The Insights by Lateef Adewole
This government can be considered to be a “cheetah” when it comes to adding more financial burdens and inflicting pains on already dying Nigerians and their businesses, while they suddenly become “snail” when it comes to delivering good governance to the same citizens.
In the past few weeks, the government and its agencies have been introducing one form of taxation or another. Firstly, it was the proposed introduction of charges on online transactions, then the resuscitation of the previously suspended charges on cash deposits by individuals and corporate organisations into their bank accounts.
Again, there is proposal that businesses should begin to pay 0.005% of their net profits to police trust fund. The latest is the proposed increase in the Value Added Tax (VAT) from 5% to 7.5%. We do not know how many others are still in the offing. Truly, this “next level” will be interesting.
Ordinarily, it is not out of place for the government to request that the citizens make more sacrifices for national developments, by contributing in the form of additional tax, one way or the other, but the question always is: how are such funds managed? What do the people saddled with the responsibilities of running the country do with the funds? Are they not using them to increase their profligacy and financial recklessness?
This is because, even when they keep telling the citizens about paucity of funds, their lifestyles do not reflect same. While they ask the masses to make sacrifices, they are the people who “eat” the sacrifices, “not the gods!” (pun intended). A cursory look at our annual national budgets presented by the executive arm and that of the legislative arm, do not reflect a country in financial distress.
A situation where over 70% of the budgets go to consumption spending in the recurrent expenditure, for less than 5% of the entire population, leaving less than 30% for the rest 95% of the people, in the capital expenditure. That’s criminal. And to have the temerity to ask the people to still continue to pay more money for them to sustain such lifestyles is wickedness. This is also applicable to the states too.
All these are as reflected in an article I wrote last year, 18th of August, 2018. I will simply attach it to this, as the same realities are still staring us in the face.
TAXATION IN NIGERIA: WHY WON’T CITIZENS BE RELUCTANT TO PAY?
“Obe t’odun, owo lo pa” (A soup that is sweet and nutritious, costs money).
The above proverb succinctly captures the importance of money to the well being of any society. Countries all over the world survive based on the resources available at thier disposal. These resources are used to run the governments of such countries and can be from nature (oil, minerals, agriculture etc) or people (citizens).
The contributions from the people of a country, as obligations to support their government can be in the form of tax. This often forms a critical part of fiscal policy of the government, especially in many developed countries.
What is Taxation? This is money paid as tax.
What is a Tax?
According to Wikipedia; A tax is a mandatory financial charge or some other type of levy imposed upon a taxpayer, individuals or other entities, by a governmental organisation in order to fund various public expenditures. A failure to pay, evasion, or resistance to taxation is punishable by law.
These penalties can be civil, (like in penalties, fines or forfeiture) or criminal leading to incarceration.
Tax can be direct or indirect and can be paid in money or labour equivalent.
In Nigeria, the government agencies saddled with tax collection at federal level is Federal Inland Revenue Service (FIRS) and State Board of Inland Revenue Service (SBIRS) at various state levels. The bodies are model against that of United States Inland Revenue Service (IRS).
THE ESSENCE OF TAX
The importance of tax to any country and it’s government can not be overemphasized. The funds generated through tax are used for, among many other things;
The operations of government itself. The existence and continuous functioning of the government of a country are made possible with the use of funds, without which, civil service cannot be operated, government workers cannot be paid, facilities required to run government cannot be provided, political office holders’ emoluments cannot be taken care of, and so many other things.
Security of the nation. The security of lives and properties of the people is the primary responsibility of the government. This is done by maintaining internal security within the country and security of the sovereignty of the country against external aggression. Hence, police, military, and other paramilitary organisations are established, equipped, and maintained by the government, made only possible by the available funds.
Provision of economic infrastructures. Roads, rails, power, communication facilities, enabling business environment, are few of many things that are expected to be provided by the government for the use of the populace. These are done with money.
Public services to the citizens. This is a critical role of government for proper human development of the people. The government is required to provide quality and affordable education, good healthcare facilities, power, housing, mass transport system, durable water, and so on.
According to the information released by the National Population Commission, NPC, Nigeria now has an estimated population of 198 million people. From the ministry of finance, the taxable population is put at about 70 million and that the number captured by Joint Tax Board as taxpayers is a mere 14 million plus.
Nigeria ranks among the countries with the lowest tax to GDP ratio, put at 6.1 percent. This is far below many African countries like Ghana 16, South Africa 27, and in other parts of the world like; India 17.7, Denmark 45.9, France 45.3, United Kingdom 33.2, and United States of America at 26. All in percentages.
How then is it possible that, despite our huge population and even taxable people, Nigeria has such a low ratio? This is because, many individuals and corporate organisations have not been paying at all or have been paying less than they were supposed to pay.
They device many crooked ways and means to do so. These include:
The use of intricate structures when carrying out transactions. This makes it more difficult for the tax agencies to accurately evaluate the business or individual’s worth for appropriate taxes amount.
They manipulate their accounting records by keeping two sets of books. One for their shareholders, the other for the purpose of tax evaluation, where the figures would have been manipulated, so as to reduce the payable amount as tax.
Some will not register for Value Added Tax or not remit it as and when necessary.
Another, is doing transactions with the use of off-shore companies which are registered in tax havens. Example of such was the revelations in the Wikileaks sometimes ago about Panama papers. Many prominent Nigerians featured prominently in it.
Some hide their assets overseas to avoid paying tax to Nigerian government. We have heard series of stories of many Nigerians possessing humongous number of properties and assets scattered all over the world. They only benefit those countries while Nigeria loses out on them.
Many states do not have adequate capacities to track true incomes of people and organisations more accurately.
Registration of assets in nominees names.
Non payment of capital gains tax on disposed assets, which can be properties, shares, stocks etc.
With such scenario, how then can the government function effectively?
As previously highlighted, the importance of tax could be seen in the existence and running of a country, as well as for the society to function. If these are true, why then do people tried to avoid paying or are reluctant to pay tax?
There are so many reasons which can be adduced to such actions. These include, but not limited to:
Corruption
This is one of the biggest challenges we are facing in Nigeria today. In tax administration, the corruption factor which can be from both the citizens and the government. Many Nigerians, by their corrupt nature always look for ways to avoid doing the right things. They can go to any length to evade paying their taxes completely or paying less than actual amount.
On the other hand, many government officials saddled with the responsibilities of collecting the taxes often collude with the prospective taxpayers to short-change the government. They encourage the taxpayers to pay lower amount to government while they collect a part of the balance money as “bribe”.
Lack of capacity to pay
Many individuals and small businesses who are barely surviving could not afford to pay due to exorbitant costs of running the businesses, especially the provision of power, where needed. All revenues go into keeping the business afloat. They barely break-even.
Excessive Taxation
Due to the governments’ desperate needs for funds, they tend to impose excessive tax on those businesses, which are already struggling to survive. This can harm the business operations and lead to eventual closure. Hence, they are discouraged from paying.
Double Taxation
This has to do with what many individuals or companies suffer in Nigeria today. Tax demands are made on them by various agencies of government and by governments at all levels, federal, state and local governments. These often become too much burden on businesses.
Transparency in collection
For those who were able to pay, seeing all kinds of dubious arrangements from the people in government, in the name of Public Private Partnership (PPP), where tax collection duties are given to third party contractors, whose owners often have connection with politicians and political office holders. They take ridiculous percentages as commissions, from the source. The people who pay such taxes which are being criminally frittered away into private pockets, will definitely be unhappy and uncomfortable to continue to pay or to pay accurate amounts. These are more rampant among the state and local governments.
Discriminatory Taxation
While salary earners with fix incomes get their taxes deducted from the source, even before getting paid, their counterpart citizens, with connections in the right places, spend their incomes to buy anything, including luxurious items, without paying appropriate taxes on them.
READ: Buhari working to ensure better livelihood for Nigerians – Presidency
Or is it the case where small businesses are squeezed to their last kobo in the name of one levy or another, while the big men and their big businesses are given fraudulently suspicious and ridiculously huge waivers and tax breaks, because of their “unofficial” relationship with people in government or politicians.
Poor service delivery by civil and public servants in government MDAs
People and organisations pay taxes to support the government to function. Situations, as commonly seen in Nigeria, where same taxpayers need the service of any of the government Ministries, Departments and Agencies (MDAs) but were poorly served or badly treated. They do not get value for their money. It then questions the essence of paying for the services, through taxes, in the first place. This can demoralise any dutifully tax-paying person or company.
Misappropriation of the available funds
This is the most visible among the causes. When people sweat days and nights to make ends meet, and as responsible citizens, pay their taxes, only to see it been mismanaged, misappropriated and squandered on frivolities by the people at the helms of affairs. Many times, the funds were outrightly stolen/embezzled. When the taxes are not used for the purposes for which they are collected in the first place, how then do governments expect people to continue to pay?
The Flamboyant lifestyle of the country’s leadership
It is always difficult to juxtapose and reconcile the claims of inadequate funds in government purse with the exorbitantly flamboyant lifestyles of our political and public office holders. In the midst of inadequate resources, barely sufficient to provide public goods and services to the citizens, the people in government and those who are holding public offices, live lives, at variance with the people who put them their.
They pay themselves, legally or otherwise, humongous amount of money in emoluments. Provide all that they need for their personal comforts, as well as that of their immediate families. All these done from the available meager resources, at the expense of the rest of the people. It is a case of “monkey dey work, baboon dey chop!”. And the rest of us, who break our backs to survive, are expected to fund those lifestyles by dutifully paying our taxes. People will definitely be unwilling to do so.
We can go on and on, but let us just stop here.
As the governments at all levels continue to demand of people to pay their taxes, which is their civic duties as responsible citizens, it behoves on the governments to rise up to the challenges as well. They need to live above board. All the reservations of Nigerians, which are likely pushing them away from doing the right things should be looked into and adequately addressed.
Many of them are as previously discussed above. When citizens can see what governments are doing with their hard-earned money in their care, and they are satisfy with them, and they are getting values for their sweat-money, they will be eager to not only pay, but pay the appropriate amounts, as their taxes. Good begets good.
With these done, the society will continue to get better. Governments will run smoother and everyone will be happy.
God Bless Nigeria.
Lateef Adewole is a political analyst and social commentator can be reached by email: lateefadewole23@gmail.com or via WhatsApp +2348020989095
