Need to boost Nigerian taxpayers’ morale
Attitudinal change could spark revenue chart
Absence of good governance, respect for human rights and rule of law, rising corruption cases, lack of accountability, injustice, inequality in the distribution of basic amenities as well as dilapidated infrastructure nationwide, have contributed to dampen tax payer’s morale in Nigeria.
As at the end of the third quarter of 2020, the Federal Government’s non-oil tax revenue totalled N927.47 billion (76 percent of revised target). Companies Income Tax (CIT) and Value Added Tax (VAT) collections were N486.68 billion and N137.03 billion respectively, representing 79 percent and 64 percent respectively of the pro rata revised targets for the period. Customs collections were N303.76 billion (78 percent of revised target). Other revenues amounted to N697.75 billion, of which independent revenue was N390.50 billion.
In view of the enormity of challenges facing this country at the moment, coupled with dwindling revenue from crude oil sales, these collections amount to a flash in the pan. And except something urgent is done, our country could be heading for the worst.
Like any other government in the world, the Federal Government and indeed the various state governments are responsible for the protection of lives and property as well as the provision of basic social amenities for the citizenry. To be able to discharge these responsibilities effectively, the government needs adequate funding.
Despite numerous potential sources of revenue in the country, Nigeria still depends largely on petroleum. With the plummet in crude oil price, nations are now diversifying their revenue base to non-oil sources. Nigeria may not be able to survive if the citizens do not lend their maximum support by way of paying their taxes.
At the same time, the citizens expect the government to reciprocate by protecting their lives and properties, respecting the rule of law and above all, ensuring fairness, equity and justice in the distribution of essential amenities.
In July 2018, the Nigerian Economic Summit Group conducted a survey on the perceptions of taxation by tax payers in Nigeria. The survey was designed to understand the “tax morale” of Nigerians, that is, the attitude that ordinary Nigerians have about paying and not paying taxes. The results were both shocking and important for the design of policies to boost tax revenue going forward.
Some of the issues discovered were that people receive relatively little information about tax. International experience suggests that better information and knowledge about taxes facilitate payment. However, in Nigeria, almost half of the respondents to the survey said that getting information about what taxes to pay and how to pay them is difficult or very difficult.
Secondly, some people’s day-to-day experience of the tax authorities is quite negative. Often, people give bribe to tax officials to evade paying tax or being prosecuted.
Another reason for low tax returns is the belief that people get nothing back for the taxes they pay. For most publicly provided services, Nigerians are dissatisfied with the services they receive (particularly electricity, water, security and road maintenance). More generally, the link between taxation and service delivery appears to be broken, in most states, people believe that services have gotten worse over the last six years while taxes have gone up.
For instance, VAT this year went up from 5 percent to 7.5 percent. Also, electricity and fuel prices went up without commensurate value addition. Invariably, the poor services are the main reason for people to avoid paying tax. Another reason is that taxes are either already too high, or people cannot afford to pay. With little information, a bad day-to-day experience, and little to show for the taxes they pay, many Nigerians do not trust tax officials or the government.
Agreed, the authorities have the right to make people pay taxes, but Nigerians want better services and many are willing to pay for them. Nigerians would be willing to pay tax if they could be guaranteed that the money would be spent on better services.
The existing evidence suggests that the Nigerian government can do a lot to boost the morale of taxpayers. Improved information and communication about tax obligations, along with simplified and clean payment mechanisms would provide taxpayers with the confidence that their money is not simply being stolen.
It is our firm belief that working together with the agencies responsible for the delivery of public goods, even linking some taxes to such delivery, could help to build confidence that taxation is used for the benefit of the people.
We have observed that taxation in Nigeria has a long way to go, but understanding how Nigerians really feel about it provides valuable pointers on how to boost it as a share of GDP and build a better social contract for the future.