There is no doubt that COVID-19 hit all economies globally really hard. From the drastic decline in business activities to some organisations shutting down operations, the impact of the pandemic can hardly be ignored. To curb the rate at which the disease is rapidly spreading a number of countries have restricted movement with some implementing outright lockdowns.
I once heard that there are two things that are certain in this life; death and taxes. However, to mitigate the effects of the global pandemic, the governments of many countries have implemented monetary and fiscal measures; Nigeria is one of such countries and a number of palliative measures have been put in place, one of which is the proposed Emergency Economic Stimulus Bill 2020. Please read our thoughts on this Bill here in case you missed it. As it stands taxpayers still have to comply with their tax obligations either as it relates to tax filings or remittances.
In Nigeria, to ensure tax compliance with the Relevant Tax Authorities (RTA), you would need to make one or more trips taken to the RTA’s office. Although in recent times, a number of technology measures have been put in place such as e-filing; but most often than not the general tax compliance process is still largely manual.
COVID-19 definitely hit us unawares and now we have to implement other measures to ensure that taxes are paid. I cannot help but wonder what would happen post-COVID-19 to the tax system in Nigeria. Would we go back to our old ways and continue to take trips to the RTAs office or step up and fully digitialise our tax processes?
I believe we should take a cue from some of our West African countries, one of which is our neighbouring country Togo. Togo stepped up its game in its tax administration processes. According to the World Bank’s Paying Taxes Report, within a year of Togo adopting technology into its tax processes there was a reduction in tax compliance time by 57 hours. I believe we can follow suit and even do better.
Lack of enforcing digitalization of tax payment creates bottle necks for a country’s tax administration and compliance rate to move forward. Nigeria is still lagging behind with a poor tax to GDP ratio of about 5.6%.
Another thought that keeps lingering in my head is the drastic rate at which the nation’s foreign reserves are depleting. I cannot help but think of what we would have to fall back on when things get tougher. The ‘diversify the economy’ gospel has been touted for as far back as I can remember but I still don’t think it sank in well enough. How are we to survive now? ‘Tax to the rescue’ we may say, but do we have sufficient tax revenue as it stands?
The health care system is in dire need for revamp at this time and we cannot turn a blind eye to that especially in this crucial COVID-19 times. This is just one amongst other sectors that needed to be funded by ‘oil revenue’. At the risk of sounding insensitive, I think this may just be the wakeup call we needed. However, I wonder if it had to get to the stage of a global pandemic and depleting foreign reserves before we woke up. These are the thoughts that would keep me up for more days ahead.