Strengthening Nigeria's Fiscal Policies through the UNDP Tax for SDGs Initiative

July 25, 2024

The UNDP Tax for SDGs Initiative has been instrumental in helping Nigeria align its fiscal policies with the 2030 Agenda such as by providing support on capacity building on tax administration to the Federal Ministry of Finance, the Federal Inland Revenue Service, the Presidential Committee on Fiscal Reforms and Fiscal Committee and sub-nationals such as Abia, Ondo and Kaduna States. The Initiative operates under UNDP’s Sustainable Finance Hub (SFH), which supports governments, investors and businesses in reaching climate, social impact and sustainability targets.

Tax for SDGs Hosts the Second National Tax Dialogue in Nigeria

In May 2024, the Tax for SDGs, in collaboration with the Chartered Institute of Taxation of Nigeria, hosted the second National Tax Dialogue as part of the country’s 26th Annual Tax Conference. This hybrid event was attended by more than 3,000 participants, including politicians, governors, traditional rulers, finance ministries, tax administrators, academics, civil society, women's groups, tax professionals, and the general public. Led by the Institute's President, Bar. Samuel Agbeluyi, the dialogue focused on "Sustainable Tax Culture and Economic Roadmap for Nation Building."

Building on the foundation of the first dialogue held last year, which focused on achieving sustainable development through taxation, this second dialogue emphasized the crucial link between tax revenue and sustainable development. Keynote speakers, including Dr. Abiodun Adedipe, Managing Consultant at B. Adedipe & Associates, and Ms. Elsie Attafuah, UNDP Resident Representative, highlighted the importance of a sustainable tax culture in combating illicit financial flows, promoting tax compliance, and fostering trust in public administrations. Ahmad Aliyu Sokoto, Executive Governor of Sokoto State, and Princess Adejoke Orelope-Adefulire, Special Adviser to the President on SDGs, also contributed to the discussions.

The dialogue also featured HRH Hammim Nuhu Muhammad, Emir of Dutse; Mrs. Oluwatoyin S. Madein, Accountant General of Nigeria; and Mr. Shakaar Chira, Auditor General of Nigeria, who further underscored the significance of enhancing domestic resource mobilization for public goods and services and addressing external debt.

Strategic initiatives were discussed to sustain tax revenue and promote inclusive growth, such as blocking loopholes, widening the tax base, and increasing the tax burden on the wealthy. Ms. Attafuah reaffirmed UNDP's commitment to building stronger tax systems and aligning tax policies with the 2030 Agenda.

Technical support through partnership

UNDP has provided significant technical support to Nigeria based on request. Through the Tax Inspectors Without Borders, a joint OECD-UNDP Initiative, the Federal Inland Revenue Service (FIRS)- the agency responsible for assessing, collecting and accounting for tax and other revenues for the Federal Government of Nigeria- has benefited from three critical programs:

Transfer Pricing Auditing: This programme has been successfully completed, enhancing FIRS's capabilities in managing and auditing transfer pricing.

Tax Criminal Investigation: Currently ongoing, this programme aims to strengthen the investigative skills of tax officials to combat tax fraud and evasion. Automatic Exchange of Information: In its ideation phase, this programme focuses on establishing mechanisms for the automatic exchange of tax information to enhance transparency and compliance.

Advancing Digital Taxation

UNDP has also introduced digital technology solutions to FIRS, leading to significant advancements:

Digital Transformation Maturity Model Assessment: This assessment has helped evaluate and improve the digital capabilities of tax administrations.
Digitalization of Tax Administrations: Efforts have been made to digitize various tax processes, improving efficiency and reducing manual errors.
Information Storage Enhancements: Upgrades in information storage systems have ensured better data management and security.

Tax officials have received comprehensive training in several areas, including digital taxation, international taxation, tax transparency, and the Base Erosion and Profit Shifting Project. This training aims to equip them with the skills necessary to navigate the complexities of modern tax administration.

Capacity Building and Regional Collaboration

In addition to federal support, UNDP has extended its capacity-building efforts to three sub-national tax authorities, enhancing their operational efficiency and effectiveness.

This year, UNDP, in collaboration with the West African Tax Administration Forum, co-hosted a training event focused on taxation and the African Continental Free Trade Agreement. This cross-sector training is crucial for tax officials to understand the interplay between trade in services and taxation, ensuring that both sectors complement and support each other effectively.

Future Directions: Tax Gap Analysis

Looking ahead, a tax gap analysis is currently being drafted. This analysis will provide a clearer picture of Nigeria's tax base, identifying areas for improvement and potential revenue sources. By understanding the tax gap, Nigeria can develop more effective strategies to enhance tax compliance and revenue collection. The gap analysis will be provided through a partnership by International Monetary Fund.

Through these comprehensive efforts, the UNDP Tax for SDGs Initiative continues to support Nigeria in building a robust, transparent, and efficient tax system aligned with the broader goals of sustainable development.