As part of measures to enforce tax compliance, reduce tax evasion and deter late payments, the federal government has announced a hike in the interest rate on unpaid taxes for the year 2017.
The new rate, which was approved by the Minister of Finance, Mrs. Kemi Adeosun is five per cent higher than the Central Bank of Nigeria’s Minimum Re-Discount Rate (MRR) for the year 2017.
Section 32(1)(b) of the Federal Inland Revenue Service (Establishment) Act, she explained, empowers her to approve the new interest rate.
The minister said the review of the interest rate on unpaid taxes was one of the necessary measures adopted by the federal government to enhance tax compliance, eliminate tax evasion and serve as deterrence on late payments.
The minister has therefore directed the Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Tunde Fowler to commence the implementation of the new interest rate on all unpaid taxes from July 1, 2017.
“Majority of Nigerian tax payers (PAYE) have taxes deducted automatically. However, those who do not and are required to file their taxes like companies and business enterprises must understand that there are financial consequences for late payments.
“We believe that this will support our efforts to ensure that people pay their taxes promptly, thus providing a sustainable source of revenue for the government to finance infrastructure and other projects,” the minister was quoted to have said in a statement issued by the Director (Information) in the ministry, Mr. Salish Na’Inna Dambatta.
Adeosun had during the finance ministers’ meeting convened by the G24 Group at the 2017 IMF/World Bank Spring meetings in Washington, stressed the need for Nigeria to embark on aggressive tax revenue generation in order to drive economic growth.
She emphasised that with a tax to GDP ratio of only six per cent, one of the lowest in the world, the country has to intensify efforts at tax collection in order to build a sustainable revenue base that will deliver inclusive growth.
The focus of the federal government in 2017, she added, was to improve tax revenue by ensuring voluntary compliance with tax laws.