Government must tax ‘untouchable businessmen,’ say stakeholders
• Urge exploitation of indirect tax as enterprises groan under heavy levies
• ‘Nigeria can earn share of global $4 trillion E-commerce tax revenue’
It should not be business as usual for the 20 per cent of the nation’s population that control 80 per cent of the common wealth when tax administration issues are brought to the fore, stakeholders at the maiden edition of The Guardian’s Economic Forum Series on Tax have argued.
Applying the Pareto principle of 80-20 rule, which specifies an unequal relationship between inputs and outputs, the stakeholders urged the Federal Government to go after high networth individuals, often described as the ‘untouchable businessmen’ for tax remittances.
According to the stakeholders, there are too many affluent individuals not captured in the tax net.
They contended that, in a push for increased revenue generation, government should explore indirect tax, especially those related to consumption, as corporate entities are already over-burdened with enterprises’ mortality rate rising across the various value-chains.
The stakeholders noted that with revenue from oil receipts dwindling, the non-oil sector remains the other alternative to exploit.
They added that there were opportunities for Nigeria to earn a share of the globally-projected income of $4 trillion in revenue from Value Added Tax (VAT) on e-supplies, if opportunities in the e-ecommerce sector are properly harnessed.
Unveiling the series with the theme: “Unlocking Nigeria’s Tax Revenue Potential for Sustainable development,” in Lagos, yesterday, the Chairman of Guardian Newspapers Limited , Lady Maiden Ibru, in her welcome address, said the on-going reforms at the company aim at reflecting current realities, included the introduction of conferences and master classes to discuss national issues.
For the Publisher of The Guardian, the role of the company has gone beyond the printing of newspapers to taking issues of public interest head on, especially those relating to tax, insurance, investment bonds and e-marketing, which globalisation has forced on us all.
Her words: “We feel tax revenues are critical to sustainable development because they provide governments with independent revenue for investing in development, reducing poverty and delivering public services, increasing state capacity, accountability and responsiveness to citizens.
“Nigeria is faced with ‘taxing’ challenge, a situation where its tax receipt compared to its potentials and vis-à-vis other developing countries has been dismally low.
“In Nigeria, government is always afraid of charging appropriate fees, yet the same government does not have enough resources to fund education to global standard….in Lagos, there have been unending protests about multiple taxation….in churches, the leaders are even resisting tax on their businesses outside the preaching of the gospel.
“Nigeria is not earning enough to take care of itself anymore. Twenty seven out of the 36 states of the federation cannot pay salaries anymore. It means they are bankrupt. They have failed….while other African countries collect an average of 20 per cent of their Gross Domestic Product as tax, Nigeria could barely achieve a third of this rate.”
The Executive Chairman, Federal Inland Revenue Service (FIRS), Babatunde Fowler, while commending The Guardian in leading national discourse on key issues, said the forum would lead to a re-examination of the role that taxation currently plays in our development as a country and how we can better harness its potential for sustainable development.
Fowler noted that the global fall in oil prices is currently having a profound and significant effect on our national revenues.
“A three-year review of tax collection figures showed that while collections from non-oil taxes have been growing, collections from oil taxes, have steadily declined and perhaps, set to decline even further in 2016.
“The fall in crude oil prices has impacted the collection from oil taxes, thereby making the contribution from non-oil taxes compare favourably with that from oil taxes, such that oil taxes only contributed 35% of total tax collection in 2015,” he said.
While these statistics give cause for concern, they also present an opportunity for us as a nation to grow our non-oil tax revenue base, which is in tandem with the theme of this forum “unlocking our tax revenue potential,” he stressed.
To entrench a tax payment culture, Fowler said that since his assumption of office, FIRS has widened taxpayer database with over 700,000 new corporate taxpayers and over one million new individual taxpayers.
It has also extended its target to bring over one million new corporate taxpayers and five million individual taxpayers by the end of the 2016.
He said that FIRS, in efforts to achieve these, has embarked on widespread taxpayer education and enlightenment nationwide, utilising print and electronic media in all major languages.
Consequently, the number of companies regularly filing returns has moved from 31,458 companies in January 2016 to 77,440 by the end of June 2016- a growth of over 146%.
“Our enforcement activities in the past few months have also yielded results, as we have recovered N4.14bn and US$5m with commitments secured from the taxpayers to pay additional N2.37 billion and $23.65 million over the next few months,” he said.
Speaking on the prospects of increasing non-oil revenue through Value Added Tax (VAT), Tax Partner, Akintola Williams Deloitte, Seye Arowolo, attributed the low revenue from VAT to heavy dependence on oil revenue, noting that there are viable alternatives yet to be explored.
According to him, there are opportunities for Nigeria to earn a share of the globally projected income of $4 trillion in revenue from VAT on e-supplies.
He explained that until the Federal Government focused on non-oil revenue generation through tax as primary option rather than as a child of necessity, the potential for improved earnings may not be realised.
“E-commerce rules need to be addressed as the use of payment cards accounted for $640 million added to the Nigeria’s Gross Domestic Product (GDP) between 2011 and 2015. With many transactions being completed online, there is a great opportunity to earn more if the potential is fully explored, he remarked.
While comparing trends in selected African countries, Arowolo noted that Nigeria’s VAT rate stands at five per cent unlike South Africa at 14 per cent, Kenya, 16 per cent, and Ghana, 17 per cent.
On the prospects for VAT increase, Arowolo urged government to eliminate leakages like ambiguity in the VAT Act, information asymmetry, constraints to innovation, limited automation, illegitimate input VAT claim, transfer mispricing as well as protracted audit processes.
To do this, Arowolo said: “Government needs to adopt strategies to get the 20 per cent that contribute 80 per cent or more of Nigeria’s tax revenue to as near 100 per cent compliance as possible, adopt strategies that nurture compliance by those not yet in tax net, destroy the perception of “untouchable taxpayers through relentless detection and enforcement measures and accelerate data integration across all available databases.”
Making a case for the private sector, the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, noted that there was a dilemma over tax administration in the country and that structural issues need to be addressed.
He noted that revenue generation could only go as high as the prosperity of the institutions in the country, especially when weighed against the tax burden being placed on them by government.
According to him: “The conditions of business operations should be evaluated vis-à-vis the tax burden placed on them. Businesses are concerned about too many demands on them through taxes and levies as many government agencies depend heavily on internally-generated revenues when they should be serviced from taxes paid to the Federal Government. Businesses are the ones suffering for this dysfunctional system.
“When Nigeria is compared with other African countries, the advocates of increased tax payments forget that the privileges across countries differ. While an average entrepreneur in Nigeria provides virtually the entire infrastructure needed, other countries provide a good environment for operations.
“With the wealth of the country being held by a few, such few should be made to pay more rather than burdening corporate entities. Equity and creativity matter in tax administration.”
The Registrar/Chief Executive, Institute of Chartered Accountants of Nigeria (ICAN), Rotimi Omotoso, advised against encouraging orthodox and aggressive method of tax collection noting that electronic filing was the safest, fastest and easiest way to submit individual and business tax returns.
According to him, every Nigerian individual and business must be able to e-file his or her tax returns, as well as low income earners, for free.
Immediate Past President, Chartered Institute of Taxation of Nigeria (CITN), Anthony Chidolue Dike, affirmed that to wean the economy away from oil taxes, there was a need for a shift from direct to indirect taxes especially in the non-oil sector.
“Nigeria has an underground economy that is so large. Reigning in their activities provide great scope for widening the tax base. Government needs to reduce cost of doing business by reducing Company Income Tax and Personal Income Tax rates, as shifting to indirect taxes would still not lead to a shortfall in meeting revenue requirements,’’ he added.