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News » Nigeria overhauls tax structure to boost BPO industry

Nigeria overhauls tax structure to boost BPO industry

Nigeria overhauls tax structure
Photo from Getty Images

ABUJA, NIGERIA — In a strategic move to revitalize Nigeria’s Business Process Outsourcing (BPO) sector, the Presidential Fiscal Policy and Tax Reforms Committee has announced significant changes to the country’s tax structure. 

The committee, led by Taiwo Oyedele, aims to remove barriers to the growth of the BPO industry and position Nigeria as a competitive player in the global market.

Addressing tax impediments

At a recent workshop in Lagos, Oyedele highlighted the current tax policies that deter international companies from hiring Nigerians for remote work. 

“Our existing tax structure demands that any company outside of Nigeria that hires Nigerians living in the country to work remotely will be expected to pay tax on the company’s income as well as on the income of the Nigerian working for the company,” Oyedele explained. 

This dual taxation has driven companies to favor countries like India and the Philippines, where the BPO sector has seen exponential growth.

Simplifying the tax system

Oyedele pointed out that the current tax system suffers from low compliance due to a lack of tax morale. 

“One of the critical challenges facing the tax system in Nigeria is the shockingly high level of non-compliance as a result of low tax morale,” he said.

To create a more favorable environment for BPO businesses, the committee proposed reducing the number of taxes to a single-digit figure of eight which includes income tax, value-added tax, property tax, customs duties, excise tax, stamp duties, special levy, and harmonized levy. 

The goal is to eliminate low-yield, high-cost nuisance taxes and focus on high-revenue, broad-based taxes that are easier to collect.

Expected outcomes

The committee’s comprehensive reform plan aims to streamline tax administration, rationalize tax incentives, and leverage technology for better compliance and efficiency. 

Additionally, the reforms will focus on better budgeting, spending, and management practices to enhance fiscal responsibility and transparency. 

This includes restructuring the budget, tackling systemic corruption, prioritizing essential spending, and leveraging public-private partnerships for viable projects.

By addressing these tax impediments and implementing strategic reforms, Nigeria aims to create a conducive environment for the BPO industry to thrive, ultimately boosting employment and economic growth in the country.

Economic potential of BPO

Kashifu Inuwa Abdullahi, Director General of the National Information Technology Development Agency (NITDA), emphasized the economic potential of the BPO sector in Nigeria. 

“Today, Nigeria’s outsourcing sector is worth $285.8 million, employing 16,540 Nigerians mostly living in Nigeria and working for companies outside Nigeria,” Abdullahi stated. 

He noted that the sector began to take shape in 2020 and has the potential to create more jobs than any other sector in the country.

Read more here.

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