The plan by the federal government to link various services to the taxman would have significant consequences for the country in the coming year. There are many upsides, but even more significant downsides in the socio-economic life of citizens. Government as a critical first step must outline a clear implementation schedule that shows readiness to grapple with the issues it will throw up.
Beginning in January 2020, citizens would no longer be able to operate bank accounts, renew or procure new Nigerian international passports or register new vehicles or renew existing licenses unless they show their taxpayer identification number (TIN). The TIN is proof of registration as a taxpayer.
A new Taxpayer Identification Number (TIN) registration system introduced by the Federal Inland Revenue Service in July 2019 is now part of the Finance Bill the Senate passed recently. The two-phased project involves a new Unified Tax Identification Number (UTIN) and the Integrated Tax Identification System. They seek to assist taxpayers with easy verification of their TIN online, print their tax certificates and send it via email.
An overarching goal is to increase the tax base from 20 million to 45 million persons.
The route is through the amendment of Sections 33, 49 and 58 of the Personal Income Tax Act. Specifically, the Tax Clearance Certificate would now become one of the essential requirements for transactions across banking, immigration, vehicle registration and possible extensions.
Government is deploying the stick to not only grow but double the country’s tax base. Compulsion is the message of the new measures. Citizens must follow the legislation or find themselves out of the financial system.
On the positive side, the measures are likely to register a high degree of success. Compliance will happen even if it comes with grudges and grumbling. The citizen seemingly has no choice.
The first question, therefore, is whether the federal government and its agencies that would implement the measures are ready and capable? We ask because of the experience with various schemes including the perennially unavailable national ID card or even the new national drivers’ license. The government would boastfully decree ownership of these items as mandatory but then fail in its duty of providing them as and when citizens need them.
The question has even more significance given the dire consequences of the measures. It threatens to cut off many citizens from banking services, deny others access to international passports etc. Should the availability of these essential services be encumbered with inhibiting provisions? Does it not constitute a denial of civil rights due to Nigerians?
The aggressive push for tax enrolment and compliance is commendable. However, taxation is a function of gainful activity. Only citizens who earn income pay taxes. What are the prospects for this tax enrolment against the backdrop of an economy that witnesses daily contraction and shutting down of big as well as large companies?
Default, unintended, is likely to be high in the immediate period. The burden may fall on the many operators of small-scale enterprises, the mum and pop shops and street-side retailers who run the informal economy. In the last few years, Nigeria actively pursued financial inclusion with technology aiding the financial system to grow the number of persons utilising the banking system. When you add charges on mobile and online transactions to the demand for TIN or TCC as a basis for banking, we fear the effect on numbers of citizens participating in banking.
The upside is that taxation demands representation. The tax noose will compel engagement by citizens. They will ask questions and demand better answers than the system has offered thus far. Above all, complete preparation is necessary and critical before the introduction and implementation of these measures. That preparation should include a period of communication, information and education.
