Nigeria is a paradox by all ramifications. A nation where the sentiments of religion and region reigns supreme. According to Pew Centre, nine out of ten Nigerians profess strong belief in either Islam or Christianity. Unfortunately, in Nigeria, religious virtues and values are 100 metres wide outwardly but 100 millimetres deep inwardly. While not intending to question the moral pay offs of our religious doctrines and conceptions, our deeply religious citizens must not forget that their civic responsibilities remain an integral part of what God and mankind expects from true worshippers and good citizens alike.
By 2050, Nigeria is expected to be the third-most populous country in the world. World Bank projected that the Nigerian economy will be growing at only 2.2 percent in 2019 while the average population growth is about 3 percent. The implications of this trend are far reaching. Our media on several occasions have reported that the federal government is finding it difficult to raise money for its operations. In 2017, Oxfam reported that Nigeria occupied the last position out of the 41 countries in Africa ranked according to spending on healthcare, education and social security. Our budgetary allocation to the education sector is still far below the UNESCO benchmark of 15-20 percent. In 2018, the Federal Government generated a revenue of N3.96 trillion as against the N7.16 trillion apportioned in the budget.
As at June 2019, the government had generated 2.042trillion as revenue from both oil and non-oil sources from N6.998trillion target for full year. Figures from 2020 budget showed that the allocation to Power, Works and Housing is lower than the figures for 2019 by N39 billion. This is worrisome for a nation with decaying road infrastructure and huge housing deficit. In the past five years, the gap between the budgeted and actual revenues has widened thereby forcing government to resort to huge borrowings to fund its planned expenditure. Today, debt service as a percentage of revenue has exceeded 60 percent which is above the safe borrowing limit. Evidence of funding challenges and the consequent governance failures in our society is endless.
Raising revenue is one of the most basic responsibilities of any nation-state. Before a state can protect its citizens, provide basic amenities or administer justice, it needs to raise money. More government revenue most times results to more public infrastructure. A limiting factor in determining the government budget for its duties to her citizens is the capacity to tax. The level of taxation is used as an indicator of state capacity. Developed countries raise more tax and therefore are able to provide better welfare services to their citizens. According to Jim Young Kim, the immediate past president of World Bank Group, “fair and efficient tax systems, combined with good service delivery and public accountability build citizens trust in government and help societies prosper”.
The general level of tax compliance in Nigeria is still abysmally low. Recent IMF country report on Nigeria shows that only about 10 million people out of a labour force of about 77million people are registered for taxes. Nigeria’s tax to GDP ratio of about 6.1 percent is low both in absolute and comparative terms relative to other developing countries. This is far below the global average of 15.2 percent according to 2017 data provided by IMF and World Bank. 2015 figures show that tax as a percentage of GDP is 20.8 percent in Ghana, 26.9 percent in South Africa, 18.2 percent in Cameroon, 15.4 percent in Benin Republic and even 11 percent in our neighbouring Niger Republic. Compared to the low middle-income countries and upper middle-class countries average tax to GDP ratio of 19 percent and 23.3 percent respectively, it appears that one of the attributes of under developed countries is that they are yet to learn how to tax their citizens.
The challenge before our policy makers then becomes how best can government use the instrument of tax to increase its revenue. While the illusionary easier approach is to increase the tax rate, available data suggests the opposite. In a country where only 10 percent of the workforce pay tax, it is not a rocket science to know that if we succeed in increasing the number of tax payers, the government will not need to increase tax rate to increase revenue. We run the risk of taxing the existing businesses out of existence if we continue to increase tax rates. Government has a duty to ensure that paying today’s taxes does not endanger the ability to pay tomorrow’s taxes.
If we get our economic policy right, we don’t need to increase tax to generate more revenue. In Ireland, the corporate tax rate has been lowered substantially from 50 percent in the 1980s to 12.5 percent today. Despite the tax cuts, Ireland’s revenues from corporate taxes have gone up as a share of GDP because tax base has grown significantly largely as a result of massive inflow of foreign investment driven by good policies. In 2016, the Ghanaian government identified the tax burden on the private sector as a contributory factor in the slowdown in their economy. In response, the government abolished and reduced various taxes in an effort to stimulate the economy. Today, Ghana’s revenue is growing at over 20 percent driven mainly by tax revenue which increased as a result of tax reforms that stimulates private sector and consumer spending.
Putting into consideration that Nigeria’s informal sector is a significant portion of her GDP, moral suasion would do far more than the tax enforcement can do in improving voluntary compliance. It is imperative to note that for as long as the informal sector largely remains outside the fiscal net, the formal sector alone cannot generate the required level of taxes required to fund government expenditures. Considering that Nigerians are deeply religious, our churches and mosques have a significant role to play in fixing and promoting the fundamental social contract between citizens and their government which requires taxpaying from citizens in return for provision of social goods from the government.
Churches in America helped to end slavery in the country and also helped them to develop positive attitude to charity. Till today, America is still one of the most philanthropic nations in the world. Our religious institutions should take a cue and prepare their religious believers to be good democratic citizens. Luckily, it appears that they are beginning to appreciate the need to be the agents of social change judging from the robust advocacy for PVC collection that came from the pulpits during the recently concluded voters’ registration exercise. The same drive or even a higher zeal would be required from our religious leaders in informing their congregations and laymen that it is indeed noble and theological to be a tax payer.
Nigerians must strike a balance between religious obligations and civil responsibilities for the nation to transform to the country we all desire. To “give Caesar what is due to Caesar” is a divine command that Jesus used to reconcile religious belief with citizenship duties when the Jews refused to pay Roman led government-imposed taxes. It is therefore imperative for Christians not to see civic duties as optional but rather as a fundamental obligation that is firmly rooted at the very core of the Christian faith. Thus, we cannot in all honesty claim to be good Christians if we pay our tithes but refuse to pay our taxes. Christians and other religious citizens alike who ignore their civil responsibilities but fulfils their religious obligations and at the same time expect our society to be a good place to live, work and play, lose the right to be model citizens.
EJIKE NWOLISA
Nwolisa Lagos based economist
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
