As Nigeria makes effort to broaden her tax base and capture more eligible tax payers, there is need to ensure whatever is paid is reflected in the country’s development and the people’s standard of living. ABDULWAHAB ISA reports
Crude oil is currently cruising on a good pricing as global events, forces of supply and demand are in its favour. Predictably too, experts presume the product looks pretty set to sustain the price surge to near $100 per barrel in the years ahead. Good enough, Nigeria in recent times is witnessing stability and an increase in production output after the price turbulence of 2015 and 2016.
Nigeria’s oil production, including condensates, is reported to have increased to 2.07 million bpd, as at April, from 2.02 million bpd in March. Nonetheless, experts on tax matters in their assessment of the future prospect give little recognition to the country’s harvest from oil. Rather, they harp on broadening the tax net, which they say is most reliable, and credible source of revenue for the country.
Abysmal tax to GPD position
Nigeria ranks low in the ladder of tax revenue generation. The Minister of Finance, Mrs. Kemi Adeosun, and other experts at various fora put the country’s tax to Gross Domestic Product (GDP) at ratio of six per cent. She described the low tax position as unacceptable considering the load of works the government intended to carry out.
An advocate of improved broader tax base, Adesoun repeatedly gave reasons why the Federal Government was focusing its attention on improving the non-oil revenue aspect of the economy. She said: “Our revenue weakness, and the high cost of short term domestic debt are the core cause of our high debt service to revenue ratio.”
Of recent, the minister in collaboration with Federal Inland Revenue Service (FIRS) initiated series of tax reforms aimed at boosting and expanding tax to fill the shortfall in revenue accruals to government coffers. The recently introduced Voluntary Assets Income Declaration Scheme (VAIDS) is one of such steps.
The International Monetary Fund (IMF), an arm of World Bank, has been consistent with its call on Nigeria to broaden its tax base. Last week, the Fund repeated the need for Nigeria to widen her tax revenue base. It noted in its recommendation that Nigeria should widen its tax revenue base to finance growth and upgrade the nation’s infrastructure and social programmes.
The Fund’s position was contained in its economic out-look for sub-Saharan Africa released last week. It said Nigeria needed a higher revenue base to drive its reform efforts. It also warned that nations in the region were at growing risk of debt dis-
tress because of heavy borrowing and gaping deficits, despite an overall uptick in economic growth. It cautioned that refinancing that debt could soon become more costly. About 40 per cent of lowincome countries in the region are “in debt distress or high risk of debt distress,” the IMF said, adding that delays by oil exporters in adjusting to the crude shock have left some with high debt levels.
States on the edge
The second tier of government, the states, are the worse hit as their revenue sources shrank. Save for monthly allocation they receive from the federation pool, the states would hardly survive on their own. The Vice- President, Professor Yemi Osinbajo, last week, painted a picture of dire financial situation in some states.
The occasion was a conference on tax with the theme: “Institutionalising tax paying culture in a developing economy,” organised by the Chartered Institute of Taxation of Nigeria (CITN) in Abuja. The vice-president noted that prior to the discovery of oil, many regions of the country generated adequate revenue through taxes from agricultural produce to the extent that they contributed money to run the central government. Regrettably, however, Osinbajo said monthly fund from FAAC had turned to a bailout for most states.
He decried the low tax paying culture of Nigerians, adding that at six per cent, Nigeria has one of the lowest tax to GDP ratio in the world. He illustrated his point with figures, saying as at May 2017, only 14 million out of the country’s 70 million Nigerians, who are economically active, paid taxes to government.
To ensure that larger proportion of taxable population pay taxes, Osinbajo said the FIRS devised policies for tax compliance, a measure that had been able to increase the number of tax payers from 14 million in May last year to 19 million. He said out of the total tax payers in the country, only 943 of them paid self-assessment taxes of N10 million and above.
Giving further breakdown of the 943 tax payers who paid N10 million and above, the VP said 941 of them resided in Lagos while the remaining two are residents of Ogun State. “Today, the states in the whole western region, apart from Lagos, do not even earn enough in taxes to pay salaries, let alone do any major project. “Without federal allocation, most states cannot survive. Lagos State alone takes as much IGR as 31 states combined. This tells you how little the other states generate in IGR,” he said.
According to him, paying taxes comes with accountability. He said when people pay their taxes, they tend to hold government more accountable on how the country’s resources are being managed. He said the reason why mismanagement of funds thrived in the past was because oil monies were readily available, thus reducing the necessity for people to pay taxes. He said the current administration had put in place measures to check the mismanagement of government resources.
For instance, he said through the implementation of Treasury Single Account (TSA), about N4 billion monthly bank charges is being saved by government. In addition, he said the audit of the government payroll through the Presidential Initiative on Continuous Audit had saved the government over N200 billion personal costs.
This N200 billion, according to him, would have been paid to ghost workers if government had not cleaned its payroll. “When people pay taxes, they are more inclined to hold government accountable and they tend to be less passive in governance,” he added.
Missing links in compliance
Why would Nigerians of taxable age, who earn income, not want to pay tax? The reasons are not far fetched. Looting public funds by government officials, including tax proceeds, make compliance a difficult habit to cultivate by most Nigerians. Cases of tax diversion by public officers abound.
Most Nigerians have lost faith in the utilisation of tax income to provide infrastructure and social amenities for the benefit of citizens.
The disconnect between tax collection and its utilisation largely accounts for apathy. The onus lies on the government to build citizens confidence and trust by ensuring that tax proceeds are channelled into infrastructure provision, healthcare services and not looted into private pockets.
Tax, as it were, remains the most reliable and easy to collect revenue by government. However, government must invest efforts in changing public perception. It has to be trusted by tax payers. It has to demonstrate high level of accountability to people because unless the old narrative changes, apathy may continue to linger.
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