Attracting defaulters into the tax net
The Voluntary Asset and Income Declaration Scheme signed into force via an Executive Order of Acting President Yemi Osinbajo is a sensible, out-of-the box measure to encourage tax payment and increase the revenue of government. Responsible citizens have an opportunity and a nine-month period of grace to redress their weighty offence of failure to pay tax, a failure to fulfill their legal and moral obligation to government and to society. This is a commendable idea. The three tiers of government should firmly apply the provisions of this executive order and shun all personal, class, or any other sectional interest to derail it.
Arguments for a citizen’s obligation to pay tax are, in principle and in practice, many, as well as unassailable. Where would any government be without the tax revenue to fulfill its primary purpose which, as the nation’s constitution states, is to ensure ‘the security and welfare of the people’? The expanding responsibilities of government to an increasing population in an increasingly complex world also come with a financial cost that must be met. There is a need, therefore, to broaden the tax net.
Indeed, the Constitution of the Federal Republic of Nigeria (as amended) states in chapter II section 24(e) that ‘It shall be the duty of every citizen to declare his income honestly to appropriate and lawful agencies and pay his tax promptly.’ This is the law. But what the statistics on the violation of the law reveal is simply a crying shame. Firstly, according to the acting president, quoting figures from the Nigerian Bureau of Statistics (NBS), only 14 million of 70 million economically, that is about 20 per cent, of active Nigerians pay tax. Secondly, less than 1,000 of the very many thousands of extremely rich people in this country pay between N10 million and N20 million as tax considering that, as Osinbajo rightly noted, a huge number of those Nigerians own assets around the world. Thirdly, of the 914 persons who pay tens of millions as tax, 912 of them reside in Lagos State and the other two in Ogun State. Pray, where are the wealth-flaunting rich in the 34 other states and the Federal Capital Territory?
Paying tax is unattractive to many citizens in this polity on the argument that tax from hard-earned personal income is either stolen or misapplied by public officials. This may be true, but only to an extent. Indeed, that is merely an excuse for not doing the right thing; it is not at all a reason. A citizen’s duty is to obey the law first, and subsequently complain.
There is, as quoted above, a citizen’s constitutional and therefore legal obligation to pay tax. So, paying tax makes a man or woman a de jure stakeholder in both community affairs and governance. There is also a moral obligation to contribute one’s fair share to the public pool of fund for the upkeep of the public. This is a sacred duty a citizen ought to perform. The phrase ‘tax payers’ money’ carries weight and credibility to the extent that it grants the payer a locus standi to question an injudicious application of public fund. It also entitles him to demand accountability from managers of public affairs at all levels. Failure to pay one’s tax is to forfeit the right to enjoy such services as constituted authority is duty-bound to provide to the populace.
It is arguable that the decline in the tax paying culture in Nigeria coincides with the era of easy money from oil proceeds on the one hand, and the degeneration in the quality of national leadership on the other. Successive governments, bereft of vision of and focus on the truly important values and things, also lack the capacity to harness and invest public resources for the future, and the discipline to sustain the efficient and tax-paying and tax-collecting culture that maintained a more stable economic system of the 1960s. It may be recalled that, in another time in this country, the machinery for the collection of poll tax was quite efficient. But of course, the money was efficiently allocated, judiciously and demonstrably spent on community needs. This is hardly so today. Which justifies, partly, the lack of enthusiasm by many otherwise law-abiding citizens to pay tax.
Granted that it is the right and proper thing to pay one’s tax, the point must be made with the strongest emphasis that a man can only pay tax on what he earns. Government cannot tax unearned income in a country with double-digit unemployment rate, in a country of 180 million but with only 70 million, a miserable 38.8 per cent, as ‘economically active’. This is an unpardonable failure of government.
The social objective of State policy in Chapter II, Section 17 (3)(a) of the Nigerian constitution stipulates that ‘The state shall direct its policy towards ensuring that all citizens, without discrimination on any group whatsoever, have the opportunity for securing adequate means of lively as well as adequate opportunity to secure suitable employment.’ Whereas this provision, so crucial to the wellbeing of the citizens and the nation, is non-justiciable, government should, indeed, consider it a sacred duty and primary purpose to empower the people to work and create wealth for themselves and for their country. The more people can earn an income, the more revenue would accrue into government coffers.