Taxation and the people’s parliament
One of the most hated topics for public discussion is taxation. In fact, it usually gravitates to heated debates. Yet, no nation can ever boast of sustainable economic growth in the absence of well articulated and robust taxation policy; followed with religious diligence and delivered patriotic fervor. It was understandable therefore, when Acting President Yemi Osinbajo recently touched tellingly on the rather tricky issue and decided that the government would consider a nine-month period of grace before descending on the defaulters. And mind you, they are legions!
Taxation as a tool of fiscal policy is a compulsory levy imposed by the government on the income of taxpayers in a given geographical area. The noble aim of course, is to ensure the highest welfare for the greatest number of the citizenry through a fair distribution of financial resources. That is the ideal situation.
But the Nigerian scenario is characterised by multiple taxation, lack of credible data, even from the National Bureau of Statistics (NBS). Here, most of the rich hardly pay taxes commensurate with their huge incomes. Also, some of the favoured political apologists are given questionable tax waivers. There is over dependence on oil revenue at the expense of agriculture and industrialisation. With all these anomalies, is there value for money for taxation for ordinary Nigerians? The answer is in the negative.
Yet, there are more institutional challenges. For instance, here there is information asymmetry. Access to information remains weak for the average investor as well as the general public. Relevant data meant for stock analysis is often published with a lag. Sometimes, managers give the wrong information with regards to their actual income. About a decade ago about 75 per cent of the National Identity cards was reportedly fake!
There still exists the untoward practice of accountants preparing different account statements for banks and the Federal Inland Revenue Service, FIRS. The oil benchmark cannot be agreed upon. Banks are not funding the manufacturing sector. Fake products are all over the place. Unlike the European Union (EU) countries which are coming together to harmonise tax policies there is no stable economic model to apply holistically.
It is in the face of these daunting odds that the Accounting Education and Research Services, ACCERS came together some years ago with relevant stakeholders in the financial sector as the People’s Parliament to fashion the best way forward out of the nation’s economic wood. These included capital market operators, bankers, accountants, members of ICAN, CITAN, ANAN, legal practitioners, industrialists, small scale entrepreneurs and academicians. According to Otunba Abdul Lateef Owoyemi, the past President of the Institute of Chartered Accountants of Nigeria (ICAN), we must ensure that our tax and other fiscal policies are in sync with international best practices. This has become expedient with the ongoing ‘fiscal cliff’ of the euro-zone countries and the looming policy crisis facing the U.S.
Nigeria, like many other countries across the globe is left with three possible policy options, for economic survival. The first is to drastically cut down on public expenditure, which the federal and state governments are not willing to do. What with whopping billions of budgetary allocations earmarked to satiate the epicurean tastes of the political class, at a time over 70 per cent of Nigerians live on less than one dollar per day? Or, when unemployment of graduates has escalated to the level of a time-bomb.
The second approach is to allow those who have the ability to pay higher taxes to do so, as former President Barack Obama’s administration championed in the U.S. The third is to combine the two to meet the needs of the society.
The forceful arguments of the Parliamentarians as anchored by Owoyemi is that there is no clear-cut direction or compass to point accurately to the way forward our policy makers are piloting the ship of state. Their reasons are obvious. The persisting problems that have bedeviled the energy sector for eons, as well as even ineffective road construction and repairs are reflective of the gross failure of the economic policies. Though several research findings have raised the alarm over the over reliance on petro-dollars not much has changed. More has been said than done on economic diversification.
That is the informed position of the People’s Parliament that the need to transform the capital market in such a way as to capture possible public revenue is important. Nigeria must develop its tax system in such a manner that there is a great collaboration amongst the federal, states and local governments and for the last two to have a fairer sharing formula for tax collected. Tax revenues should henceforth be separated from all other revenues and should be shared in accordance with contributions from the states.
On the issue of financial transaction tax as a levy placed on a specific type of monetary transaction for a particular purpose, Dr. Semiyu Adeyemi of the University of Lagos traced the history to the London Stock Exchange in 1694, which John Maynard Keyes advocated in 1936 in the wake of the Great Depression. He noted that reintroducing it for the Nigerian stock market transactions is good as it is in line with global practices. However, it should not be excessive, and tax administrators should be left to design the model for monitoring, collection and accountability to benefit the citizens.
To further strengthen the implementation of tax policies in Nigeria the full computerisation of the entire economy and transactions has become imperative. This would reduce corruption. The firm belief of experts on taxation is that stable infrastructure should be put in place along with effective monitoring of governance. Poor corporate governance has over the years combined with the monster of financial corruption to cripple the economy.
For instance, tackling endemic corruption in the oil sector remains more significant than the shadow of removing fuel subsidy, thereby inflicting undue pains on the consuming masses. Reduction of taxes for those rich individuals who fund elections would never be in the best interest of the economy.
Above all, government should sustain public enlightenment on the need for the citizens to pay their tax as at when due. There should be accountability on the part of government. And Nigerians should also begin to ask pertinent questions on how their various taxes are utilised.