeria’s multiple tax channels do not reflect in the country’s GDP and the tax to GDP ratio of Nigeria is among the lowest in Africa and the world at 6.3%.

With daily and weekly payments from different informal sectors who are pressured to pay for stickers, cards and certificates as dues, the sector only generates 12 percent of tax in the country.

Full text

In a tweets on financial advice, Kali Aja, a financial and investment advisor tweeted a picture showing stickers and certificates of multiple tax channels with a caption; “if you know you know” and then replied the thread saying, “Nigeria tax to GDP is amongst the lowest in the world.
These are mostly illegal multiple extortion,”

In contrast, the Federal Inland Revenue Services (FIRS) boss, Mohammed Nami said in November 2020 that tax covers 70% of the revenue generated by government in Nigeria.

Verification

What is Tax-to-GDP Ratio? It is the measure of a nation’s tax revenue to the size of the economy and the World Bank recommends 15% tax-to-GDP as a key ingredient for economic growth and, ultimately, poverty reduction.

Read also: FACT CHECK: Buhari says projects by his govt have increased access to portable water to 71%. True or false?

Knoema, a data aggregator platform published the revenue to GDP ratio of different countries from 2009 to 2020. The revenue to GDP includes taxes, social contributions, grants received and other revenue sources.

The data show that from 2012 till date, Nigeria’s revenue ratio to GDP year-on-year change has been on a decline, having the worst of it in 2015 at -33.59%.

However, 2017 and 2018 witnessed growth at 29.19% and 28.84% with an actual value of 6.6% and 8.5%.

Knoema records show that 2020 revenue ratio to GDP is 6.3%. This implies that the tax to GDP ratio is less than six percent.

The OECD report 2020 with the title ‘revenue statistics in Africa’ shows Nigeria and Equatorial Guinea at the bottom of the Tax-to-GDP Ratio in Africa with 6.3 percent in 2018. It was reported that Nigeria’s tax-to-GDP increased by 0.6%, moving from 5.7% in 2017.

The report accounts for 50% of the total tax coming from corporate tax, 14% from Value Added Tax, 12 percent on Goods and Services other than VAT, 10% from personal income tax, 8% from social contribution and 6 % from other taxes.

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