Tax reforms must address government spending, states’ accountability to succeed – Sam Amadi

Nigeria’s ongoing tax reforms risk failing to deliver real benefits for citizens and broad economic development unless governments at both federal and state levels demonstrate accountability in spending, according to Sam Amadi, a public policy expert.

Speaking at a Tax reform conference convened by BusinessDay on Thursday in Abuja, Amadi said tax reforms, which aim to increase revenue, streamline processes, and plug loopholes, must also address the expenditure side of governance.

“You need to balance the other side, which is that this bulk of money that comes to the states,” he said.

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He noted that much of Nigeria’s tax revenue, including value-added tax (VAT), flows to states and Local  Government  Areas, which hold increasing responsibility for social protections; thus, they must justify growing revenue with accountable spending for tax reforms to be perceived as successful.

Amadi warned that Nigeria could find itself trapped in a “tax enclave” if rising revenues from reforms fail to translate into economic development and improved public services.

“Every tax is the state taking from the individual. That taking has a social justice component. It rests on the assumption that citizens themselves are net beneficiaries of that subsidy,” Amadi said

“So, if our government officials take the money and use it for politics, as is happening in many states, then it might not still drive development. We might move from an oil enclave to a debt enclave to a tax enclave, where you have very aggressive taxation but still a stunted economy,” he said.

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Amadi highlighted key issues he believes are critical for the success of tax reform, one of which is public trust. He said citizens will pay taxes only if they believe governments will deploy funds responsibly.

He also noted that tax experts often focus narrowly on revenue collection, viewing taxation as a technical or fiscal exercise rather than a political and social instrument. “Tax is not just income. Tax came after the value had been expanded. People together organised a great value,” he said.