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OECD's new rule will exempt some foreign firms from taxes in Nigeria -tax chief

05/25/2022 | 03:44am EDT

ABUJA (Reuters) - The OECD's minimum corporation tax rule will exempt several multinational companies from paying taxes to the Nigerian government, hurting its ability to generate revenues, the country's tax chief said on Tuesday.

Nigeria did not sign up to the Paris-based Organisation for Economic Cooperation and Development rule last October because some multinational firms would stop paying taxes.

"That is a concern," Federal Inland Revenue Service Chairman Muhammad Nami said.

The 15% tax floor agreed to by a group of 136 countries is, however, well below a corporate tax rate which averages around 23.5% in industrialised countries.

Nigeria, Kenya, Pakistan, and Sri Lanka refused to agree to the global deal that sought to make it harder for big companies to avoid taxation. The agreement requires countries to repeal their digital service taxes.

Nigeria has been struggling to raise revenues after recovering from a recession caused by previously low oil prices. The revenue situation worsened with the COVID-19 pandemic.

The country plans to prioritise tax collection from its digital economy this year and focus on non-resident firms with significant economic presence that generate turnover in Nigeria. Nami said Nigeria will struggle to generate tax revenues under the new rules.

The government has said it wants to boost non-oil revenues since oil sales make up 90% of foreign exchange receipts. But raising more money from taxes has proven difficult because many small business are not registered.

The World Bank said last year that Nigeria needed to raise non-oil taxes to at least 12.75% of gross domestic product to boost growth. It said tax collection sits at around 4.5% of GDP, one of the lowest rates in the world.

(Reporting by Camillus Eboh; Writing by Chijioke Ohuocha; editing by Grant McCool)

By Camillus Eboh


© Reuters 2022
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