Nigeria’s tax drive and burden of responsibility and accountability
Steve Omanufeme is Businessamlive Managing Editor.
You can contact him on steveo@businessamlive.com with stories and commentary.
February 19, 20181.2K views0 comments
Nigeria’s tax to GDP ratio at six percent is definitely very low when compared to its peers.
According to available statistics, Ghana, the nation’s West African neighbour’s ratio at 15 percent cast a pall on Nigeria as the dominant economy in the sub-region. Again, South Africa’s at 24 percent also puts doubts on Nigeria being the largest economy on the continent, as well as the whole tax administration in the country.
The six percent tax to GDP ratio is further dismal when compared to the developed world, which the nation is aspiring to emulate. Available data indicate that most developed nations have an average rate of 30 percent.
The above is surely the reason for the current tax drive by the present administration, which it hopes to double the ratio to 12 percent by the year 2020, less than two years away.
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However, the strategies being employed by the government to shore up tax revenues, though well-intentioned, may not deliver the expected results due to some issues being neglected, such as the failure to address the reason for tax avoidance and evasion in the country, the rising unemployment levels, and the lack of government sincerity in the deployment of tax revenue for social infrastructure as well as a pervading levels of multiple taxation.
Most Nigerians are struggling to pay taxes because of the worsening economic conditions, where jobs are lost daily and the costs of doing business are rising. The situation is equally compounded by lack of trust from the citizenry on the use of taxpayers money for infrastructure development and social safety nets for the underprivileged.
In Nigeria today, there are no known social programmes to take care of the unemployed and social infrastructure is short in supply with people and businesses providing their own power, water, and access roads.
Read also: Corporate taxes to increase by 0.5% as competition bill goes for assent
Since the current administration came to power, the citizens have had to pay more in taxes in the form of stamp duties and various levies from local authorities, without commensurate social infrastructure. With the exception of Lagos state that has done some massive road infrastructure, there is no known infrastructure that the Federal Government has put in place to alleviate the masses: the roads are still death traps and power remains the epileptic aggravating cost of doing business.
The government should go beyond reeling out measures to increase tax revenue to solve the underlying issues around tax evasion and avoidance by showing clearly to the public how monies from tax are spent. It should advertise infrastructure supported and paid for with taxes to elicit trust from the people.
The government should convince Nigerians that tax monies would not be used to fund the expensive lifestyles of politicians and government officials. The government should display some modicum of responsibility in the management of tax resources to win the people over.
Similarly, economic policies should support growth for businesses and individuals to earn more and pay commensurate taxes to the government. An unemployed or underemployed citizen who is buffeted by varying economic issues would never think of paying taxes, instead would try to avoid taxes.
The authorities should create incentives for corporate Nigeria to invest in infrastructures such as tax holidays and tax forbearance for start-ups up to say three years for them to thrive. Startups are like a vehicle riding through quicksand. If burdened by heavy load would definitely sink.
On multiple-taxation, the government should be innovative in its tax governance and bring the informal sector into the tax net rather than overburdening the few that pay taxes. Currently, busineseses say there are 55 taxes and levies imposed on businesses by the local, state and federal governments, which are impeding on growth.
Yet, the Federal Government is planning to impose 0.5 percent tax on the profit of businesses to fund a new commission/agency through the Federal Competition and Consumer Protection Bill. How long will businesses pay through their noses to fund the lavish lives of government officials? That is the question agitating the minds of business promoters and owners.
On the social dimension of tax, the government should see to it that property tax is intensified to bridge inequality in the system with proceeds from it being invested in property development for low-income earners. It would also bridge the housing gap in the country.
Finally, taxation is critical to funding government revenues, but the government should demonstrate accountability in the use of such funds to engender trust and tax compliance. What Lagos has done with internally generated revenues (IGRs) should be replicated at the centre and other states to build trust. The government should establish a social programme to take care of unemployed youths; America, the most capitalist economy has such. There is nothing stopping Nigeria from starting to take care of its underprivileged citizens and the youth.
Business a.m.’s comment pages are a place for thought-provoking views and debate. These views are not necessarily shared by Business a.m.
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