The hardest civic responsibility for most citizens is tax payment, and it is one that many have cunningly evaded. Fortunately, the Nigeria government has clamped down on its campaign for tax payments, especially following the fall in oil prices, which has affected its revenue. This however begs the question: how can government collect tax with ease? Managing Director, Bidemi Daniel, in this interview with COLLINS NWEZE, proves that the simple answer is: technology.
Everyone is talking about taxation. At the state and federal level – even right up to the World Bank – government agencies are emphasising the need for Nigeria to consider its tax system. What do you think is driving this new invigorated tax campaign?
First, let us put it in proper perspective. The necessity of a strong, consistent and efficient tax system has always been there. Society consists of people who must have responsibilities towards it. Just as in a home of parents and children where everyone has a role and responsibility, so also is the larger society. Every taxable person must contribute to the common-wealth. The common-wealth is so called because it is from it that our common needs are to be met.
For instance, every individual cannot begin to fix only the portion of the road that he or she plies. Roads are a shared resource that should be funded with the common-wealth. The same applies to healthcare. We cannot continue to have citizens constantly flying out of the country to receive good healthcare. It is a common need that a good government should provide. In summary, the government needs the revenue from taxation to settle costs of at least, our basic common needs.
Unfortunately, the revenues our government currently derive from taxation is insufficient to meet our needs. I don’t think it is because our people are not sufficiently productive, as to have the means to pay their taxes; but rather, that government found a cheaper form of funding our societies developmental needs and abandoned developing a relatively fool-proof tax system. Government had chosen to partake in the crude oil business. Even the taxation of the crude oil business in time past, was far from optimal.
Our approach to the oil sector brought us more curses than blessings, with the most glaring consequence being that we had money but were not developed as the people were not empowered to create wealth and contribute taxes.
The conversation about tax is, therefore, timely, and the message is simply that there is much more to be done. Interestingly, we are not the only ones having this conversation. Even the more advanced countries of the world feature taxation in their daily conversations because there is no over-emphasizing its role in the development of any society. Society is an aggregation of people, so if you want to see a developed society, develop the people and let them fulfill their fiscal responsibilities.
Do you think the conversation was triggered by the drop in oil prices?
Yes, you are correct to say that. However, like I said, this is a conversation that should awaken us to our responsibility, whether we have a profitable crude oil business or not. In my view, taxation is a more sustainable means to building the common-wealth. The wealth from natural resources should be transformed into more sustainable means to generate wealth. For example, (although not the best example, as I will route for human capital development above all else) Dubai funded its rapid and impressive development using its crude oil to create a tourist haven; mega cities that people are trooping into today. While our older generation have made their mistakes, our generation should not fall into same trap. We need to tame ourselves from voraciously consuming our natural resources and rather transform them into more sustainable sources of wealth creation. We must leave something greater for future generations.
There is the belief that the government is not doing its own part regarding taxation. People don’t trust the government to properly utilise paid taxes. What do you think is creating this fear?
I think it is the absence of effective communication. Not that there is no communication, but there is need for much more. We need to spread the message with more than newspaper adverts and radio jingles. Taxation is in some respects, cultural; a creation of habit. Government should not expect that a society that has been marginally fiscally responsible will suddenly wake-up and become responsible. A process of socialization and acculturalization is needed. I think, starting from the nursery schools, primary, secondary to tertiary levels, a process of education on civics and fiscal responsibility must be inculcated in the educational curriculums. Some basic knowledge of how the tax system works is absolutely necessary. Considering the tax revolution we need, there cannot be a case of over-communication.
I think a well-thought process of ICT development should also be a major part of the communication process.
I also think, the dynamics of our level of infrastructure development has not helped government. Of course, we hear sentiments such as: what has paying tax ever done for me when we still have bad roads, no power, and practically zero basic amenities; why then should l pay tax?” But then, come to think of it, I live in a part of Lagos, that has recently seen the Jubilee Bridge, Ajah; built over a period of about 20months. That should inspire me to pay more tax, right. Sure it should. But then, how many more of such life-enriching projects would you see if, with the way our governments’ budgets are structured, more monies are voted to the payment of salaries and maintaining its workforce than on capital projects. Ultimately, there are things government does that we cannot see. It is, therefore up to government to balance its politics and financing in other to incentivize (used loosely) voluntary tax compliance.
How is technology driving taxation?
Pretty well. Taxtech, a subsidiary of Taxaide, is Nigeria’s foremost tech-based company that deploys technology for effective and efficient management and administration of taxes. Several tech companies provide some solutions around taxation, but then, Taxtech is solely focused on providing tax technologies. The company is on a mission to provide technology solutions around the following process issues in tax management and administration: registrations, computations, remittances, returns, receipting, auditing and accounting.
Is the technology you spoke about foreign or locally developed?
Absolutely, locally developed. It is amazing the talents readily available in this country. My background is in Law, but in the three years that I have delved deeply into running a tax management business, I have worked with young, indigenous developers, and I’ve been amazed at what can be done, the wealth of intelligence readily available, and the progressive technology and innovations they are conversant with.
However, we live in a globalised world where we do not have to physically move outside our locations to be privy to current happenings; with ICT, I can see it. With the right organisation, we can harness our capabilities to create products and services our people are comfortable with and can compete on a global stage. We also ensure we conduct our own integrity test using global benchmarks, and all the reports we have received have been absolutely positive. So, while we may have designed it locally, it is globally acceptable, relevant and competitive.
During the last World Bank Spring Meetings, the Finance Minister talked about taxation. Of the 13 million companies in the country, only 500,000 pay tax from the statistics she gave us. How can that be? Does it mean that companies are not paying their taxes?
I would be hard-pressed to speak directly to this as I am not aware of how or when these statistics were measured. However, we cannot ignore that there are more people who are not willing to pay tax, than people like me who are. What we need to do is introduce mechanisms to properly capture all eligible tax payers, and then measure from there. That is where technology comes in. We need technology to harness that data in order to obtain relevant and useful information.
I believe this challenge is easily surmountable, once the relevant mandates are given. Through technology and public-private partnerships, government can easily have the useful information it needs to for effective tax administration.
What is your view on government’s plan to name and shame tax defaulters?
I think the possibility will be great. The legal infrastructure is there in terms of the laws required, although with manageable challenges. It may however involve significantly stretching the infrastructure, for example, having the needed experts to successfully prosecute the cases. While the government can single out a few people and parade them as examples, it can and should spend more time erecting structures that will promote compliance, and easily identify defaulters. With that, prosecution can be pursued with sufficient, direct – not circumstantial – evidence.
In other words, we need infrastructure that can provide all the information we need and I think technology plays a fantastic role in fulfilling that need. What we are doing is looking at the same elephant, but from different parts. So, we say why don’t we have an aerial view of this problem and capture it appropriately? Thus, ICT is the anecdote to the challenges that the current situation poses. We can enforce tax compliance using technology.
Talking about the challenges, what is the biggest challenge you are facing in this tax business?
The major challenge would be in establishing a strong relationship between government and tax management firms. There is a world of difference between tax management firms and tax consultants. While tax consultant provide tax advisory services to tax payers, a tax management firm actually implements or manages the day to day compliance process.
It is interesting to note that, at least to the best of my knowledge, Taxaide is the first indigenous company that brands itself as a tax management firm in Nigeria. We are not a firm of accountants or auditors or lawyers, simply tax managers. To paint a clearer picture, we are a private tax office. So, the quality of service that a typical high net worth tax payer may not ordinarily be able to achieve at typical government office, he or she is able to achieve it with us, of course at a premium.
It, therefore, goes back to ‘Private-Public Partnership.’ If the government can license firms to manage individuals’ pension and call them pension managers, the same can easily apply to tax managers who will be responsible to a regulator within the government. No payment is required from the government, individuals have the right to make a choice for efficient services for a premium. If we can properly structure our society accordingly, a company like Taxaide will be empowered to achieve so much more. As it stands, Taxaide can testify to the bounty of responsible, patriotic Nigerians ready to pay their taxes at the right time if the right infrastructure is available. That is the gap that Taxaide is bridge.
Many lawyers are into taxation. What is driving this trend?
Taxation is essentially statutory. Without the law, there can be no taxation. Taxation is taking away from the private wealth of the citizens and putting it compulsorily in the common wealth. For government (the executives) to exercise such power, government (legislature) must have expressly stated it. Government (the judiciary) must also be there to that the laws are properly interpreted in the event of disputes.
What is your take on the increment of Value Added Tax (VAT) from five per cent to 10 per cent?
Luckily, this is a subject where the outcome can easily be measured. If the ‘math’ works out, then so be it. I currently do not have access to government information, but I believe that until we optimise our tax system and ensure that we capture the sufficient number of taxable persons, the decision to increase VAT may have no statistical basis. Is it that the rate is too low or that government has been unable to bring the sufficient number of tax payers in the tax net? Where we have captured the sufficient number of taxable persons and the revenue from VAT does not meet our collective financial objective, then we have to increase the rate.
Are you saying increase in VAT is not justifiable?
I am saying that increasing the VAT has to be a product of the efficiency with which government has administered the prevailing VAT rate. There is no basis for an increment of the VAT rate if all government has to do, to meet its financial objective, is to increase the number of tax payers – the tax base.
What is your message to Nigerians?
We all must recognise that paying taxes is a civic duty we must fulfill. We cannot have a functional society if people don’t pay their taxes. We should consider it as a fundamental human obligation to be part of the tax system, which is for the benefit of everyone, and not the exclusive preserve of government. Government simply acts as the managers of wealth, while we contribute to it.
We must, therefore, engage more with the system to discover what the issues are, and make concerted efforts to fix them. Without a doubt, the lifeblood of any country/society should be its tax system. Allow me to reiterate: crude oil will never be a sustainable source of revenue, the sooner we build a balanced and efficient tax system, the sooner we do not only survive as an inclusive society, but thrive very well in the process.
