“Empirical data affirms that Nigerians are willing to fulfill their tax obligations when they see meaningful returns on their tax contributions.”
– Taiwo Oyedele (Chairman, Presidential Committee on Tax Reforms)
One of the bold steps taken by President Ahmed Tinubu-led administration so far was the inauguration of the presidential committee on fiscal policy and tax reforms back in August, 2023. It is worthy of note that the president approved the establishment of the committee in July of this year and appointed Taiwo Oyedele, a tax and Fiscal Policy Partner and Africa Tax Leader at PriceWaterhouseCoopers, as the Chairman.
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The committee comprises experts from both the private and public sectors and is responsible for various aspects of tax law reforms, fiscal policy design and coordination, harmonisation of taxes, and revenue administration. According to the Special Adviser to the President on Revenue, Adelabu Adedeji, the president recognises the importance of a sound fiscal policy environment. And indeed, how an effective taxation system could act as catalyst for the functioning of the government and the economy.
The committee will go beyond advising the government on necessary reforms to also drive the implementation of such recommendations. It also has a mandate to achieve an 18 percent tax-to-GDP (tax to gross domestic product) ratio within three years. The current dire economic situation however, brings forth some burning questions, needing urgent answers.
For more public enlightenment we need to know what taxation is all about, the percentage of the income thereof, the disbursement pattern, the beneficiaries, and of course, the hurdles between its collection and the implementation and how to scale over them.
In its distilled essence, 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 welfare for the greatest number of the citizenry through a fair distribution of financial resources. That plays out of course, in an ideal situation.
As reflected in my previous thought on the critical issue back in 2017 titled: “Taxation and the People’s Parliament”, given Nigeria’s peculiar scenario, the challenges are characterized by multiple taxation, lack of credible data, and 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.
Another frictional factor to taxation here is that many of the rich hardly pay taxes commensurate with their huge incomes. In fact, it has been proven time and again that some of the favoured political apologists and sponsors of some political parties 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 the ordinary Nigerians? The answer is in the negative.
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There still exists the untoward practice of some dubious and unpatriotic 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 came together to harmonise tax policies there is no stable economic model to apply holistically in Nigeria.
In response and in the face of these daunting odds the Accounting Education and Research Services, ACCERS came together as concerned professionals 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 and accountants. Others were 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) enlightened Nigerians 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. If not, how do we explain the current painful yet, preventable situation that has each lawmaker smiling home with an SUV vehicle worth N160 million when some 133 million Nigerians are multi-dimensionally poor and 71 million of them daily agonise in extreme poverty?
Similarly, how do we explain to the ordinary citizen that Mister President who has called on them to make sacrifices to stabilize the wobbling economy has since obtained approval from the Federal Executive Council (FEC) for the renovation of the president’s official residence with N4 billion at Dodan Barracks,Lagos? Yet, there is an additional N4 billion approved for the construction of office complex? Not left out of the spending spree and jamboree at the executive level is the approval of N1.5bn for vehicles for the First Lady’s office.
Coming at a time that food inflation has galloped to 29.34%, as the highest in 18 years, and also when unemployment of graduates has escalated to the level of a time-bomb the fear that the taxes would be judiciously applied is real!
The second approach on impactful taxation 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.
Though several research findings have raised alarm over the over reliance on petro-dollars not much has changed. 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. More has been said than done on economic diversification.
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.
Read also: Experts task FG on tax reforms to rejig Nigeria’s economy
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. Stable infrastructure should be put in place along with effective monitoring of governance. We should do away with poor corporate governance.
What is of significance to the average citizen is the implementation of the recommendations made vis-à-vis accountability, fiscal responsibility, thoroughness in terms of prioritizing the crying needs. They want the assurance that the poor would not be taxed to satisfy the tastes of the rich and mighty. They would therefore, be happy, if at the end of the day it guarantees adequate and nutritious food on their table in a safe and secure environment.
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.
