Wale Edun: No plan to increase tax rate — we’re improving collection

Wale Edun, minister of finance and coordinating minister of economy, says the federal government has no plan to increase tax rate. 

Edun spoke on Monday at an interactive session with the house of representatives committee on appropriation.

The minister said the government’s target is to improve collection efficiency to get more people into the tax net.

“I would say there is no plan for the increase in the tax rate as such. The plan is to increase the revenue from taxation,” he said.

“The plan is to increase taxation returns — tax revenue as a percentage of GDP from around nine percent as it is now within three years to 18 percent which is closer to the African average.

“So, the emphasis is on collection, it is not on increasing the tax rate. It is increasing the efficiency of tax administration, particularly collection.”

Edun said low taxation attracts investment, allowing people to have more money to inject in job creation.

“In a government that is dependent on foreign direct investment, including domestic investment is dependent on private sector investment to grow the economy, create jobs and reduce poverty,” he said.

“The intention would be where possible, to reduce taxes to allow people to have more money to invest in job creation and production. I think it is very important to make that clear.”

GOVERNMENT EXPENDITURE

Speaking on expenditure, the minister said the government is spending “relatively” low compared to other countries in Africa.

“Government spending as a percentage of GDP as we said earlier is relatively low not to talk of the developed world where is it often over 50 percent in richer countries like the Scandinavian countries but even in Africa we are low relative to our peers which means the government is not spending enough both on key infrastructure and social services — education, health and so forth,” he said.

Edun said accountability and transparency are needed on the part of the government to earn the trust of the people.

“In terms of recurrent expenditure, the chairman did point out what I will call overestimation of certain recurrent expenditures.

“The first thing to say is that if we do not get a hold of government expenditure. If we are not able to restrain it and show transparency and accountability and efficiency in government spending, then you lose the trust of the public whose name you’re spending that money,” he said.

“So it is critical that government expenditure is seen to be efficient, that waste is cut to the minimum and leakages.

“I think we need to go back and interrogate why in the two years that you have mentioned, there seems over an estimation of certain recurrent expenditures.

“I think it is a very important exercise and we are on the same page with the appropriation committee of the house.”

The minister said the government is taking all necessary measures to improve revenue generation, noting that there is not “enough revenue to fund critical infrastructure”.

He said government revenue as a percentage of the gross domestic product (GDP) is under 10 percent compared to the average of other African countries which is nearer 15-18 percent and in some cases it is even over 25 percent.

He said the government can no longer rely on borrowing, whether domestic or foreign 

“So, the emphasis is on domestic resource mobilisation. The emphasis is on getting government revenue up,” Edun said.