THE ‘STATE’ OF TAX REFORMS IN NIGERIA

Abstract

In the last decade, Nigeria has experienced an unprecedented level of tax reform. Unlike at the federal level, the trigger at the state-level was not from a business community call for a better business environment, but from the impact of failing oil revenues which had destabilised the budgets of state governments during the mid-2014 - 2016 fiscal crisis. By 2017, all State governments had reached a consensus on the importance of domestic resource mobilisation (DRM), following the set up two DRM focused technical assistance programmes within the Nigeria Governors' Forum (NGF) Secretariat. The most progressive reforms have focused on tax consolidation and codification through the passage of a Consolidated Revenue Code (CRC) in nearly all states to end multiple taxation, although more than half of them have not yet been able to achieve full administrative and financial autonomy as enshrined in their revenue laws - the primary reform that disentangles them from the bureaucracies and controls of the civil service. Where tax authorities have been fully supported by their state governors, administrative changes have led to increased digitalisation, taxpayer compliance, and tax revenues, although the scope of collection remains generally challenging for taxes on mining and quarrying activities, land use and property. Ultimately, tax authorities are playing an active role in defining the fiscal headroom of state governments and the state-society relations. Through tax-for-service programmes, they are helping to build much-needed public trust and legitimacy. Tax reforms are associated with strong resistance from vested interests, from elites who may bear the greatest burden of taxation and public institutions that benefit from a dysfunctional revenue system. Going forward, the quality of support for these reforms can be maximised when underpinned by highly potential 'inflection points' (where possible), such as during periods of fiscal crisis or political transition; a well-designed pathway of change informed by a comprehensive political economy analysis; established linkages with the state-society relations to gain long-term internal and public support; and when driven as a whole-of government reform.