Friday, 29th March 2024
To guardian.ng
Search

Taxation, governance, democracy and development

By Chude Jideonwo
05 February 2016   |   2:26 am
CONTINUED FROM WEDNESDAY THE oil boom of the 1970s put the final nail in the coffin. Since all favours came from the center, the military doled these out to themselves, the political class and the civil service in the form of things like the Udoji Awards. They determined who did and did not succeed in…
Tunde Fowler

Tunde Fowler

CONTINUED FROM WEDNESDAY
THE oil boom of the 1970s put the final nail in the coffin. Since all favours came from the center, the military doled these out to themselves, the political class and the civil service in the form of things like the Udoji Awards. They determined who did and did not succeed in business, and were accountable to no one.

In addition, the contest for these resources at the center brought things like ‘federal character’ and ‘zoning’ into our national lexicon. Everyone had to have the opportunity to get their nose in the trough. Such a belief is also behind the clamour for more states, never mind the fact that most of those we have now are merely names on a map.

It will take a long time to rid ourselves of these extractive political institutions and consequently improve governance.

When oil was the means by which government got its money, bad governance was overlooked, tolerated. It became: ‘Just leave us alone, and we will leave you alone’. However, a country run with money generated by the taxes on economic activity will be different. Which is where the present tax drives will yield important fruit.

A focus on taxation often brings with it increased interest in accountability, first to establish credibility and then to fan momentum.
To which the question must be asked: Does any government that spends billions on feeding itself and its hungry guests stand any chance in gaining credibility with the very people it wants to tax?

Can a state whose 2016 budget is currently not available by line items anywhere, even when the bulk of its revenue is Internally Generated, be seen as credible in demanding that businesses be accountable? The short answer is no.

It’s unacceptable really. It leaves the process of budgeting open to wanton abuse, and disempowers the people, apart from stealing their faith in government.

Many will of course remember that significant part of what caused the unrest that led to American Revolution, was taxes. The Englishmen who settled in the US were subject to laws by the British Crown, without having any say in how those laws were passed and taxes were imposed. One of the slogans became, ‘No taxation without representation’ and soon enough, it led to a revolt.

And that is the crux of the matter: in a space where a people have chosen democracy as the way they prefer to be governed, governments cannot act like know-it-all uncles. Actions and policies must be driven by an appreciation of what citizens determine to be just, to be fair and to be effective.

Democracy relies on that concept of a social contract:
You do your part, and I do mine.
You ask for my permission, then you act on my behalf.
Facing forward
In the meantime, here is our reality. The economy remains firmly beholden to the oil and gas sector, and by and large, it is the same characters in charge, operating through fronts.
Everything else is downside up.

A report by Ernst and Young on Nigeria in 2014 showed that 52% of foreign direct investment inflows went to the oil and gas sector since 2007, and even domestically, loans to oil and gas firms by Nigerian banks also crowd out other sectors of the economy. Even though oil contributes 11.2 per cent to GDP, bank loans to that sector make up an average of nearly 30 per cent of total loans, while other sectors like manufacturing receive far smaller shares.

This morning, the FBN Merchant Banking and Asset Management Report presents scary news: Nigeria records the worst manufacturing data in January 2016, falling to 44.6 versus 54.2 only last month.

Yet there cannot be any genuine development without a reallocation of resources toward manufacturing for export, which will generate employment and create a more resilient economy, one immune to the ups and downs of the global oil markets.

This reallocation must also expand towards vast areas of growth yet untapped, cliché as they now are, across an array of areas including the creative industries and ICTs.

And there lies, as business researcher, Jim Collins advise those two decades ago: the imperative for the genius of the AND.
Yes, taxation is presumably a tool for development. The purpose of taxation is for government to provide the public services – security, electricity, health care, water, roads, schools and a social safety net – that make development possible and sustainable. When applied judiciously to public infrastructure, these taxes can help create wealth, by having a healthier, better educated, better connected society that is secure and gives people the platform to become the best version of themselves.

The social welfare programmes of this administration are therefore worthy of commendation in a country with so many poor people.
However we need to think and tackle these imperatives with discipline and humility. The humility to say, we have this problem, it’s a major, stubborn problem; and ideas from the past will just not do for a world that has radically, considerably changed.

The reality of the new world is this: we must rapidly expand wealth, and include millions in that growth.

Only a focus on expanding wealth now and into the future can make a real difference, even in keeping these socalist pogrammes sustainably.
We need to both ensure efficient tax regimes, direct them towards social welfare while AT THE SAME TIME, creating and expanding wealth from those who have the capacity so to do (Hint: Not government).
Conclusion
The current challenges with crude oil prices offer yet another opportunity for the Nigerian state to change the focus of its economy, to build an economy worthy of its name.

This is a frustrating fact: we have gone through the pain of low oil prices before, but have not learnt any lessons. So the imperative is simple: before anything changes, the thinking at the top of the government needs to come into the future.

And this is the future, a focus on spending alone is a focus on failure, a focus on collecting and collecting alone is a focus on tyranny, even a focus on pursuing thieves alone can lead to a dangerous tunnel vision.

The one focus any economy interested in owning the future must have is creating wealth, expanding that wealth and then bringing more into the bracket of its rising tide.

There is something I learnt a while ago as a young business person studying the secrets to wealth: neither good nor bad luck are in themselves good or bad. It’s the return on luck that makes the difference between that last and those that die.

The collapse in oil prices is bad luck that can do us a huge favour.
We have a massive opportunity to change the character of our democratic institutions and thereby unleash the Nigerian potential I have been hearing of since I was born in 1985.

If we can begin immediate to apply the discipline of thought and action to create wealth in an inclusive sustainable manner, then instead of taxing to death the little that we have, we will create more and better that we can tax comfortably, and win with, now and far into the future.

.Being the concluding part of a paper presented by Chude Jideonwo, Co-Founder Managing Partner, RED, at the inaugural conference of the Ibadan School of Governance and Public Policy, on Monday.

0 Comments