Nigeria’s economy seen hindering level of tax compliance

The dwindling state of Nigerian economy and the present economic recession have hindered the level of tax compliance by individuals and organizations, said Ntiedo Umoren, immediate past dean of the Faculty of Business Administration, University of Uyo.

The expert believes that when tax is managed properly, the economy grows at an acceptable pace, while social programmes that benefit the poor receive boosts to enhance quality living conditions for all.

Umoren disclosed this in a paper titled “alignment of appropriate tax policy options with economic realities: the essence of business oriented and timely intervention”, he presented at the just concluded 19th annual tax conference of the Chartered Institute of Taxation of Nigeria (CITN) held in Abeokuta, Ogun State with the theme “Taxation and Governance: The Social Contract Imperatives”.

According to him, “Where the income of individuals and organisations are negatively affected by external factors, tax evasion becomes a normal practice.”

In the paper he presented, Umoren attempted to examine how a business oriented approach to taxation via qualitative tax policies can enhance an improved socio-economic environment for the benefit of the people. He discussed current tax policy options in Nigeria.

“This practice affects government revenue and the provision of infrastructures. This also impairs government from the fulfilment of social contract to its citizens. Therefore, to establish the link between tax policies, socio-economic realities, there is the need to revisit the fundamental principles of taxation as advanced by Adam Smith,” Umoren noted.

The professor opined that there can be no meaningful tax policy if the four doctrines (Canon of Equality, Canon of Certainty, Canon of Economy, and Canon of Convenience) are not satisfied.

“Where taxes are assessed without any input from the taxpayer, it negates the provisions of the basic cannon of equality”, he added.

He had noted that as a critical component of the global governance structure, taxes provide governments with a manipulative tool for national development. “It does not matter whether the government in power is conservative or liberal, it surely must tinker with taxes in order to develop a budget that matches that government’s developmental agenda”.

“We have argued elsewhere (Umoren, 2015) that taxes drive economic progress, and provide social stability.

There are ample theoretical and empirical evidence in the literature indicating that a strong historical, causal, and symptomatic relationship exists between the sustainability of effective taxation, good governance and social contract. However, in spite of the huge benefits derivable from taxation which is indeed a social contract with the people, the scarcity of money in the economy usually necessitates tax evasion among individuals and organizations”, Umoren stated.

Iheanyi Nwachukwu