How Diaspora Taxation Can Shore Up Nigeria’s Revenue Base
By Cees Harmon NE
As Nigeria struggles to shore up revenues to reduce her perennial budget deficit, there are growing calls among pundits to legislate taxation for diaspora Nigerians.
It is estimated that there are at least 18 million Nigerians living in the diaspora who remit at least $24 billion annually.
Experts, who spoke with NATIONAL ECONOMY yesterday drew attention to the fact that the United States imposes income taxes on its citizens living abroad to contribute their fair share of taxes to their country, regardless of their country of residence, since the US provides relative security for their citizens living abroad. This perhaps underscores the benefit Americans enjoy wherever they live as successive US governments have sought to protect the lives and properties of Americans globally.
Eritrea also imposes 2 percent income tax on their citizens in the diaspora.
In the same vein, a barrister who practices in Port Harcourt, Charles Nwabuke, says it is time Nigeria considered all other viable funding options for the country’s development programmes, considering projections of high population growth and deepening level of poverty.
However, according to Section II Personal Income Tax Act (PITA) (as amended), a person resident outside Nigeria is only taxed on the income or profit derived from Nigeria. Although section 3(1) PITA provides that “subject to the provisions of this Act, tax shall be payable for each year of assessment on the aggregate amounts, each of which is the income of every taxable person for the year, from a source inside or outside Nigeria,” this is only applicable to residents of Nigeria.
It therefore means that non-resident Nigerians are not subject to income taxes under PITA except such income was derived from Nigeria and where such is not within the 183-day rule of residency in cases of foreign employment.
unarguably, remittances received in Nigeria enjoy tax exempt status by the combined interpretation of section 19 and Third Schedule PITA.
Although many believe that diaspora taxes would be a good alternative to bolster revenue to build infrastructure, a broad spectrum of persons who spoke to NATIONAL ECONOMY yesterday said corruption and mismanagement of public finances are not positive factors to encourage citizens’ tax compliance.
Notably, remittances from Nigerians in diaspora have been instrumental in fostering economic growth. Hence, pundits are of the opinion that any attempt at imposing an additional burden would witness a sharp decline in remittances.
According to an Afrinvest Research, 70% of the remittances from 2018 was spent on consumption such as education, health, marriages, funerals, etc. whilst 30% was invested in real estate development, savings, loans, etc.
One official of government, who chose to be anonymous, told NATIONAL ECONOMY that the only way to induce Nigerians in the diaspora to commit to paying taxes to Nigeria is to have a bigger say in the way government is run.
According to him, “It is widely acknowledged that there can be ‘no taxation without representation. Given the renewed call for diaspora voting and the establishment of Nigerian Diaspora Commission (NIDCOM) all in a bid to foster a sense of collective ownership in the Nigerian project, it is therefore prescient that same be introduced to shore up Nigeria’s dwindling revenue base.”
For years, Nigerians in diaspora have constantly called for more representation in the Nigerian government, which has led to the establishment of the Nigerian Diaspora Commission. Their contribution through the payment of income taxes to the Nigerian government will further amplify their claim and demand for good governance and can demand accountability of its taxes.
Nonetheless, the Nigerian government must however show some level of ‘good faith’ in the management of tax revenue before seeking to impose taxes on Nigerian in diaspora. Perhaps, aggregating all potential sources of revenue and given the country’s growing population could be Nigeria’s lifeline post-crude era.
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