Pat UtomiUnremitted 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
IN 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 cross-section 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 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 self-sacrificing", 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 according to what they earn, then members of the National Assembly, including those at Federal Executive levels and their cabinet extensions that have been enjoying the increasing recurrent expenditure of the economy; should also remit what is required of them to the public purse. But unfortunately, this has not been the case", he stressed.
Like Utomi, a constitutional lawyer, Prof. Itse Sagay (SAN), expressed outrage over the country’s underdeveloped tax system, a development he blamed on the insincerity of the Federal Government and its agencies, which have not shown the required leadership as far as tax compliance is concerned.
Sagay, who admitted that the society as a whole still needs education as far as their civic obligations in terms of payment of taxes, however, expressed disgust that the so-called lawmakers who make laws for the smooth administration of the country also deafult in the payment of taxes.
Particularly worrisome, Sagay said: "Is the fact that our lawmakers and those in government are the greatest breachers of the law. Take for instance, the issue of tax remittances, they have been known to default most of the time, whereas ordinary citizens and corporates are chased around by the tax authorities if they fail to meet the same obligation. We continue to hear that the National Assembly and other tiers of government are owing several billions in unremitted taxes. This should not be the case."
Insider Perspective
One-time President of the Institute of Chartered Accountants of Nigeria (ICAN), Mr. Emmanuel Ijewere, who chaired a public forum organised by the Accountants in the Lagos State Civil Service recently, broke his silence over his well-kept secret concerning the nation’s tax regime. Ijewere, who served as the chairman of the body that was put together to introduce Value Added Tax (VAT) in Nigeria, recalled:
"The history of VAT is not difficult to find; it arose from the World Bank report presented to then General Ibrahim Babangida’s government saying that Nigeria should introduce VAT because a number of state governments were practising sales tax in a disjointed and chequered manner. And in many cases, they discovered that in all the states, except Lagos, there was so much inefficiency in the collection system of sales tax and they (World Bank), felt that the Federal Government should set up VAT to help the state to help themselves. "But even then, given the plurality of the federalism of Nigeria, Lagos state was already threatened to lose because they were the most efficient and the calculations my committee had at that time, showed that 72 per cent of all sales tax collected in Nigeria were collected in Lagos. As such, when we were asked to put this together, we now came up with a system that would not be perfect, but would give advantage to those who are hard working and efficient.
"So, we now said that the Federal Government involvement would be purely that of a facilitator, that means that they would set up an independent body to handle VAT to replace sales tax and that body shall be maintained with five per cent of whatever money they collect, while the rest shall be shared among the states of the federation on the basis of the collection. In other words, VAT is to be collected state-by-state and at the end of each month, you determine how much is collected.
"After we did the calculation, we discovered that Lagos state stood the chance of getting about 80 per cent of all the VAT collection in Nigeria, and that was presented to the then government, but other interests came in that created so much debate that my committee report was never officially accepted.
"In fact, they gave us dates and dates to formally present but we never did till today. It is little surprising therefore that we are yet to fully harness the potentials in the tax system."
The anecdote, Ijewere stressed, goes to show how underdeveloped the nation’s tax regime still is compared to other advanced countries, where tax administration remains an effective and efficient mode of revenue generation. The outgoing President of the Chartered Institute of Taxation of Nigeria (CITN), Prince Rasaq Quadri, also decried the presence of touts in the system.
In an interview with The Nation, he said tax evasion was unheard of."In other climes, an issue like this never occur. A government officer knows he’s being paid with tax payer’s money. We’ve sanctions within the Nigerian tax laws. When you hear of those not paying tax, you will be surprised that some of them are being paid with tax payer’s money. I want to advise both the Federal and State Government to take necessary measures against their staff who’re evading tax."
He was however, quick to admit: "Some people allow themselves to be used to evade tax. The law as far as Nigeria Tax system is concerned, are on ground. The tax collectors are there to make sure they collect the right amount of tax. But there are so many problems within the Nigerian tax system."
Solution
While proferring suggestions, the CITN boss said: "The first issue has to do with the availability of data. The tax payers don’t have data with respective regulatory authorities. These are issues that the regulatory agency needs to look at. We’ve tax laws and they ought to be adhered to by the tax payers.
"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.
"The general tax policy has drawn another tax for us, by shifting the emphasis from direct taxation to indirect taxation. In this case, we pay according to consumption. Those big men buying luxury goods have to pay higher tax by consuming those goods while those who pay less tax are those who consume goods of lesser quality. That is the only way developed countries handle those who they refer to as portfolio carrying company to the dragnet. What the national tax policy is doing is to bring in as many of those people as possible."
Comparing the tax regime in Nigeria and other countries, Quadri said: "Comparing the system here with those developed countries means, we’re just starting off. Before now, government don’t really talk about taxation or tax payers money. Rather, they focus on crude oil and government money.
"Whether the money is from the tax payer or it’s a revenue generated by the government, it’s still tax money and people should be able to ask them what they’re using that money for. I’ll still rate our system as developing. We’ve just had the national tax policy and that policy will lead to good tax laws, which will translate to good taxation. All these will give us a good tax system. Until we’ve all these things on
ground, then, we’ll be able to match up to those we’re looking up to."
The Nation
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