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THE NATION ON SUNDAY, JUNE 5, 2011
Why Nigeria’s tax system is weak Unremitted taxes running into several billions of naira by ministries, agencies, management of the National Assembly and other tiers of government, remain a concern not only to tax authorities but other stakeholders, reports Ibrahim Apekhade Yusuf
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N other climes, especially in more advanced economies, tax is relied upon perhaps as one of the most important fiscal policy instruments deployed by the government to raise the standard of living of the people. But in Nigeria, this is an irony. As a rule, tax is only observed in the breach by a broad spectrum of the society, most especially so-called enlightened citizens, who have since gained notoriety for circumventing the tax processes in the country. The above terse statement captured the lamentation that resonated among a crosssection of Nigerians recently, who at separate interviews with our correspondent expressed outrage over the parlous state of the economy, which, in their estimation, was as a result of poor fiscal discipline in the allocation of resources and the operation of an ineffective tax regime in the country. Critique of the tax regime In the view of analysts, despite the fact that one of the major areas of reform in recent years has been tax administration, the reform seems to be more of ‘pro-rich’ proposition in its design and implementation, thereby creating the regime of ‘unfairness’ and ‘unequal opportuinities.’ Tax payment in various parts of the country, the analysts stressed, especially in government, is easily manipulated, as tax officials double as ‘consultants’ to whoever wants to evade tax; they help them compromise the books and they collect a handsome fee for their services. These same set of persons are reluctant to remit taxes and nobody is bold enough to wield the big stick. It is common knowledge that Nigerian leaders routinely live above the law. Hence, the question of how much has our past and present leaders paid as tax in the last decade, is never answered, experts further argued. Tax default The Federal Inland Revenue Service (FIRS) revealed that as the end of 2009, the Nigerian Universities Commission (NUC), Nigerian National Petroleum Corporation (NNPC), amongst other Ministries, Departments and Agencies (MDAs) as well as the National Assembly had not remitted a total of about N72 billion in Personal Income Tax deductions, Value Added Tax and Withholding Tax. This was made known by the the FIRS after it declared that Tax Clearance Certificate
•Utomi
•Sagay
•Ijewere
would soon be a requirement, and be made compulsory, to be able to access certain government services, even as part of vehicle particulars. Assistant Director Tax, FIRS, Mrs. Camilla Chuta, said the management of the National Assembly Withholding Tax was about N306 million made up of N22.34 million. Although the National Assembly officilas had then promised to meet with the officials of the FIRS for final reconciliation before effecting payment for the period under review, the above economic pundits argue, obviously shows how the National Assembly, in spite of being a conduit that drains the economy of funds, is still not able to perform its obligatory role of adequately paying back the tax required into the system. The Director of FCT/Special Tax Office, Abuja, Mr. Peter Olayemi, remarked that the enforcement became necessary given the “uncooperative posture” of
many defaulting MDAs and government officials, who had deducted these taxes but refused to remit same to the detriment of the smooth running of the government. Shedding more light on the foregoing, professor of political economy, Professor Pat Utomi, in an interview with The Nation had decried what he described as the country’s painful journey into a state of anomie, “where the selfish few live off the majority.” He said: “A country like Nigeria, where more is devoted to recurrent expenditure with little or nothing left for capital expenditure, is not just a bad signal but shows us as a country not yet in a hurry to develop and catch up with our peers out there.” Apparently discomfited over what he called the rent taking mentality of the ruling class, Utomi, who is a Director at the Lagos Business School, said: “A situation where members of the ruling class believes the rest of the country owes them the good things of life, when the essence of leadership is supposed to be improve quality of life for the rest of the people by maximising all funds, whether as taxes, loans, is a sad commentary on the leadership and the society as a whole.” While commenting on the funds expended on President Goodluck Jonathan’s inauguration last week, Utomi, who fell short of accusing the Federal Government of outright robbery, said it is
rather appalling that:”Tax payers’ money is being spent with impunity in the way and manner we have seen these past decades. “Nigeria, at this point deserves selfless leaders at all levels of the society,leaders, who will not choose to be selfish, but are willing to sacrifice their all for the common good of all. Nigeria is in dire need of leaders with others-centred behaviour, especially leaders who are selfsacrificing”, he said. “One of the reasons why the country has not been able to harness the full benefit of taxes compared to other countries of the world is because there is still mistrust in the system. Many people, who pay taxes pay it reluctantly because there is no guarantee that the common wealth would be put into judicious use by those who control the country’s resources.” Expatiating, he said with revelation that a lawmaker takes home about N50 million every quarter, which amounts to about N200 million per annum ($1.5million), “Means that the tax per member is about 60kobo per naira after the first N60, 000. If this is correct, then it is obvious that the government ought to be making much from the lawmakers. But unfortunately, it appears this has not been the case over the years. “If people are expected to pay tax
“I think there’s a problem in getting the big people into the dragnet. Not that they’re not in the tax dragnet, but bringing their income to the pool is the problem and it has to with the type of regime we operate in this country”
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