The tax alternative
AS cash-strapped Nigeria looks for ways to shore up its dwindling revenue, leaders now in search of ideas on how to turn around the national economy merely look back to the past in nostalgia and call for a resort to a better system of taxation on the citizens.
This is not only simplistic, it advertises a complete flight from the rigour which the Nigerian crisis demands. Better taxation may be one of the solutions but even so, many other variables will have to be in place before it can be an effective one.
Governor Adams Oshiomhole of Edo State is among those voicing a return to stringent tax rule as the way out of the country’s current crisis. While noting that the Federal Government must deepen its internally generated revenue as it is done in the developed world, the governor said, “central to every debate to every country with mature democracy is the issue of tax payment. We have to find the courage to be firm and just and we have to give commensurate service.” In the same vein, the Governor of Kwara State, Abdulfatah Ahmed said he would prioritize tax collection in his state, especially efficiency of collection, administration and management in order to generate funds for infrastructural development.
Simultaneously, the Acting Chairman, Federal Inland Revenue Service (FIRS), Mr. Babatunde Fowler has called for a tax alternative to the dwindling national revenue during an interactive meeting with members of the Chartered Institute of Taxation of Nigeria (CITN) in Abuja. He said it should by now dawn on the people and government at all levels that the days of reliance on oil revenue often statutorily shared among the tiers of government were over and as a consequence, organisations and individual earning income must be willing to pay tax.
No doubt, taxation is an essential part of democratic governance as it engenders inclusiveness, responsibility and participation of all citizens and of course, accountability to all on the part of the government. These calls for taxes, however, would appear not well-thought through. They are not only simplistic depositions, they ignore other variables in a quest for easy solutions to government’s insolvency. Since the 1970s, the country has had several oil windfalls, enough to diversify the production base of the national economy and make Nigeria great, but the resources were squandered by successive governments. The occasional lean times that have occurred have often been greeted with empty calls for such diversification of the economy.
At no time has any government demonstrated commitment to walking its talks in re-engineering the national economy, in re-orientation and in boosting production capacity. So the Central Bank of Nigeria, (CBN) was right when it observed the other day that Nigeria missed the opportunity to diversify the economy when the crude oil prices were above $100 per barrel benchmark. There are no infrastructural surplus, no further employment generated to absorb the mass army of the unemployed and someone ought to account for the squandering of the commonwealth before a blind plan to impose tax burden on already pauperised citizens of the country.
At this point, it is pertinent to ask: what value has the proceeds from both direct and indirect tax regimes prevalent in the country now added to national development? Apart from misapplication and mismanagement, direct looting of such amassed resources from the people has been the order of the day.
In those countries where tax payment is gospel, and deservedly so, it is not a primitive way out of self-inflicted economic woes or mis-management. It is a deliberate well-articulated action of responsible governments with which they provide public goods and make life abundant with social security and pensions to their citizens. They do not tax the unemployed but work assiduously to provide employments for the people. Naturally, tax functions better in the context of a dynamic and highly diversified economy in which governance is truthful, service is priority and loyalty of the people is earned. Indeed, government revenue comes from direct taxes, company profits and indirect taxes on goods and service due to the fact that such economies are productive. Industrialisation and, of course, diversification provide the context in which government is able to decide on forms of tax policies.
To run a good tax policy, therefore, government first and foremost must deal with the basics. Government has to earn the trust of the people who are largely disenchanted with the waste and non-accountability and, therefore, distrustful of public officials. And the statistical foundation must be in place. Presently, no government at any level in Nigeria has the data bank for effective tax administration. So the Nigerian leadership needs to generate employment and provide the enabling environment for wealth creation by the citizens while critical infrastructure must also be put in place for massive production. So far, the government has exhibited ineptitude and an over-reliance on only the formal sector as well as tax collection process that is fraught with distortions such as multiple taxations with the corruptive or corrupted use of tax consultants to generate tax revenue.
A scheme of imposing taxes on Nigerians, many of whom are unemployed, would not amount to productivity or diversification of the economy but a mere escape route for indolent and irresponsible governance. Whereas, the 1999 Constitution as amended stipulates in Section 24 (f) the payment of tax as when due, it is however the responsibility of government to empower the people to be able to pay such tax.