Chief David Nwachukwu is chairman, steering Committee of Strengthening Public Finance in Nigeria (STREPFIN) an initiative of Oxfam and ActionAid at the forefront of advocacy for tax justice and efficient service delivery of corporate social responsibility (CSR) projects in the country. In this interview with Ibrahim Apekhade Yusuf he speaks on the outcome of the baseline study conducted by his group vis-à-vis challenges of public finance management in the country. Excerpts:
What is STREPFIN all about?
Strengthening Public Finance in Nigeria (STREPFIN) is an initiative of Oxfam and ActionAid, two international nonprofit, nongovernmental organisations. Three years ago, they did a pilot study of public finance management in Nigeria; the project focused on ministry and departmental agencies (MDAs) in Abuja, Rivers, Bayelsa and Delta states. And from the findings of that pilot study, it was revealed that public finance management in Nigeria was very inefficient, very suboptimal and that we were not getting value for the money we spent.
For instance, in many communities in the Niger Delta, we have situations where a local government will spend money doing a project, the state government will spend money doing a project, the legislator in Abuja would still do constituency project for the same thing. In an instance, it was borehole. The oil companies operating in that community also need to spend money doing a borehole; the federal government in Abuja through the Ministry of Niger Delta will spend money doing a borehole. And from these five agencies, five different boreholes not one is working in that community. The same thing goes for schools and hospitals, they will tell you so-so budget was for hospital renovation and you go there, the place is dilapidated, money has been spent but no value was got from it.
One of the conclusions was that such incidences are one of the samples of what goes on across Nigerian states. So rising from that pilot study, they now did a Lagos study on expenditure patterns across Nigeria. The study came up with what they called public finance roadmap for the country and it had three dimensions; public sector, corporate sector and the civil society organisations respectively, which also includes the media.
There are policies to help us access information and manage our public finances but either because of our lack of interest, ignorance and apathy, nothing gets done. For instance, there’s the public Information and Freedom of Information (FOI) Act that empowers journalists and other interested parties to have access to information but we don’t show interest.
One of the other findings was that the emphasis was on allocations from the centre, nobody was paying attention to revenue that can be mobilised from other sources if we diversity our revenue base. And so whilst we were vulnerable because of that overemphasis on the central allocations, we felt that to reduce the risk of shocks, we needed to diversify our revenue base. Of course, in diversifying it one of the key elements is taxes.
People argue that our lack of interest in paying tax in Nigeria is because we have lost confidence in government and what they do with the taxes we pay. If you have the privilege in traveling outside the country, you’ll see good roads, water, and electricity. If you want to do business, you can take it for granted that those basic things would be in place. But here, people pay taxes and the tax money is not utilised to give us those services. That’s a major challenge.
One of the findings was that because government is failing in its duty of providing those basic services, a number of companies now embark on what they call corporate social responsibility (CSR). So in the community where they operate they’ll do the road, provide light, not just for themselves but for the community. Now the taxman argues that since those costs for CSR is not directly utilised for the business that you cannot claim it for tax relief.
But if government had done those things you won’t be spending money doing it. So if you have spent your own money doing it, is it fair that when the taxman comes they would add that money you’re spending for CSR into your income for the purpose of taxing you? That’s double jeopardy now. So that the concern that many corporate entities complain about. And the study concluded through some issues and came up with recommendations on how such concerns should be addressed.
That’s the summary of the activities we had about in going through as the second phase of STREPFIN and in the last one week, we’ve paid advocacy visits to Manufacturers Association of Nigeria (MAN), Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Lagos Chamber of Commerce and Industry (LCCI), because these are umbrella organisations for people in the organised private sector to share the findings of the research with them.
From your findings are companies willing to pay taxes knowing full well the challenges they have to confront?
Now like I said, any responsible corporate citizen would give to Caesar what belongs to Caesar. If a company does business in an environment, makes money, you’re obliged to pay your workers their dues and wages. You’re equally obliged to pay government its taxes. And the shareholders of the company, you’re also entitled to their own remunerations for taking the risks to do that business. Because government has failed in their duty, if it is in a right environment, you find situations where, there’s a lack of coordination in even the taxing policy. Somebody would set up a business here, like I said, he has spent his money providing electricity, road, water, security and all the utility government should provide he provides them himself. After he incurs all those costs, you expect him to pay taxes to government. Now it’s a collective responsibility for all of us for the civic citizen who’s paying tax take an interest in what government does with your tax money. For the companies that pay taxes and don’t get services, incurring costs doing those things is not a solution to the problem; they should come together and make the government authorities accountable. These monies you collected as taxes; you budgeted you’ll do this and that but what did you do with my money? Did we get value for that money?
If people are doing their own role, government is also expected to play their own part. So our take is that everybody has a role to play in improving the situation. If people playing their roles, I mean all the entities, then we’ll have a better society where the level of poverty will reduce because if a company is doing well in its business, the tendency is that the business would grow. If government is using the tax money properly to provide these services that we deserve, we’re pointing fingers that A or B is at fault. No. We’re only saying that everybody has a role to play for us to have a better society in Nigeria. That’s our attitude and we’ve identified what those roles are and make sure each person plays his own role.
Part of the thing we must bear in mind is that a rational investor has a choice to put his money where it would yield better value. If I’m a foreign investor who wants to invest, I’ll look for where I’ll get the best returns on investment.
If I know that by coming to Nigeria I’ll provide all these things for myself, and that increases the cost of doing business and I cannot claim reliefs, then it has a disincentive doing business in Nigeria, I’ll rather go somewhere else, for example, Ghana, etc., where those services are being provided.
Now because there’s no clear policy, they say the law is an ass, if I spend money doing CSR and I call it a donation, the tax law allows donations. But because I’m not as knowledgeable as you’re, and I probably don’t have a tax consultant and if I don’t call it donations, I call it CSR, they’ll tax me for it. So the tendency is that those who are knowledgeable or have tax consultants, will package the money they spend on CSR in a manner that you get tax reliefs. But the unfortunate thing is that this tendency by companies to seeking tax reliefs through CSR reduces money available to be taxed and so it affects government’s revenue. What we’ve tried to x-ray these past week, is the various angles to it. So that the policymakers are now better informed of the implications of certain decisions they take. So that we can come up with a reform agenda of our tax laws that’ll make for what I call tax justice in the system.