‘How taxes can fund budget’

TAXES can comfortably fund Nigeria’s fiscal plan, but not before relevant laws are straightened and simplified for easy interpretation or assimilation by the taxpayers, the Chartered Institute of Taxation of Nigeria (CITN) has said.

Such laws must, however, also allow for proper and fit persons to be in charge of tax authorities as well as make for easy interpretation or assimilation by the taxpayers.

The President and Chairman of Council of CITN, Dr. Olateju Abiola Somorin, in an exclusive interview with The Guardian at the weekend in Abuja, said raising between N5 trillion and N6 trillion yearly would not be too difficult a task for tax administrators in the country.

Somorin, who spoke to The Guardian on the sidelines of the CITN inauguration of the new national leadership of the Society of Women in Taxation (SWIFT), headed by Mrs. Ezinwa Okoroafor in Abuja, maintained that tax resources, if well harnessed, could adequately take the place of oil to fund the nation’s yearly spending plan.

The CITN president explained: “I am confident that taxation can do it if properly managed with the right people in place and government funding tax authorities properly. There was nothing like Value Added Tax (VAT) until 1991 when a study group recommended that it should be introduced into Nigeria. Since then, VAT has been a money-spinner.

In the first year, VAT generated N4.6 billion and that yearly amount has been growing by leaps and bounds. Also, state internal revenue services most of which are not yet autonomous should be granted autonomy. Federal Inland Revenue Service and the Lagos State Internal Revenue Service are already autonomous and everybody can see the wonderful jobs the two agencies are doing collecting taxes for government. So, government should pay a lot of attention to the tax authorities and approve not only local but foreign training for them as well.

Government’s ban on foreign seminars should exclude public servants in tax authorities. Issues like transfer pricing, debts or how to tax multinationals are foreign issues and tax workers have to be properly trained. If you localise their training, you get localised revenue. You won’t get more dollars coming in.”

She also stressed that because some of the tax laws are encumbrances to the realisation of more revenue to government, the need has arisen for the Federal Government to urgently review the laws to smoothen tax collection and administration.

She maintained that the ambiguity in most of the Nigerian tax laws was at the centre of the challenges of low tax to Gross Domestic Product ratio.

Her words: “Tax laws, if they are not well drafted, will constitute problems to tax payers, tax administrators and tax collectors. As much as possible, they should not be ambiguous because if there is ambiguity, it is always in the favour of the tax payer and when it favours the tax payer, government will lose revenue.

If you tell anybody that the rate of company’s income tax is 30 per cent somebody will ask which law supports that.
“If you say the rate of Value Added Tax is five per cent, somebody would demand the law which provides for that.
So, tax laws must be drafted in such a way that tax payers understand it, and of course subject to amendments as issues develop and loopholes emerge.
“Anytime such issues and loopholes emerge and there is the need for amendments, the Chartered Institute of Taxation of Nigeria should be there to express an opinion as to why a certain section should or should not be amended, redrafted or expunged totally from the statue.”

She cited when the Company’s Income Tax Act was before the National Assembly for possible further amendment and the CITN at the public hearing, pointed out issues the tax payers were not comfortable with, such as Section 33 which talks about minimum tax.”

She also urged government to do the right thing by unequivocally stating that top positions in tax authorities should be occupied by members of CITN.
“Section 88 of Personal Income Tax Act talks about constitution of those that are supposed to be the chairman and directors in a typical tax authority. The section says anybody that is versed in taxation or somebody who is a member of a relevant professional body can occupy the post. But our position has always been that government and the drafters of tax laws should state categorically that whoever is going to head any tax authority in Nigeria should be a member of the Chartered Institute of Taxation of Nigeria.”

Also speaking, the new national chairman of SWIFT, Mrs. Ezinwa Okoroafor, expressed the readiness of her new executive members to assist CITN in broadening awareness, particularly among women as well as students at both the secondary and tertiary levels so as to inculcate the virtues of tax in the young minds.