With nary a prospect of rebound in the price of the liquid gold in the near term, the debate on alternative revenue sources has suddenly acquired a strident and interesting tone. Only last week, my colleague, Tunji Adegboyega in his Sunday column practically took the National Assembly to the cleaners over their suggestion that the federal government should rather grow the tax revenue than finance the budget from borrowing.
Poor senators! They had in the course of their debate on the general principles of the 2016 budget drawn attention to the debt component said to average N500 billion daily which they considered outrageous. Senate Chief Whip, Olusola Adeyeye (APC Osun Central) who led the debate thought that what the nation needed at this time was to go back to the model of governance used during the First Republic where every adult was made to pay tax.
As he recalled: “Nobody in my village will go to his farm until he can produce his tax receipt; we need ingenuity to bring this to pass. We must begin to tax things like cigarettes, alcohol; you beat your wife, you pay heavily…Text messages cost N3.81 a page: if we add just N1 to a page of text message and we say that money belongs to government, we will make billions.
He did end there: “We must install toll on roads, but that is not enough: across the world, when you park at any airport, you pay per hour; we must do what the rest of the world does…We must begin to tax allowances; Nigeria is the only country that shelters the bulk of the earnings of its workers and call them allowances. You don’t want your allowances taxed? They will be taxed because they must be taxed.”
Those were what my colleague would have none of. He thinks Nigerians are already overburdened as it is. And just because the current public finance system ill-serves the ordinary citizen, he thinks there is no basis to demand more sacrifice while our profligate parliamentarians live their lives to the hilt. And so for starters he counsels that the lawmakers think outside the box!
There are two isues here. The first is whether the call by the senators have any merit. The second is whether our-pampered, overpaid and under-performing lawmakers should be the ones pushing for more taxation at this time.
Let’s be very clear about what the issues really are.
The first is that the nation is practically broke. If we weren’t, we wouldn’t be talking about a budget of N6.08 trillion with an assumption of a whopping N2.2 trillion deficit. Unfortunately, we are also talking of a budget which assumes a sales price of $38 for its barrel of crude at a time crude goes for sub-$30. If the present situation, fostered by the obduracy of major oil producers in their opposition to any idea of production cut is grim, the re-entry of the Iran crude into the market simply forecloses the possibility of imminnent oil price rebound. Like I said not too long ago, we are on to a long, dark night.
The second is that the options open to us as a nation is increasingly limited. While we are nowhere yet near the balance of payment crisis of the late 1980s, the full-blown symptoms of a maldajusted economy are firmly set upon us. I see most of the contribution to the current debate on the economy not taking sufficient time to chew upon the implications of the global oil movements against the demands of the local economy; had they done so, they would have appreciated not just the nature but the depth of the current emergency. Today, we know that some 24 out 36 states have their receivables falling far behind recurrent expenditures. Indeed, with understandably the exception of the federal government and one or two states, the rest being unable to discharge their responsibilities to their workers ought to be in receivership by now!
But even more fundamental is the yawning infrastructure gap. Whether it is roads, power, railways, or the hydrocarbons sector, at least we all agree that the supporting infrastructures for a modern economy are virtually non-existent. Few months into the lean season, we are yet again pretending to be wise to the need to diversify the economy, improve its competititivenes and generally get Nigerians working. Except that we forget that none of these can be delivered without massive public expenditure; and not while we remain oblivious to the need for current sacrifices to ensure the future good.
Nigerians are certainly not alone when it comes to loathing the tax idea. Even in the so-called advanced economies, discussions on the subject are oftentimes impassioned. Yet, it is at the core of the social contract between the governed and the governing authorities. Aside being one of the oldest ways to redistribute wealth, it is the most sustainable way to finance public expenditure.
Let’s come to the question: are Nigerians overburdened with tax? The figures obviously suggest otherwise. In the course of a simple check on the tax-to-GDP ratio for different countries for year 2015, my findings are most instructive. Whereas the tax-to-GDP ratio for Nigeria ranks bottom at 6.1 percent, that of Egypt is 15.8 percent; Gambia 18.9 percent; Ghana 20.8 percent; Kenya 18.4 percent. In this, Nigeria compares well with the Saudis at 5.3 percent.
The point is – we can do far more than we are currently doing on taxation. For instance, at the current five percent rate, Nigeria probably pays the least Value Added Tax (VAT) on the continent. Under the ECOWAS common tarrif, Nigeria is supposed to be paying 14 percent. Aside paying the lowest rate, a good number of items that could have been brought under VAT are currently excluded. In the current circumstances, the debate on VAT has become legitimate.
Le me say this: whenever the subject of tax comes us, the images that readily pops up is the tax man chasing obdurate folks in strret corners for the tax certificate. Apart from being the image many of us grew up with, it’s one of the enduring myths of taxation being an oppressive machine. The world has changed and with it new methods for tax collection. Changing with the times means finding more creative ways to collect tax.
For now, we can debate all the methods in the world, the peccadilloes of our governing elite and their tax and spend tendencies. These are certainly legitimate. But let’s not imagine that there can be an alternative to tax.
