Strengthening mechanism for increased internal revenue generation is critical to the expected increased revenue in the non-oil sector, Yue Man Lee, World Bank Senior Economist, has said.
Lee said this on Tuesday in a paper she presented at the ongoing 3-day National Council on Finance and Economic Development conference, holding in Kaduna.
The paper was entitled “Strengthening States Revenue Performance through Transparency and Open Government.’’
Lee observed that Nigeria’s revenues were very low due to contraction in oil revenues and the stagnancy in the non-oil revenues which she attributed to the absence of stable tax policy reforms and weak tax administration.
She said that with no improvement in revenue collection, total spending would decline; debt would increase while fiscal space would shrink.
The expert noted that the government could not deliver on its social and development agenda without it increasing total public spending.
According to her, the only mechanism to increase government expenditure in a sustainable way is to triple total revenue through mobilising non-oil revenue.
“However, Nigerian tax perception survey shows low tax compliance due to weak transparency and accountability.
“Corporate income tax is less than six per cent of registered taxpayers, personal income tax shrinks to two per cent, while compliance in the case of VAT varies between 15 and 40 per cent.
“This is worrisome because low tax compliance reduces states revenues and strengthening revenue and increasing expenditure efficiency needs to be underpinned by an increase in transparency and accountability.”
Lee, however, said that the Nigerian states could increase transparency and accountability to strengthen IGR through harmonisation of revenue collection and automation of tax payment.
“Kwara and Kaduna States are good example of states where such reforms were initiated with a significant increase in IGR,” she said.
Meanwhile, the Accountant-General of the Federation, Ahmed Idris, said that automated collection and management of non-oil revenue was critical to increasing its performance in revenue generation and sustenance.