Experts’ assessment, recipe for Nigeria’s tax system

The nation’s tax system has been agog, at least in the last three years, than it has ever been in more than 10 years past. Riding on the back of the country’s fiscal crisis, the present administration, like “hunting without barriers,” raved up the campaign for honour to civil obligations.

Granted, the campaign is yielding more positive results, according to experts, but they said there are cases of regulatory flip-flop, need for review of laws, leakages, lack of transparency in governance and fiscal indiscipline.

The Chartered Institute of Taxation of Nigeria (CITN), at its just concluded yearly tax forum, outlined series of outstanding issues in the country’s tax system to be resolved in the week-long brainstorming sessions.

Prominent among them were the unending dependence on oil and raging controversies over tax increase, expansion of tax net and introduction of new ones.

The President and Chairman of Council, CITN, Chief Cyril Ede, in his welcome address, said the institute’s yearly conference was part of its contributions to resolving topical tax issues in the country, advance taxation as an essential tool for promoting macroeconomic goals of achieving full employment, income redistribution and competitive environment for businesses.

“The role of taxation in the development and sustenance discourse cannot be emphasized enough. We are happy to engage this subject every time an opportunity presents itself, more so as we believe in its vast potential to deliver economic prosperity for our great country.

“It is imperative to establish the fact that Nigeria still relies principally on oil revenue, which also accounts for a substantial part of our foreign exchange earnings.

We owe it ourselves and generations unborn, to break away from this un-dimensional approach, which comes with its harvest of false affluence…” he said.

Earlier in the conference, the Pioneer Chairperson of the Society of Women in Taxation (SWIT), Justina Okoror, had raised concerns over the lopsided developments in the pursuit of tax revenue, which put 70 per cent of the N5.2 trillion of the taxes collected in 2018 to Lagos State alone.

The development, which is not only an indication that the four-year tax reforms and campaign have less impact in the remaining 35 states, with huge untapped potential, but a clear assessment that most of the states are not in tune with the message of taxation.

“For instance, out of the trillions of naira generated by the Federal Inland Revenue Service (FIRS), 70 per cent came from Lagos, which means that 35 states and the Federal Capital Territory contributed only 30 per cent.

“That also means that there are so many states with nearly no productive activities happening in them and by implications, are not paying tax. So, if Lagos decides to become a sovereign state, Nigeria will not be able to generate any revenue from tax,” she said.

Stressing the need to expand tax base, she said that with some states mining gold, diamond and other natural resources, there is an urgent need for government to go into the hinterland and increase their revenue base, especially from private companies.

“Government must take seriously tax revenue generation just like what is being done with crude oil. They should go into these places with natural resources and make it another revenue base,” she said.

But the incoming National Chairperson of SWIT, Kudiirat Abdulhamid, queried government’s increased borrowing, when potential revenue generation is lying idly, saying the increasing obligations is tying the nation’s resources to payment and servicing of the loan that is being taken.

She maintained that revenue generation through taxation is more sustainable, especially when such resources are judiciously tailored towards development projects that would benefit the people.

“I agree with people complaining over government borrowing, but if citizens pay taxes and it is judiciously utilised for provision of this services, people will be eager to pay more. But when government borrows money without providing infrastructures, citizens would become angry,” she said.

But transparency and governance issues were resonated, as President Muhammadu Buhari, admitted that government was aware that the challenges faced in achieving voluntary tax compliance was due to alleged lack of transparency and accountability in the management of revenue.

Represented by the Permanent Secretary, Ministry of Finance, Mahmood Isa-Dutse, he said his government was committed to changing the narrative by ensuring judicious use of funds through the strict enforcement of Treasury Single Account policy and zero tolerance for corruption.

He stressed that for Nigeria’s tax system to be dynamic and respond to the ever-evolving commercial landscape and increased technology-driven business model, he called for the support of the institute and other major stakeholders in
widening the tax base for improved revenue collection and voluntary compliance.

He also expressed concern over abysmal low level of tax to the Gross Domestic Product (GDP), reiterating government’s stance in setting aggressive target for increased tax collection in the country.

According to him, tax collection supposed to grow in line with growth in the economy but that has not been the case in the country, attributing it to low-level compliance and in some cases, underpayment of the effective tax rate paid by those that are complaint.

But the Chairman of United Bank of Africa, Tony Elumelu, asked government to expand its double taxation treaties with foreign missions, as part of efforts to increase its revenue base.

Nigeria, according to him, has only 14 double taxation treaties despite the numerous foreign missions, embassies, high commissions in almost all the countries of the world, when South Africa has 80 taxation treaties.

Elumelu said that government does not understand the benefit and implications of the treaties for national development, pointing out that to achieve a progressive, efficient and effective tax regime, there was need for government to take a second look into the double taxation treaties with other countries.

But he lamented that most multinational companies are relocating from Nigeria to Ghana and companies that want to move into the country are discouraged because an average business in Nigeria provides for itself water, electricity, handles waste disposals, security, among others.

He said that another recent study revealed that 75 per cent of Nigerians believe it is their responsibility to pay tax, but because they provide everything for themselves, they see no reason to pay tax.

But other tax experts at the conference warned government to tread cautiously in its plan to increase the Value Added Tax (VAT), advising it to consider the expansion of the informal sector tax base as alternative, particularly the electronic sector, which still remains untapped in VAT collections.

The past President of CITN, J. K Naiyeju, noted that Nigerias’s VAT is as unique as Nigeria itself, affirming that any increase at the moment would send an uproar to the business community and a negative effect on the economy.

“If I may advise, it must not be increased now. The reason is that the poverty level of those who really engage in consumption would be increased. The increase must be very minimal and it should not be done when the economy is down and people are hungry and suffering,” he said.

Naiyeju said it was political negligence that made Nigeria suffer over the years, giving instance that UK started with four per cent, but today they are between 17-20 per cent.

The Executive Director of the Kano State Inland Revenue Service, Sani Abdulkadri Dambo, said that the issue of VAT increment must be one of “give and take”, wherein the consumption income tax and the company income tax are reduced, while VAT is increased, so that the public can be easily convinced.