Casting a wider tax net

The National Tax Policy Document Review Committee revealed recently that only 10 million Nigerians pay tax. This revelation is disturbing but not at all surprising. At a recent meeting of stakeholders, a member of the committee Mr Taiwo Oyedele further advocated the need for the country to expand the tax net to include all taxable […]

The National Tax Policy Document Review Committee revealed recently that only 10 million Nigerians pay tax. This revelation is disturbing but not at all surprising. At a recent meeting of stakeholders, a member of the committee Mr Taiwo Oyedele further advocated the need for the country to expand the tax net to include all taxable adults, institutions and companies in order to boost the country’s revenue base. He also called for the imposition of high consumption taxes as many Nigerians have a taste for exotic goods and services. This will offer government the opportunity for gleaning tax revenue from such indulgences. Oyedele must be referring to individuals who indulge in acquisition of exotic cars, foreign food and drinks and private jets, to mention a few.
According to the committee, some of the problems militating against the successful implementation of a robust tax policy include insufficient information, lack of accountability, lack of clarity, lack of skilled manpower and inadequate funding as well as public aversion to use of force for tax collection. Meanwhile the situation is not helped by the use of obsolete laws by tax authorities. Oyedele therefore called for a good tax policy that will make tax payment easier. Just as well, Chairman of the Committee Dr Sanni Abiola noted the need for political will at the highest level of government in order that a more robust tax administration regime will evolve.
Against the backdrop of the depressed state of taxation in the country, the foregoing speakers could not have put the picture better. However, more significant is lack of political will which under any circumstance remains the missing catalyst that should have driven the process of reforming the country’s tax regime. Many observers have attributed the lack of political will and the attendant compromised practices to the overdependence on oil money since the onset of the oil boom. Successive governments at all tiers have over the years sidelined the promise of tax revenue and hence promoted a complement of malpractices and abuses in the regime.
It is in that context that the efforts of the present administration to re-position the nation’s tax regime should be elaborate and sustainable in both the short and long run to enable the country reap optimally from the tax potential of its resource base. Speaking in Abuja recently at the opening of the 18th Annual Tax Conference of the Chartered Institute of Taxation of Nigeria (CITN) with the theme “Fiscal Challenges and Opportunities of the Nigerian Economy,” President Muhammadu Buhari who was represented by Finance Minister Mrs Kemi Adeosun reiterated his directive that henceforth, no payment, no matter how small, should be made by the federal government to any individual or company without the payee showing evidence of compliant tax status. While the president’s directive is a step in the right direction, the incidence of underassessment and underpayment of taxable entities should be addressed effectively if the desired impact is to be achieved.
Meanwhile, the call by the Technical Assistant at the Nigerian Association of Small and Medium Enterprises Mr Chris John Mamudu on the committee to consider a tax amnesty for SMEs qualifies for consideration on a case by case basis. The SMEs comprise the informal sector and are the employment generation bedrock of the Nigerian economy. Hence, granting the entire informal sector tax amnesty may introduce wide spread abuses in the system and thereby make it dysfunctional. If as envisaged all taxable adults should pay tax, it becomes indefensible to grant any business in any capacity an unconditional tax exemption.  Rather, tax concessions can be designed as an incentive to direct investments into sectors of the economy that generate high employment and much value added.