By Amos Adetunji with Research materials provided by Ilemoboye Oluwakayode aka EKONET.
Since his appointment in September 2023 as the Executive Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji has steered the agency towards new heights in tax administration. His leadership has been marked by bold initiatives aimed at reforming Nigeria’s tax system, improving revenue collection, and reducing the country’s reliance on external borrowing and oil revenue. By overcoming numerous challenges, Adedeji has not only achieved but surpassed the FIRS revenue targets, positioning the agency as a key driver of Nigeria’s economic transformation. This article delves into Adedeji’s achievements, the systemic issues in Nigeria’s tax system, and the strategic moves being implemented to enhance tax compliance, boost revenue, and diversify government funding sources.
Challenges Faced by Zacch Adedeji and How He Surpassed Expectations
Upon his appointment, Zacch Adedeji inherited a tax system plagued by inefficiencies, low tax morale, complex compliance processes, and a narrow tax base. Nigeria’s tax-to-GDP ratio stood at a mere 6%, one of the lowest in Africa, and well below the global average of 15-20%. These systemic challenges threatened the country’s fiscal sustainability, especially in the wake of fluctuating oil prices and ballooning external debt.
However, Adedeji’s leadership from the outset was driven by a clear vision of transforming FIRS into a more efficient, transparent, and technology-driven institution. A key factor in his early success has been his relentless focus on expanding the tax net by targeting sectors and individuals that had traditionally evaded taxation. His administration aggressively pursued high-net-worth individuals, corporate bodies, and the informal sector—areas that had historically contributed minimally to the tax system.
One of the most notable achievements under Adedeji’s tenure has been the surpassing of FIRS revenue targets. Despite the challenges, FIRS recorded a significant increase in tax revenue collection, exceeding projections within the first year of his leadership. The success can be attributed to the combination of rigorous enforcement of tax laws, improved taxpayer education, and innovative use of technology to streamline tax administration.
Systemic Challenges in Nigeria’s Tax System
Nigeria’s tax system has long been characterized by a narrow tax base, over-dependence on oil revenue, and complex and cumbersome processes. With over 60% of the economy operating informally, the challenge of bringing informal businesses and individuals into the tax net has been a persistent problem. Furthermore, the perception of tax as a burden rather than a civic responsibility has contributed to widespread tax evasion.
To meet these challenges, Adedeji has focused on simplifying the tax system, making it more inclusive, and improving taxpayer compliance. One of his major initiatives has been the ongoing review and modernization of Nigeria’s tax laws and regulations to reflect global best practices. By aligning the tax system with international standards, FIRS is better positioned to attract foreign investment and reduce tax avoidance and evasion.
Another key challenge is the low tax-to-GDP ratio, which at 6%, is far below the African average of 16%. Adedeji recognizes that for Nigeria to meet its developmental goals, it must improve this figure significantly. FIRS is now working closely with the Ministry of Finance and other stakeholders to design policies that will expand the tax base, increase tax compliance, and ensure that tax revenue grows in line with the country’s economic growth.
Zacch Adedeji: The Best Man for the Job
Zacch Adedeji’s appointment as Executive Chairman of FIRS was a calculated decision by the government. With a background in accounting, finance, and tax administration, he brings a wealth of experience and knowledge to the role. Adedeji’s previous stints in public service, including his time as Commissioner for Finance in Oyo State, where he significantly improved the state’s Internally Generated Revenue (IGR), prepared him well for the enormous task at FIRS.
In addition to his technical expertise, Adedeji’s leadership style has proven to be transformative. He is widely recognized for his ability to build consensus, drive change, and deliver results. His focus on collaboration with other government agencies, international organizations, and the private sector has strengthened FIRS’s capacity to achieve its goals.
What makes Adedeji the right person for this role is his deep understanding of the need for a progressive tax system that taxes wealth creation rather than poverty. He has been vocal about the importance of creating an enabling environment for businesses to thrive, while ensuring that wealth is taxed fairly and equitably. His approach to tax reform is not punitive but rather developmental, emphasizing the role of taxation in fostering inclusive economic growth.
Creating an Enabling Environment and Taxing Wealth, Not Poverty
One of Adedeji’s key advocacies since taking office has been the need for the government to create an enabling environment for businesses to thrive. He argues that a thriving private sector will create jobs, generate wealth, and ultimately increase tax revenue. For this reason, FIRS under his leadership has been working closely with the government to reduce bureaucratic red tape, ease business registration processes, and improve the overall ease of doing business in Nigeria.
Adedeji has also championed the idea that taxes should be levied on wealth creation rather than poverty. This means focusing on individuals and corporations that are making significant economic gains while offering tax relief and incentives to smaller businesses and low-income earners. By taxing wealth creation, the government can mobilize much-needed revenue without stifling entrepreneurship and innovation.
Weaning the Government off External Borrowing and Oil Revenue
Nigeria’s over-reliance on oil revenue has long been a source of concern for policymakers, especially given the volatility of global oil prices. Adedeji has made it clear that one of his primary objectives is to diversify the country’s revenue sources by focusing on domestic taxation. Under his leadership, FIRS has launched several initiatives aimed at boosting non-oil tax revenue. This includes expanding the Value-Added Tax (VAT) base, enforcing tax compliance among high-net-worth individuals, and strengthening tax collection in the agriculture, telecommunications, and digital sectors.
By increasing domestic tax revenue, FIRS is playing a crucial role in reducing Nigeria’s dependence on external borrowing. The agency has set ambitious targets to increase non-oil revenue collection, and these efforts are already bearing fruit. With a more robust tax system, Nigeria is better positioned to fund its development programs without resorting to unsustainable levels of debt.
Improving Nigeria’s Tax Revenue as a Percentage of GDP
One of the most pressing challenges that Adedeji faces is the need to improve Nigeria’s tax revenue as a percentage of GDP. At 6%, Nigeria’s tax-to-GDP ratio is one of the lowest in the world, far below the African average of 16% and the global average of around 15-20%. This low ratio limits the government’s ability to invest in critical infrastructure, education, healthcare, and other social services.
FIRS has set an ambitious target of raising Nigeria’s tax-to-GDP ratio to 10% within the next few years. To achieve this, Adedeji’s administration is focusing on expanding the tax net, improving tax compliance, and ensuring that all sectors of the economy contribute their fair share. By increasing tax revenue, Nigeria can reduce its reliance on external borrowing and create a more sustainable fiscal framework.
Leveraging Technology for Improved Taxpayer Service
One of the hallmarks of Adedeji’s leadership has been his embrace of technology to improve tax administration and make it more user-friendly for taxpayers. Under his direction, FIRS has made significant strides in automating its processes, reducing human intervention, and minimizing opportunities for corruption.
FIRS has deployed advanced data analytics and artificial intelligence (AI) to improve tax compliance and detect potential cases of tax evasion. AI is also being used to handle routine taxpayer queries, improving the efficiency and responsiveness of the agency’s customer service. Additionally, FIRS has invested in upgrading its website and digital platforms to provide taxpayers with easy access to relevant tax laws, regulations, and guidelines.
The use of technology has not only improved the efficiency of tax collection but has also made the process more transparent and accessible. Taxpayers can now file their returns, make payments, and access support services online, significantly reducing the time and effort required to comply with tax obligations.
Efforts to Improve the Ease of Paying Taxes
A key part of Adedeji’s reform agenda has been to simplify the tax payment process and make it more convenient for taxpayers. Nigeria’s tax system has long been criticized for its complexity, with multiple layers of taxation and cumbersome compliance requirements. FIRS has taken steps to address these issues by introducing a more streamlined process for tax filing and payment.
Adedeji’s administration has introduced measures to reduce the time it takes to pay taxes, minimize the paperwork involved, and eliminate unnecessary bottlenecks. This includes the introduction of an e-filing system, which allows taxpayers to file their returns online, and the integration of various payment platforms to make it easier for businesses and individuals to pay their taxes.
Conclusion
Zacch Adedeji’s tenure as Executive Chairman of the Federal Inland Revenue Service has been marked by significant achievements in reforming Nigeria’s tax system and improving revenue collection. Despite the challenges, Adedeji’s leadership has been instrumental in surpassing revenue targets, expanding the tax base, and modernizing FIRS’s operations through the use of technology.
His vision of creating a tax system that supports wealth creation rather than burdening the poor is a bold departure from the past, and his focus on leveraging domestic resources to reduce Nigeria’s reliance on oil revenue and external borrowing is critical to the country’s long-term economic stability.
As Nigeria continues its journey toward economic diversification and fiscal sustainability, the reforms being implemented by FIRS under Adedeji’s leadership will play a pivotal role in shaping the country’s future. The agency’s efforts to increase tax revenue, simplify tax processes, and create an enabling environment for businesses will not.
