‘Government should tax luxury goods to save the poor’
Despite the glaring economic hardship besetting Nigerians, the Federal Government has continued to mull increased revenue through new levies and taxes. But while admitting that a modern economy cannot be run successfully without the citizens paying for its development, leading management and financial consultant, Odilim Enwegbara, told BRIDGET CHIEDU ONOCHIE, that the issue of fairness of taxes and utilisation should never be discounted.
What are your views on taxes and levies being mulled by the Federal Government?
The truth is that a modern economy cannot run successfully without citizens paying for its development. Even semi-primitive societies about 3, 000 years ago such as Imperial China taxed their subjects. And doing so fairly, they raised their army to defeat and conquer unorganised neighbours that could not raise taxes. Also, South Africa in 2016, through its revenue services was able to generate $76miillion from taxes. Nigeria with an economy of $415billion could not generate up to $10 billion from taxes. This shows that we don’t want raise enough money to meet government’s needs.
Why are we struggling to fund our budget if we can genuinely raise large sums through taxes?
It is because of low tax to budget ratio. We have one of the smallest budgets among peer economies. Oil has deceived us for so long that we believe that oil revenue would be enough to meet government’s financial needs. So, it is high time we went back to the drawing board and put in place, a tax system that will enable us to raise the trillions of naira that we need to finance our infrastructure.
How do we start doing this?
We have to start by closing all the tax loopholes and strengthening our tax collecting policy. Government should also summon a National Tax Policy Summit, where stakeholders from the 36 states will converge to deliberate on how to fix our tax problems, so that whoever is paying tax would be happy to do so, because when you pay tax, you should see what it is being used for. A tax summit should help to overhaul the tax system to the extent that in the next two years, we would be generating about 50 per cent of our GDP annually from tax, and about 70 per cent of our budget through tax, not from oil or external borrowing.
But is our tax regime fair at all?
The fairness of the tax regime is dependent on the angle it is looked at from. A poor person will question the reason the rich is not taxed more, and that is the truth. One of the causes of the French revolution was because the rich were not taxed and the poor were forced to bear the burden. That cannot repeat itself in modern economies like ours. What we have to do is to look at the percentage income of rich people, which they pay as tax, and look at the income of the poor that is also paid as tax. If that is not done, the poor would be suffocated, while the rich get away without paying the proper tax. We have to structure our tax based on our income. If you are earning N100million income, you cannot pay N1million as tax, when someone that earns N20m is paying the same amount, you would be cheating him/her.If the rich must be heavily taxed, then the tax on luxury goods should also be high.
Yes. There should be luxury goods tax, which should be very high. For instance, those who have private jets; those who fly first class and business class; those who live in expensive homes should be made to pay huge amounts as taxes. This is not only to discourage them from unnecessary consumption, but also to ensure that if they are taxed properly, they will not have enough money to throw about abroad. So, we have to make sure that the Aliko Dangote and Jim Ovia pay proper taxes, and this can only be achieved by imposing a high tax on luxury goods, and introducing the policy of tax report filing.
In the United States, tax reports are filed every April. Citizens go online to declare how much they earn in a year and anyone who gives wrong information faces the consequence.
So why is this not happening here?
The problem here is that existing laws are not enforced. If this policy operates here and people know the consequences of giving wrong information, they will not lie. Unfortunately, in Nigeria, even when lies are discovered, nobody will take defaulters to court.
How do you see the call by the CBN Governor for voice calls to be taxed?
The CBN governor’s proposed tax on voice calls is not totally bad. It would rather curtail excessive calls. In modern societies, calls are for urgent discussions and things like that. We are not using a satellite-based telephone system, which is cheap, yet you see people spend over 30 minutes on calls.
But there are other ways of making a lot of money from tax.
Yes. And one of the ways modern societies make money is through property tax and traffic offences. What we need to do is identify these property that dot the country, most of which are left empty for years, and afterwards get professionals to determine the actual cost of each building. Thereafter, the owners should be made to pay a 10 per cent tax for each of the buildings. If the person cannot afford it, then the government should take over the property and put it up for sale so that people will cut their coats according to their cloths. But the problem is that those who are supposed to make the law are the owners of the property.
How do you think those in authority have managed taxpayers money in the past?
As far as I am concerned, money collected as tax is free money because the tax regime is not strengthened. The tax is not actually factored into government expenditure plan. If we have a transparent system that ensures that all money goes to the proper account so that at the end of each year, it will be easy to see the money generated from every sector, it will be difficult for any money to be diverted. But when the whole money goes into open-ended accounts, it would be easy for such to be diverted, especially in a country that does not obey the rule of law. People get away with such crimes because they believe that if they are caught and taken to court, they can call the judges and they will take their own share, then, they call those in EFCC, and they will also take their own share.
Do you mean the EFCC is not accountable?
The EFCC is not accountable to anybody. It is only accountable to itself and then, to the government. If I am in government and they account to me, I can say, let us sit down and share the money, after all, no one is asking questions.
Is there the possibility of a successful tax regime without comprehensive data?
Those in charge know that the day we have a comprehensive database that will show Nigerians where they are, and who they are, then stealing will be a thing of the past. Look at the National Identification Number, look at the Bank Verification Number, these two are enough to help Nigeria create a comprehensive database because most Nigerians have bank accounts and most of us have National Identification Numbers. Most of us also have mobile telephones. The problem is that because those who are supposed to do the job are allegedly compromised, they feel that a non-reliable database is better for them. They will make sure we don’t have a comprehensive database because they know that an overhauled database will clearly show how much they have collected and they will not want that to happen. They take their time to ensure that forensic data are not collected, but the government can set up a strong agency that would be charged with the responsibility of collating all the data in the country and reviewing the database using the BVN, telephone numbers, international passport numbers, and all available information necessary to fill the database of the country. If not, we will not know those who are Nigerians and those who are not.
Is judicious use of tax revenue a possibility in this country?
I suggest that the government should set targets for tax collectors, make sure that tax collectors are transparent, that tax collection is transparent, and also ensure that the income and lifestyle of tax collectors are monitored. It must also be ensured that tax money hits government bank accounts directly, and not indirectly. Again, government should map out projects that the money would be spent on. If it is for a road project for instance, the cost and duration should be spelt out and the source of the tax revenue stipulated so that over a period of time, the money would be raised and paid into government account meant specifically for the project. But when there is no project, or budget tied to the tax revenue, we should be sure that money would be diverted.