The new administration that recently took over the helms of affairs of government has reiterated plans to reform the tax system currently in place in the country. The objectives of the tax system include the facilitation of economic growth and development, providing the government with stable resources for the provision of public goods and services, economic stabilization, fairness and equity, and correcting market failures or imperfections.

In recent times, there has been renewed interest by Governments of developing nations to increase domestic revenue mobilization through taxation. The government, through its fiscal policy framework, employs taxation, government spending, and borrowing to influence the overall economy.

In a broad attempt to reform the tax system in Nigeria, the Federal Government of Nigeria published the National Tax Policy (NTP) in 2012 as part of its efforts to entrench a robust and efficient tax system in Nigeria.

The failure of the initial National Tax Policy led to a Revised National Tax Policy approved on February 1, 2017, by the Federal Executive Council. The revised policy sets broad parameters for taxation and ancillary matters connected with taxation in Nigeria.

The Finance Acts of 2019, 2020, 2021, and 2023 are the recent tax reforms that the Federal Government has introduced to address the inadequacies in the tax systems and provide a basis for tax legislation and tax administration.

Despite the bold attempts of the previous Government to reform the tax system in the country, there are still inadequacies that are conspicuous and need to be addressed. The present administration has reiterated its commitment to addressing this challenge and promised to put in place a formidable tax system that will help stimulate economic growth.

In evaluating the effectiveness of tax reforms geared towards stimulating economic growth and job creation, the Government needs to consider the following issues in order to maximize the positive impact of such reforms. These include;

1.Collaboration with Stakeholders: It is imperative for the Government to collaborate with critical stakeholders in the country. During the design and implementation of tax reforms, stakeholders include business organizations, labour unions, organized private sector, industry experts, opinion leaders, tax and revenue agencies. Gathering input and insights from relevant parties can lead to more effective tax policies that align with economic growth objectives.

2. Targeted Tax Incentives: The Government must encourage key industries identified with maximum potential to promote economic growth and job creation with tax incentives that will help sustain the activities of such organizations. Incentives such as Investment Tax Credits, Job Creation Tax Credits, Pioneer Status, Tax Holidays, Research and Development Tax Credits, Capital allowances, and Accelerated Depreciation for businesses to defray the cost of acquiring assets in the early years, etc.

3. Efficient and Transparent Tax System: For the Government to optimally derive results from tax reform, an efficient and transparent tax system is a fundamental structure that must be in place. The government, through its revenue agencies, must operate a simplified tax system and reduce administrative burdens for taxpayers. An efficient and transparent tax system reduces compliance costs, encourages tax compliance, and facilitates ease of doing business, which can promote economic growth and job creation.

4. Progressive Tax Structures: The Government should design tax systems with a progressive structure that ensures a fair distribution of tax burdens. The fundamental principles behind progressive taxation are the belief in fairness and the ability-to-pay principle. Progressive taxation can help reduce income inequality and promote social cohesion, which, in turn, can contribute to long-term economic growth.

5. Long-Term Planning and Stability: Stability in tax policies promotes confidence and facilitates economic growth. The government should ensure stable tax policies to encourage long-term investment and business planning. Frequent changes in tax laws can create uncertainty and discourage investment.

6. Evaluation and Review Mechanisms: A review mechanism like the Medium-Term Expenditure Framework 2022–2024 recently embarked upon by the Federal Government serves as a verifiable tool to evaluate the impact of tax reforms on economic growth and development. This helps the government monitor and review the identified outcomes and areas for improvement.

7. Comprehensive Policy Approach: The Government must implement a comprehensive policy approach that combines tax reforms with complementary measures such as infrastructure development, investment in education and human capital, and support for entrepreneurship and innovation.

8. International Cooperation: Since no economy operates in isolation, the Government should foster international cooperation in economic matters to address issues such as tax avoidance and evasion. Active participation in schemes like the Africa Continental Free Trade Area (AfCFTA), the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), etc. would help ensure a fair and level playing field for businesses and reduce distortions that can hinder economic growth.

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