The culture of paying tax is still alien in this part of the world, with majority of companies and individuals yet to be fully captured in the nation’s wider tax net, reports Ibrahim Apekhade Yusuf
“IN this world, nothing can be said to be certain, except death and taxes.”
Benjamin Franklin, renowned author, made this wisecrack over two centuries ago in his now famous ‘Letter to Jean—Baptist Le Roy’, in 13 November 1789.
But contrary to Franklin’s assertion, only death and not taxes is certain as the culture of paying taxes is more repudiated than it is encouraged in this part of the world.
Reality check
In Nigeria, more often than not, you find that the category of individuals who default in the payment of taxes are easily the exclusively rich, who thinks, perhaps, by virtue of their credo and social standing, the rest of the society owes them a first class treatment, a world of favours, not to be returned!
Even among the middle-class, it is still the same. For those who deign to pay at all, they consider it as a matter of choice, and not as a fulfilment of a civic responsibility.
At the last count, after a careful audit by the Federal Government, it was discovered that over 350, 000 companies in the country do not pay taxes.
According to informed sources, in the last couple of years, the Federal Inland Revenue Service, which is the central tax authority, has been having a running battle with high net worth individuals and companies in its quest to get them into the nation’s wider tax net.
It is however, instructive to note that the Nigeria Extractive Industries Transparency Initiative, NEITI, did uncovered unremitted taxes amounting to $9.8 billion (N1.538 trillion) by oil companies into the federation account.
The unremitted taxes resulted from under-payment of taxes and rents, through under-assessment, process manipulation and poor management of agreements between the Federal Government and different companies.
Speaking to newsmen in Abuja recently, NEITI Chairman, Ledum Mitee, disclosed that the body had been able to recover $2 billion (N314 billion), being money owed the Federal Government as unremitted taxes by companies operating in oil, gas and mineral sectors of the economy.
Factors militating against tax culture
Nigeria tax system comprises of at least 41 taxes, levies and fees including 8 by the Federal Government, 13 by the State Government and 20 by the Local Government, these are taxes and levies specified for various items.
A study on the Nigeria tax system and administration by Professor Emmanuel Edozien observed a number of factors were responsible for the evasion of taxes by companies and individuals alike.
Such factors include but not limited to the problem of duplicity of taxes by the different tiers of government, lack of coordination by the tax authorities, fraud, among others.
Tax laws
The laws as contained in Part II of the First Schedule of 1999 Constitution is under the concurrent list of the National Assembly and State Houses of Assembly to enact tax laws with a view to fashioning out ways and measures of implementing them.
Item Seven of the Constitution, according to a financial law consultant, Barr. Imoni Fred is within the power of the two legislatures to ensure the workability of certain tax laws under their jurisdiction. Items Eight and 10 of the Constitution, he notes, confer the power to speak about the liability of the people who are supposed to pay a particular tax.
Taxes such as Pay As You Earn (PAYE), Value Added Tax (VAT), tax on household equipment and levies imposed on the citizens among others, are within the purview of the two bodies.
These taxes, however, are difficult to collect due to laws guiding their implementation. Some of these laws, in practice, are difficult to implement due to various bottlenecks.
Citing PAYE as one of the taxes Nigerians evade most, Fred said that some companies do not remit the necessary tax they are deducting from their staff salaries as tax, since the law is helpless to ascertain their level of compliance to such tax law.
Some companies, Fred noted, are not paying their VAT regularly due to the fact that they are not being prosecuted.
Best practice
Elsewhere, abroad, like Franklin asserted, taxes are the fulcrum upon which major economic and fiscal obligations are built, as such individuals consider it a bounden duty of sort and have no quams at all about fulfilling their civic obligation in that respect.
Even where circumstances does not allow that, such individuals are compelled to declare bankcruptcy lest the law catches up with them.
The law is no respecter of persons out there. Once it is established that a citizen has either defaulted or undermined his tax responsibility as required by the law, he or she is made to face the music.
“You recall the famous case of Mitt Romney, the presidential aspirant in the US who was discovered to have undercut his taxes, that proved to be the greatest mistake of his political career,” recalled Barr. Dada Amao.
“There are other high profile cases involving corporations and individuals. Nigeria can learn from these examples,” Amao urged.
Conniving tax officers
The media has been awash with reports about how tax officers have been playing accomplice to tax evaders.
Among other heinous crimes, these tax officers help their criminally-minded ‘clients’ in cooking up tax receipts as well as giving them a ‘clean bill of health!’
From Oyo, Enugu, Plateau, Uyo, the story is the same. Confirming this development, a source at the FIRS Headquarters, Abuja, who would not be named because he was not authorised to speak with the press, confided in The Nation that in the last couple of months, the agency has filed cases against some of its erring staff who have being linked to one tax-related fraud or the other.
War against tax evaders
It would be recalled that under the former Executive Chairman of the Federal Inland Revenue Service (FIRS), Mrs. Ifueko Omogui-Okauru, she set machinery in motion for the introduction of the Tax payer Identification Numbers (TIN), through which companies and individuals could easily be captured into tax net.
The FIRS has not rest on its oars. For instace, the agency has concluded plans to fully automate Nigeria’s tax system by October this year.
What this means is that tax evaders will no longer have a hiding place because, the moment a transaction is concluded and money is transferred, it will be captured in the system automatically.
Acting Chairman of FIRS, Alhaji Kabir Mashi, disclosed this recently in Abuja at the Public Presentation and Review of Nigeria Leadership Initiative (NLI) White Papers Volume 2.
Mashi who spoke through the Co-ordinating Director for Modernisation, Mallam Abdullahi Attah said once an account is opened, it will alert the system and it will be appropriately taxed.
To check tax evaders, the FIRS boss said tax registration of all tax-paying adults has almost been completed.
However, before the entire tax system is automated, Mashi also disclosed that by September, this year, oil and gas industry will be automated.
He sought the support of the National Assembly to make it effective and observed that the new system will not be devoid of some challenges at the beginning.
Apparently giving his imprimatur of support to the scheme, the Chairman, Senate Committee on Finance, Senator Ahmed Makarfi warned that the nation’s tax reform process should not be abused and that the implementers of the reform should do a thorough job.
In his remarks, the Chief Executive Officer of NLI, Mr Yinka Oyinlola, alerted that Nigeria should redirect attention to other sources of income such as tax from oil resources because in another 10 years, about 10 to 15 African countries will start producing oil, a development that will lower the demand for Nigerian oil.
He warned that by 2045, Nigeria’s population will be over 400 million and “then taxation is the only alternative resource.”
Different strokes for different folks
Meanwhile, Nigerians in diaspora interested in bidding for public sector consultancy and contracting jobs have demanded for a waiver of three-year tax clearance requirement as a precondition for their eligibility.
They made the demand in response to the presentation by the Minister of Information, Mr Labaran Maku, who spoke at the Nigeria conversation programme in Atlanta, Georgia, recently.
Drive for tax revenue
Piqued by the country’s dwindling fortunes from the sale of crude oil, the Coordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala, has instructed the Federal Inland Revenue Service (FIRS) to employ “any efforts” to grow the nation’s revenue base.
She urged the FIRS to consider birth certificate as registration for taxation purposes as obtained in South Africa and Namibia, where tax registration and TCC are being linked to birth certificate.
A statement from the FIRS said Okonjo-Iweala gave the directive in Abuja recently at a one-day sensitisation workshop for Local Staff of Embassies on PAYE, Withholding Tax (WHT), Value Added Tax (VAT) on Contracts, and Taxpayer Identification Number (TIN).
The statement signed by Emmanuel Obeta, Director, Communications and Liaison Department quoted Okonjo-Iweala as saying that “you cannot escape tax and claim to be a responsible citizen of that country. Once you pay tax, you can now have the benefits that come with payment of taxes. Tax payment is the backbone of any country.”
Call for voluntary tax compliance
There has been a plea by the FIRS to professional bodies including the Chartered Institute of Taxation of Nigeria (CITN), the Institute of Chartered Accountants of Nigeria (ICAN) among others, to fashion out voluntary tax compliance strategies to shore-up tax revenue collection.
This was mooted at a public session in Abuja.
The FIRS boss made this known in Abuja at an interactive session with professional bodies in the Federal Capital Territory (FCT).
The session was to facilitate partnership and collaboration between FIRS and professional bodies in order to fashion out voluntary tax compliance strategies to shore-up tax revenue collection.
Represented by his Special Adviser on Taxation, Mark Dike, Mashi said the Service has “a reversed triangle in terms of the compliance model, as majority of our taxpaying public, be it individual, or corporate, do not want to comply. We are therefore left with the option of using strict force of the law to ensure compliance.”
He said: “For the group of taxpayers that have chosen to remain non-compliant, FIRS has decided to engage with professional bodies to find ways of sanctioning taxpayers in such category.”
He pointed out that Nigeria should not continue to depend on revenue from crude oil, adding that all professionals and their associations have one role or another to play towards the improvement of the Nigerian tax system.
The FIRS boss said professionals must lead the message of voluntary tax compliance for both personal and company taxes, urging professional bodies to collaborate and cooperate with the FIRS to encourage their members to comply with taxation laws.
“Voluntary compliance is the dream of every tax authority. Unfortunately, it is nearly impossible to achieve. Our review of compliance models of major economies of the world revealed that majority of their taxpayers are willing and ready to comply, hence they adopt strategies that would make compliance very easy,” he said.
Speaking with Mr. Adio Jeleel, a tax consultant with Tay Associates, Lagos, he argued that there is a lot that can be done to get the citizens tax compliant.
“In the past, not many people were willing to pay taxes because you can hardly see anything to show for it. But when state governments like Lagos began to show exemplary character in terms of service delivery and demonstrated transparency and accountability, things began to change for the better.”
Other states, and indeed the country, he noted, can learn from the Lagos state example.
Pray, is someone listening?
