The Effects of Harmonising Taxes in the Nigerian Polity; the Challenges and Prospects. 

1. Introduction

It is pertinent to note that Nigeria’s tax system is riddled with inefficiencies which make tax administration and taxpayer compliance costly for all concerned.

It can never be overemphasized that the need for Nigeria to promote a private or public unified sector to develop the harmonization of taxes across the country.

This is in to make it easier for taxpayers to comply and to pave way for efficiency for all levels of government in the administration the tax system which includes harmonisation of policies, legal and administrative reform, including automation of tax payments amongst others.

Nigeria, which should be the leading light in terms of tax administration in Africa, given its position as the most populous, with the largest economy in the continent, has yet continued to lose billions of naira of tax revenue to illegal tax collectors.

2. What is Tax Harmonization? 

According to Wikipedia, it means a process of adjusting tax systems of different jurisdictions in the pursuit of a common policy objective.

Tax harmonization involves the removal of tax distortions affecting commodity and factor movements, in order to bring about more efficient allocation of resources within an integrated market.

Tax harmonization may serve alternative goals, such as equity or stabilization. It also can be subsumed, along with public expenditure harmonization, under the broader concept of fiscal harmonization.

Narrowly defined, tax harmonization guided by this policy goal implies — under simplifying assumptions about other policy instruments and economic structure — convergence toward a more uniform effective tax burden on commodities or on factors of production.

Convergence may be attained through the alignment of one or several elements that enter the determination of effective tax rates, the statutory tax rate and tax base, and enforcement practices.

Perhaps the most widely accepted argument for harmonization involves convergence in the definition of product value or income for tax purposes.Such tax based harmonization would contribute to transparency for economic decision-making and thus, improve efficiency in resource allocation.

In particular, a common income tax base for multinational companies operating in different jurisdictions would be instrumental not only in enhancing efficiency, but also in preventing overlaps or gaps in tax claims by different countries.

It is far beyond settled that, tax harmonization is an important part of the fiscal integration process.

Fiscal integration is the process by which a group of countries agree on taking measures that lead to a higher level of fiscal convergence, the ultimate goal being the formation of a fiscal union.

Tax harmonization doesn’t automatically lead to the formation of a fiscal union, the second part involving much larger scale project that includes fiscal transfers, a fully harmonized legislation and maybe some supervising institutions, beside a long-run agreement.

Starting from the definition given to the fiscal integration process, we can easily say that tax harmonization is the process by which a heterogeneous group of countries – federal states or even local governments, agree on setting a minimum and maximum level of tax rates, also including a higher degree of harmonization of tax legislation, in order to attract foreign investors and to encourage local development and investments.

3. Challenges and Prospects in Tax Harmonization in Nigeria. 

Permit me to begin with the wordings of Mr. Taiwo Oyedele while speaking on the need for Nigeria to harmonize its tax system.

…“It is only in Nigeria that all sorts of agencies and even touts collect revenue for the government, creating confusion in the system.” Those were the words of a renowned tax professional.

According to the Organisation for Economic Co-operation and Development (OECD), in its Revenue Statistics in Africa 2021, the average ratio of Tax-to-GDP of 30 selected African countries in 2019 was 16.6 percent while Nigeria recorded a mere 6.0 percent.

A 2018 report by the Partnership for Social and Governance Research cited research work by the High-Level Panel on Illicit Financial Flows from Africa, which showed that Nigeria accounted for 30.5 per cent of illicit financial outflows (including taxes) from the continent.

The research by the Partnership for Social and Governance Research said that Africa’s most populous nation lost $217.7 billion to illicit financial flows (including tax outflows) between 1970 and 2008.

In 2020, the Federal Inland Revenue Service (FIRS) said that there were $10 billion in tax leakages arising from multinational corporations’ illicit profit shifting (to low-tax jurisdictions).

The Executive Chairman of the Federal Inland Revenue Service (FIRS), Muhammad Nami also said in January 2021, that Nigeria lost $178 billion to tax evasion by multinationals in 10 years.

Indeed Nigeria is bleeding from the activities of illegal revenue collectors, especially non-state actors.

To drive home the point, in Lagos State, for instance, motor park touts, popularly called agberos fleece the state of billions of naira in transport taxes collected from drivers of commercial buses, tricycles and motorcycles.

For example, it is estimated that there are about 75,000 commercial buses (danfos) in Lagos, according to the Lagos Metropolitan Area Transport Authority (LAMATA).

Each commercial vehicle driver pays at least N3,000 to agberos every day. This means that these drivers pay an average of N225 million each day, N6.75 billion each month, and N82.125 billion each year to agberos in Lagos. That is not all. There are at least 60,000 tricycles in Lagos, and each tricycle driver pays at least N1,800 to agberos each day.

This, therefore, means that each day touts walk off with N90 million from transport taxes collected from tricycle drivers. Every month, their pay reaches N2.7 billion, rising further to N32.85 billion every year.

This simply means that Lagos State Government is losing over N100 billion yearly in transport tax money to the touts. It is the same story all across the nation.

It is on record that most government agencies in their quest to meet and possibly surpass their revenue targets have abandoned their core functions in pursuit of revenue collection, the bulk of which ends up in private pockets.

There are at least 100 revenue-collecting agencies at both federal and state levels competing with the officially designated tax authorities like the Federal Inland Revenue Service and State Internal Revenue Services, leading to multiple taxations and compounding the ease of doing business in Nigeria.

Perhaps it was to find a lasting solution to this chaotic situation that the FIRS decided that the focus of its 2022 National Tax Dialogue, should be on building a consensus among tax professionals and authorities on the need for the harmonisation of the Nigerian tax system.

The Tax Dialogue, which is the second edition had as its theme: ‘Tax Harmonisation for Enhanced Revenue Generation”. Speakers at the event were in agreement that the time has come when Nigeria should streamline its tax system if it hopes to improve its revenue generation through taxation.

President Muhammadu Buhari in his opening speech was clear when he said, “Our current tax system is characterised by fragmented administration and multiple (and sometimes, overlapping) taxes. In most tax-efficient nations, tax administrative processes and practices are harmonised within a single system.”

The president went further to add, “On our part, we have started by clarifying in the 2021 Finance Act that FIRS is the sole authority to administer tax for the Federal Government.

This clarification became necessary in order to avoid taxpayers being burdened with multiple tax compliance obligations towards different agencies of the same government.

The multiplicity of tax administration is as undesirable as a multiplicity of taxes; it creates uncertainty and instability; and above all, it is inefficient.

“It is my expectation that the discussions at this 2022 National Tax Dialogue will be focused on what we must do to maximise legitimate revenue collection and massively improve the Tax-to-GDP ratio which according to statistics is a mere 9% (nine percent).”

On his part, Executive Chairman FIRS, Muhammad Nami said the Service chose to focus on the theme for the National Tax Dialogue because, despite Nigeria’s 38 tax authorities, several tax laws and numerous taxes or levies, the majority of the taxpaying public still remains outside the tax net.

“The tax-dodgers found it convenient to meander among the competing revenue agencies escaping their tax obligations. The result is suboptimal revenue generation at all tiers of government,” he said.

Speaking on the sidelines of the recent Annual Tax Conference organised by the Chartered Institute of Taxation of Nigeria (CITN), Taiwo Oyedele, Partner and Africa Tax Lead, PwC, said Nigeria has become a laughing stock among other African nations because of the confusion in its tax environment.

According to him, “Here you have all manner of agencies collecting taxes. This is not even a question of America or the United Kingdom, even in Africa here.

In Ghana, their tax system is unified under one agency, the Ghana Revenue Agency (GRA) which is fully in charge of all revenue collections in that country. In South Africa, the South African Revenue Service (SARS), is in charge. In Kenya, the Kenya Revenue Agency (KRA) is in charge and these are smaller countries than us”.

“In Rwanda, even the taxes for the districts are collected by the Rwandan Revenue Agency (RRA), the money does not hit the account of RRA, it goes straight to the district account.

It is on record that since they started collecting for the districts the amount they collect has gone up by 40 percent because they have a lot of intelligence that the districts don’t have and they use a lot of technology.”

He lamented that in Nigeria, the story is different.

In his words, “In Nigeria we have the FIRS, you have the Customs, you have the immigration service, you have NIPOST trying to collect tax, you have the commission for oil and gas that was created to collect royalty, you have NCC, NIMASA. The list goes on even more than 100 agencies collecting one form of tax or the other”.

“We don’t need all that, FIRS should collect the revenue for the federal government while State Internal Revenue Service should collect for the states so that all these agencies can focus on the reason for which they were created.

Let the tax authority collect the revenue and you will not have issues with accountability. We have a lot of cash collected by touts which don’t even go to the government.

“FIRS should be in charge, that is what we have in the National Tax Policy which was approved in 2017. We said there should be only one revenue agency per level of government.At the Federal level, we should have the FIRS, at the State level there should be only one internal revenue agency.”

For Mr. Toafeek Olatubosun, a Chartered accountant, Nigeria can only boost its tax revenue if it harmonises the tax system.

“We need to harmonise the tax system because there are too many lines of taxes and people are actually complaining of multiple taxations which is one of the biggest problems that is affecting the ease of doing business in Nigeria,” he said, adding that harmonisation will go a long way in building confidence in the minds of taxpayers and at the same time ease the process of tax collection.

4. Conclusions.  

Indeed, the issue of harmonizing the tax system has become a task that must be done.

Thankfully enough, participants at the second National Tax Dialogue recognised this when they concluded in their communiqué that a fragmented tax system, that is, one which is characterised by multiple or overlapping taxes or duplicated tax administrations, is inefficient and compromises tax revenue generation.

Similarly, the multiplicity of tax administration is as undesirable as the multiplicity of taxes; either case creates uncertainty and instability in the economy.

Therefore, governments at all levels should harmonise all revenue-generating functions into a single platform under the administration of only one revenue authority of each government.



1. FIRS Annual Tax Compendium  

2. The Guardian News Reports

3. Wikipedia


About the author

M.O ZUBAIR is a prolific writer and legal researcher and can be reached via Ahmadu Bello University Zaria, Kaduna State. Telephone: 08169287393. Email: [email protected]

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