• Monday, December 04, 2023
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Edo as most tax friendly state: Significance of MAN’s report

Ernst & Young enlightens Nigerian banks, others on US anti-tax evasion law

The role of taxation in the socio-economic development of any country or society cannot be overemphasised. Taxation is the foundation of modern state because it is the primary source of public finance. Taxation enables the government to mobilise the needed resources to fund the provision of social amenities and infrastructure towards the improvement of social welfare of the citizens.

It is necessary to point out, however, that while taxation is an indispensable tool in the development of the society and the sustenance of democracy, the manner it is administered is crucial to the attainment of these goals. That explains why no government can easily overlook the key issues of efficiency, effectiveness and transparency of tax policy and administration, even though it also keeps an eye on the quantum of the revenues from taxation that go into government coffers.

Thus, in a situation whereby tax assessment and collection, including the utilisation of tax revenues are not optimal, there will be problems of disincentives to the private sector, which will in turn lead to lower productivity, job losses and capital flight.

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A critical element in tax administration that could have adverse implication on economy-wide growth and welfare is the phenomenon of multiple taxation. Multiple taxation has several dimensions, but it is typically the arbitrary, sometimes unofficial imposition of exorbitant levies, taxes and charges on individuals and businesses across different levels of economic activities and jurisdictions.

Indeed, multiple taxation, no matter how it is executed, is akin to extortion of the citizens. It not only undermines the economic health of the society, it also has moral implications, in the sense that government cannot just be emptying people’s pockets because it has the power. It distorts economic decision of firms and households, it stifles initiative, it impairs the overall operating environment, making it harsher for the private sector to operate, and generate inequalities among citizens.

In fact, it has been established that one of the best ways to create an enabling, clement environment for business and the private sector and enthrone economic fairness among citizens, is to make taxation friendly. This of course include confidence building in the taxpaying public; it also relates to the modus operandi of the tax authourity, and more importantly, how the tax revenues are deployed in terms of the provision of quality infrastructure. Once this is achieved, production costs and cost of doing business would be significantly lowered and the profitability of firms boosted.

This is the case with the Edo State revenue system, according to a recent report from the Manufacturers Association of Nigeria.