Tax evasion claim stirs need for reinvention of TETFund
In a country where states and federal governments establish tertiary institutions and shirk their funding obligations, especially in the areas of manpower training, and funding of capital projects, the Tertiary Education Trust Fund (TETFund), though an interventionist agency, has done fairly well to radically change the fortunes of most of these needy schools.
The quality and quantity of projects funded by the outfit across the country, has been the sole reason schools’ helmsmen credit it with changing their architectural landscapes.
Established as an intervention agency under the Tertiary Education Trust Fund (Establishment, etc) TETFund Act, 2011, the outfit is saddled with the responsibility of managing, disbursing and monitoring the education tax to public tertiary institutions in the country.
To enable it achieve the above objectives, the Act imposes a two per cent education tax on the assessable profit of all registered companies in the country.
The Federal Inland Revenue Service (FIRS) is the organ of government empowered by the Act to assess and collect the tax and the fund administers the tax so imposed, and disburses the amount to tertiary educational institutions at federal and state levels. It also monitors the projects executed with the funds allocated to the beneficiaries.
The mandate of the fund as provided in Section 7(1)(a) to (e) of the Act is to administer and disburse the amount in the fund to federal and state tertiary educational institutions, specifically for the provision and maintenance of essential physical infrastructure for teaching and learning, instructional material and equipment, research and publication, academic staff training and development as well as any other need which, in the opinion of its Board of Trustees, is critical and essential for the improvement of quality and maintenance of standards in these institutions.
However, the allegation by the executive secretary of the fund, Dr. Abdullahi Bichi Baffa, that over 50 per cent of registered companies in the country are evading the two per cent tax has stunned not a few stakeholders in the sector.Baffa, who made this known in Abuja, when the Senate Committee on Tertiary Institutions and Services visited the agency, listed the dwindling collection of the tax as one of the challenges the fund is facing.
According to Baffa, the falling price of crude oil and the inability to access the portal of the Federal Inland Revenue Service (FIRS) to know what is paid in real time for easy reconciliation are some of the factors that contribute to the number of worries the agency has to contend with.
Over time, TETFund’s heap of challenges has grown to include dwindling tax funds brought about by the state of the economy; dearth of policy reinvigoration initiatives for sustainability of funds consolidation and interventions to institutions; funds intervention disbursement modalities which have promoted dependency by institutions on the fund itself; political interferences which have negated strict adherence to the mandate and policy drives of the fund; the porous link between beneficiary institutions, the Bureau for Public Procurement (BPP) and TETFund in ensuring transparency, due diligence and the ethos of accountability; and above all, the long bureaucratic bottlenecks in seeking approvals and funds disbursements both in TETFund and the beneficiary institutions.
In view of these mounting challenges, some stakeholders are of the view that the agency’s approach to doing things may have gone obsolete needing a change of tactics.
Also since the disclosure came to light, some stakeholders are increasingly of the view that the circumstances surrounding the evasion of tax by over 50 per cent of registered firms in the country, may be more than meet the eye. This explains why they are united in hinting at the possibility of a ccollusion between staff of the agency, defaulting firms, and even the FIRS to circumvent the system.
For former vice chancellor of Niger State-owned Ibrahim Babangida University, Lapai, Prof. Ibrahim Kolo, the so-called tax evasion is happening because the agency failed to take proactive steps before now.
“The reality is that TETFund itself does not have the mechanism to proactively follow up with firms that remit funds to it so as to know who has remitted, who is yet to remit and who has stopped remitting, as well as the reason for the stoppage. One of the issues that may affect the remission of the two per cent tax is because the outfit appears to be just looking at the law, which mandate firms to remit the tax. Unfortunately, in this country, people don’t obey a particular law for long before they start looking for ways of circumventing the same law,” Kolo explained.
He added that matters are made worse because “in the process of just waiting idly for the organisations that remit these taxes, some of the organisations are alienated and they are bound to feel disconnected because nobody wants to continue remitting monies to an organisation they do not appear to have a say in what they are doing?
“As long as organisations don’t see their roles in TETFund, or what they get in return, this issue of tax evasion may continue. So, TETFund needs to be proactive by bringing donor companies closer to itself, by even putting them or their representatives on its board. If this happens, these firms would see what their monies are being used for. Nothing stops TETFund from proactively following up on companies that remit their taxes as at when due, and paying thank you visits to these firms. Nothing even stops TETFund from hosting these firms to a lunch/dinner,” he stated.
Kolo, who was appointed vice chancellor of the still-birthed Federal University of Education, Zaria, Kaduna State, by former President Goodluck Jonathan, explained that in developed countries, tertiary institutions depend on funds from the organised private sector because of the rapport and mutual benefit between both parties, adding that this can happen in the country if the right atmosphere is put in place.
“So, before complaining of evasion of tax by over 50 per cent of registered firms in the country, the executive secretary should do a thorough in-house cleansing to ensure that a cabal within the agency is not collaborating with firms that should remit tax, and some bad eggs in the FIRS, to rob the agency of funds. He should also speedily carry out a forensic auditing of the agency’s account to ensure the true state of funds accruing to it.”
The Academic Staff Union of Universities (ASUU), agrees with Kolo that there could be high-level collusion between some persons, who end up benefitting from the alleged evasion, while the agency bleeds. According to president of the union, Prof. Biodun Ogunyemi, “Serious efforts should be made to strengthen the drive for the collection of the education tax. Efforts should also not be spared in investigating whether there is collusion between the FIRS and the companies that are to pay the tax because there is no reason for companies that are making profits not to pay what the law mandates them to.
“Additionally, the FIRS should step up action by widening its network in order to bring in companies that are not paying the prescribed tax, and strive to unravel why they were defaulting. If they were paying before, the reason why they stopped should be investigated in order for us to ascertain whether the stoppage has to do with the present economic situation in the country,” the ASUU boss stated.
On whether ASUU shares the generally held belief that the TETFund has discharged its responsibility well and so should be encouraged, Ogunyemi said, “It is difficult to give a straight forward response that TETFund has done very well. We can say that to the extent of being an interventionist agency, it has done well because its intervention has made a lot of difference in the Nigerian tertiary education system.
“TETFund is an important and relevant agency and has the potential to improve the infrastructural base of universities. But it has limited capacity to fully transform the Nigerian university system. What we need to transform the university system in the country is definitely beyond TETFund’s intervention because it has limited capacity to address the rot and decay in Nigerian universities.
“However, in the area of applying funds correctly, TETFund has, in some cases, not done that well because we have found cases of misapplication of funds, cases of diversion of funds, as well as, cases of sheer lack of transparency. Even though the agency has its framework of releasing funds and monitoring performance, there are some universities that try to circumvent these set procedures. Such universities are the ones that are giving the university system a bad name. Now, you have universities that have funds with TETFund but they cannot collect because they have not followed the due process in expending project funds granted them by the agency,” Ogunyemi explained.
On the clamour for the two per cent tax to be upped to four, Ogunyemi said that may not be easy to resolve immediately, especially in the light of the ongoing economic recession. Before asking for an increment, let us first of all see how we can make companies to comply with the two per cent they are now paying. I will say that we should not be in a lot of hurry to press for an increment because before you know it, people will begin to say that TETFund is being distracted from its original purpose.