Plug tax leakages and curtail waste

The federal government declared on Tuesday last week that its budget is too small to properly develop the country. Speaking at the quarterly Presidential Business Forum at the Aso Rock Presidential Villa in Abuja, Minister of Finance Kemi Adeosun blamed government’s inability to deliver essential services on the country’s small budget size which she said […]

The federal government declared on Tuesday last week that its budget is too small to properly develop the country. Speaking at the quarterly Presidential Business Forum at the Aso Rock Presidential Villa in Abuja, Minister of Finance Kemi Adeosun blamed government’s inability to deliver essential services on the country’s small budget size which she said could only pay workers’ salaries. According to her, the situation is so precarious that salary payments take the largest part of the annual budget which she said is largely caused by non-payment of taxes by the Nigerian public. She said increased revenue will ensure sustainability to prevent the country from falling into another death trap and will reduce the nation’s debt service to revenue ratio. 

According to Adeosun, the country’s budget is significantly lower as a ratio of GDP which is currently at 6 percent. She said this is lower than what obtains in other countries that are in Nigeria’s peer group, adding that “ours is the lowest in sub-Saharan African and one of the lowest in the world.” The minister attributed this to Nigeria’s over-reliance on oil which is only 10 percent of the country’s GDP. That means 90 percent of the economy contributes little to national revenue by way of taxes, she said. 

The striking but controversial part of the minister’s speech at the business forum which caught public attention the most was her pronouncement that with a debt profile of N19 trillion as at March 31, 2017, the federal government cannot afford to borrow anymore and will have to generate funds domestically to fund the budget. Government also needs to make its budget size bigger, she said. She added that even if government plugs all leakages and wastages there won’t be enough money for development projects.  

But two days after Adeosun said the federal government must move away from debt in funding future budgets she clarified her statement, saying Nigeria has no choice but to continue to borrow in order to implement federal government’s Economic Recovery and Growth Plan (ERGP). A statement from the Federal Finance Ministry said “Nigeria will continue to borrow. Nothing has changed.” The statement said Nigeria’s debt to GDP ratio is low when compared to other African countries and across most of the world and it quoted the minister as saying “we have headroom to borrow and are doing so aggressively in the short to medium term in order to address our infrastructure deficit and to stimulate growth.”

Although the clarification by the minister averted the heated reactions that were to trail her initial controversial declaration, the re-echoing of the need to expand the country’s tax base in her remarks is another subject of controversy. At present government is collecting its taxes very inefficiently.Tax officials collaborate with local and multi-national companies to under-assess them for tax purposes. In some cases corrupt tax officials even abet tax evasion by major tax payers. Unless government tackles high profile corrupt practices in the country’s tax administration, it would lack justification to seek to raise taxes on citizens. 

Similarly, the minister is not right to justify increased taxation by saying there would not be enough money to fund development even when all stealing, leakages and wastages are plugged. The huge sums of money so far discovered and recovered by the Economic and Financial Crimes Commission (EFCC) in the past two years is certainly a lot of money. Since those   discoveries are just a tip of the iceberg and a reflection of the bizarre stealing in the public service, such monies when recovered could be used to fill some infrastructural gaps. 

We urge government to rid tax administration of corruption. It should also plug the system of leakages and wastages in government expenditure. It is when these reform strategies fail to meet government expectations that it could further tax Nigerians who are already over-burdened by taxes.