Today marks another milestone in our quest to reform our economy and re-engineer the finances of our country for optimum performance.
Since we got into office in the last two months, we have taken steps to reset and revamp the economy. My first action was the removal of fuel subsidy that was pushing the country off fiscal balance. The second policy decision was to put an end to the misapplication of the country’s wealth through preferential foreign exchange system. While we needed to take these two immediate important decisions, we knew that our reforms will go deeper and far-reaching if we must reposition our country and remove all the barriers stunting our economic growth.
Our administration carries the burden of expectations from our citizens who want their government to make their lives better. We cannot blame the people for expecting much from us. To whom much is given, much is expected. It is even so when we campaigned on a promise of a better country anchored on our Renewed Hope Agenda. I have committed myself to use every minute I spend in this office to work to improve the quality of life of our people.
It must be said, however, that all the good and helpful plans we have mapped out to make living a better experience for Nigerians will amount to nothing if we are unable to drive the resources we need to bring them to reality. A government can only function well when it can reasonably discharge its responsibilities to the people.
A sound fiscal policy environment and a fit-for-purpose tax system are critical for the effective functioning of government and the economy. Without revenue, government cannot provide adequate social services to the people it is entrusted to serve. Yet, the means by which government raises its revenue is just as important as the ends to which such monies are put.
Unfortunately, Nigeria’s current international standing in this sector shows that we have a long way to go. Globally, Nigeria ranks very low on metrics such as the ease of paying taxes. Equally, our tax to GDP ratio is one of the lowest in the world and falls below even the African average.
The consequences of the ongoing failure of our tax regime are real and significant. The inability of government to efficiently raise revenue has led directly to an overreliance on borrowing to finance public spending. A government that cannot properly fund itself will also lack the flexibility or fiscal scope to sensibly manage the economy or respond to external shocks.
Instead, debt service begins to consume an ever greater portion of government’s already meagre revenues. This traps the economy in a vicious cycle of borrowing simply to service previous debt and leaves almost no scope for socio-economic development.
As President, I am determined to end this cycle. On the day of my inauguration, I promised that my administration would address all of the issues impeding investment and economic growth in Nigeria. This promise is why I saw an end to the fuel subsidy. It is the reason the Central Bank has called an end to its multiple exchange rate system under my watch. It is for the same reason we gather here today to inaugurate the Presidential Committee on Fiscal Policy and Tax Reforms.
This Committee has been established to address the broad fiscal challenges facing our economy. Its mandate shall be divided into three broad areas, viz:
Within the scope of this mandate, the Committee shall have as its objective the advancement of viable and cost effective solutions to issues such as the multiplicity of revenue collection agencies, the high cost of revenue administration, the excessive burden of compliance on ordinary taxpayers, the lack of effective coordination between fiscal and other economic policies within and across levels of government and poor accountability in the utilisation of tax revenues.
The Committee is comprised of experts from both the private and the public sector. I have given them a strong mandate and I expect their report to cover tax reform, fiscal policy design and coordination, harmonisation of taxes and revenue administration among other items.
Our target is to improve Nigeria’s revenue profile while making the business environment more conducive and internationally competitive. Our aim is to transform the tax system to support sustainable development, while, at the same time, achieving a minimum of 18% Tax to GDP ratio within the next three years.
In order to ensure to ensure seamless implementation, the Committee shall be empowered not merely to make recommendations; but to also provide practical support the government in the execution and delivery of the recommended changes.
The Committee is expected to achieve its mandate within a period of one year. They are, in the first instance, expected to deliver a schedule of quick reforms which can be implemented within thirty days. Critical reform measures should be recommended within six months and full implementation will take place within one calendar year.
In carrying out its mandate, the Committee will be guided by national interest above all else. We cannot continue to tax poverty when we should be promoting prosperity.
We should no longer tax investment or production; but focus on returns, income and consumption. This government will tax fruits, not seeds.
Our goal is to promote investment and facilitate economic growth as a sustainable way to grow and diversify government revenue.
We will be mindful to ensure fiscal stability for all stakeholders, including investors and businesses, both domestic and foreign, as well as all tiers of government.
All government agencies, ministries and departments are hereby directed to cooperate fully with the Committee towards achieving their mandate.
Finally, I wish to use this opportunity to seek the support of the National Assembly, the organised private sector, the international community and, above all, every well-meaning Nigerian citizen. This committee is on a crucial national assignment. Their assignment is very critical to the fiscal health of our country and our collective survival. It is now our job to support the committee members to succeed. I am confident that with your support the Committee will achieve a remarkable outcome for our country, not just for today but also for future generations of Nigerians.
Thank you and May God bless the Federal Republic of Nigeria.