The Benefits of Tax Compliance in Nigeria
By Arabinrin Aderonke
Tax! Tax!! Tax!!! Who should be involved, and why does it even matter? People often see tax compliance as a burden, but the truth is it is a tool for financial stability, business expansion, and national development. Most Nigerians do not like stress, yet many unknowingly create problems for themselves by ignoring their tax obligations. It is only when penalties hit, government services become inaccessible, or financial doors close that some realize the cost of non-compliance.
I have seen it happen over and over again. Someone needs a loan, a contract, or even government service, only to find that their tax records or lack of them are standing in the way. The reality is that paying taxes is not just about avoiding trouble with the authorities. It comes with benefits that can protect your finances and contribute to a better Nigeria.
One of the advantages of compliance is avoiding penalties and interest. Tax laws are simple if we follow them. Late payments and non-compliance attract fines and interests that only get worse over time.
Many people think they are saving money by avoiding taxes, but they end up paying far more in penalties. Beyond avoiding penalties, compliance guarantees access to government services. In Nigeria, a tax clearance certificate is not just a document. It is a key that unlocks many benefits. For example, in Lagos, it is required to access free education, healthcare, and even affordable housing schemes. Many businesses also need it to qualify for government contracts. Those who ignore their tax obligations often find themselves stuck, unable to access these services simply because they failed to comply.
Another often-overlooked benefit is eligibility for tax benefits and credits. Many assume taxes only take from them, but what they need to know is there are provisions within the system that actually help taxpayers save. For example, small businesses in Nigeria can claim exemptions if they file their income tax returns properly. Larger businesses that pay early can receive tax credits of 1% or 2%, reducing their overall tax burden. These incentives are designed to reward compliance, yet many people miss out on them simply because they want to dodge taxes.
Tax compliance also helps with better financial planning and also provides legal protection. A taxpayer who understands their obligations can plan ahead, budget effectively, and avoid unnecessary financial stress.
For people looking for loans or financial assistance, tax compliance boosts creditworthiness. When requesting loans banks and lending institutions review tax returns. A clean tax record demonstrates financial prudence, making it simpler to obtain loans and even lower interest rates. However, a history of noncompliance raises red flags for lenders, making it harder to obtain financial assistance when it is most needed. Tax-compliant businesses have an edge because they are seen as reliable, while those that evade taxes risk damaging their reputation and losing potential business opportunities.
Tax compliance is our civic duty. Everyone wants better roads, good schools, quality healthcare, and reliable security, but these things don’t just happen. Developed countries like the United States of America have strong tax systems because their citizens understand that taxes drive progress. If we want a better Nigeria, tax compliance is not an option. It is a necessity. Tax compliance promotes economic stability and progress. When people and companies pay their taxes, the government has money to invest in development projects that create jobs, support industries, and boost the economy.
Who doesn’t want peace of mind? No penalties, no last-minute rush to pay off debts or face legal repercussions. By promoting a culture of tax compliance, we can build a Nigeria where resources are allocated effectively and public services excel, ultimately benefiting everyone in society. Tax compliance is more than just paying taxes. The benefits far outweigh the costs. Do the right thing. Pay your tax today.
_Arabinrin Aderonke Atoyebi is the technical assistant on broadcast media to the executive chairman of the Federal Inland Revenue Service._