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‘Tax administrators need constitutional immunity to function effectively’

By Chinonso Ihekire
17 July 2021   |   4:18 am
So far, Nigeria has not done too badly, though we have been very slow. It took a long time before we started changing our tax laws.


Mr. Ignatius Adegunle is a chartered accountant with over 50 years of experience in Nigeria’s taxation industry. He is also the first Vice President of the Chartered Institute of Taxation in Nigeria (CITN), as well as a former Chief Invigilator at the Institute of Chartered Accountants of Nigeria (ICAN). In this interview with CHINONSO IHEKIRE, he sheds light on tax administration in the country, making a case for improved operations and compliance.

With over five decades of experience, what is your assessment of tax administration in Nigeria?
So far, Nigeria has not done too badly, though we have been very slow. It took a long time before we started changing our tax laws. But looking at what has happened in the last few years, we have woken up from our slumber. Before, there were so many aspects of the Nigerian tax law that should have been amended based on the economic situation of our country, but government was slow and the industry itself was slow in recommending to the government. A few years back, a lady, Ifueko Omoregie, was made chairperson of the Federal Inland Revenue Service (FIRS) and she carried out some changes that have had far-reaching effects on the practice and tax administration in Nigeria. And that set the pace for us. That was the first time that we even came around to have a tax policy for Nigeria, and I was privileged to be one of those that helped to create it. At least, we then knew that we had a direction to follow. I can say that we are now on the right track.

Nigeria still has a low tax to GDP ratio. It seems we aren’t doing it right yet.
That is true. It has been a lingering issue. Up till now, the tax being collected in Nigeria is too low. So many people who should be paying taxes are not doing so. How to know a big man in Nigeria is in not paying tax, unlike other places where people see it as a responsibility. In Nigeria, when you tell people to pay tax, they argue that government is not doing anything for them. They forget that it is a case of chicken and egg. Which of the two comes first? Are you not meant to meet your obligations and then you are in a position to challenge the government on failing to meet theirs. Government cannot do everything and that is what we don’t realise in Nigeria. We believe that government is like a father to take care of all your needs.

The law has been made in a way that you Pay As You Earn (PAYE). But many Nigerians earn incomes that are not declared.

There are people who have 10 to 15 houses that they rent out but they do not tell government. If you are collecting rent, the government maintains the roads that your tenants use to access the house. Some people say that they pay levies in the market, but what they pay there is nothing compared to what is to be spent on maintenance. There are many Nigerians that you and I know are very rich but nobody hears how much tax they pay. If you don’t give back to the government, how do you want the government to run the country?

There is now a high rate of tax-related graft. How can this be tackled?
There is corruption because people are not adequately informed. In most cases, when you use a short cut, you end up making a longer journey. Instead of paying directly to the government, you deviate and try to bribe a tax official and end up paying more. If you use a proper tax practitioner to advice you, you might not need to pay as much. In Nigeria, we don’t use professionals because we want to cut corners. It is not only in taxation; it cuts across all other industries. The truth is that when you use proper professionals, you would not suffer as much as you would when you use quacks.

How do you think Nigeria can achieve better tax transparency?
The first advice is that Nigerians should choose the right people. We should come out and identify people who would represent us. Many people come out to vote and they don’t even know the people they are voting for; they are voting for political parties. And these parties put just anybody there. You cannot sit in your house and not vote and then you complain. What are you complaining about? Everybody has to be involved. Nigeria is everybody’s problem. Do something. At least, know that you have done something. I always tell people that if you want to run for 2023 election and you are just coming out in 2021, then you are a joker. If you want to run for a post, you should have started way long ago, to have enough time to gather the right followers. It is not something you jump into. You don’t necessarily need to have money.

Which administration in Nigeria would you say has or had the best tax administration?
For me, I don’t think I can pick anyone as the best. I can say Obasanjo started using professionals, but what he forgot is that taxation is not consultancy. You must know and practice the tax laws. Obasanjo made a mistake by picking the head of tax administration from outside the Federal Inland Revenue Service. It was a very big mistake. The Federal Inland Revenue Service has been there for a long time and they have seasoned professionals. They also have people who know the tax laws. They have proper training for these people. At some time, the training school was one of the best in West Africa. Up till now, they still train their staff very well. That passion carried by someone who passed through FIRS isn’t the same as someone who came from outside. But to be quite honest, we started having a sense of direction when Ifueko came on board. She put people from FIRS where they are supposed to be. People like Samuel Ogungbesan were beginning to make progress until he wasn’t confirmed as the chairman. Those were good changes, because he knew the place inside out. Someone else was brought too, but unfortunately all the FIRS heads always have a target of increasing Nigeria’s tax income. Everybody wants to impress government. They now forget some important things like training and manpower development. There are certain things that you need to also understand; you need to have worked as a tax official in the FIRS before you grasp. So, using outsiders doesn’t work for us.

Again, I must mention that people are too afraid to take FIRS to court. If you take them to court, you expose yourself unnecessarily. When I was in KPMG, we took them to court. We were unfortunate to have done it in a military regime. Our client won, but the military made a decree and backdated it. Since that time, it has slighted our image. We also needed to do a lot of image rebranding. We have to let them understand that we weren’t interested in fighting, but we were trying to make things work.

Looking at the nation’s move to expand its tax base through taxing digital tech giants, do you think the government is doing it the right way?
Definitely. I support it. It is not only in tech. There are so many people evading tax in Nigeria. There are so many digital tech companies making so much money in Nigeria. Let them give to Ceaser what is Ceasers. We also must get our acts right. We must understand how these businesses operate and how they generate revenue. Then, we would be able to tax them properly. The FIRS is setting up so many departments now that are looking at these sectors critically, to be able to get our own share from it.

Nigeria’s tax administration is also going digital, but there are complaints about the operations.
The journey of a thousand miles begins with a first step. I would give kudos to FIRS for moving in this direction. The only issue is that when you put too many irons in the fire at the same time, you are not likely to get all of them equally hot. They need to go gradually. They are doing so many things at the same time, from making us to file online to expanding the tax base and revamping laws. All these things require manpower. I am glad, at least, that they are using professionals now to formulate and implement policies with the FIRS. They also have World Bank’s assistance in implementing some of these policies. There would be teething problems, no doubt. By the time that they implement all these, it would be very difficult to evade tax in Nigeria. Now, you cannot even receive payment from the government without paying your tax. FIRS is also linked with Corporate Affairs Commission. All these things are coming together to frustrate tax evasion.

Again, the law says that whatever income you earn must be taxable. The issue is in expanding our tax nets, registering more people and soliciting the support of the banks. We also need to clarify these laws to be able to help the banks protect their customers. You cannot just declare information about your customer without a court directive. If we can get these things right, it would help. The banks would be able to trace those who are earning and taxable.

Do you think the current tax administration landscape needs reform?
It depends on which aspect you are looking at it from. If you are talking about the administration of tax as it affects management or are you talking about the officers of FIRS effectively carrying out tax administration in their jurisdiction and be protected? That protection is very important. I had a friend who was trying to be smart in one of the states. He was a director in FIRS. He tried, at a time, to collect the annual report of the companies and asked them to declare their taxes. Most of these companies were friends of the governors then. They retired all the directors who were involved in that stint. Those directors were only trying to make money for the government. So, tax administrators should have immunity in the constitution. I recall another case, around 1975, in Port Harcourt, where an inspector of taxes was refusing to collect a bribe from an oil company. The company went to Lagos and spoke to them and then they transferred the inspector back to Lagos immediately. So, they need protection. You hear that these things happen.

Also, I feel that the issue of expats in Nigeria needs to be revisited. They have businesses in Nigeria that they claim are not subsidiaries in Nigeria and they keep avoiding tax. The expats are a major tax loophole in this country.