A NEW dawn is fast unfolding in the Federal Government’s tax drive. Two major developments in the last one week have underscored the seriousness with which government wants to bring more people into the tax net. The first is the decision of the Federal Ministry of Finance to appoint 7,500 tax advocates.
This is in line with the Executive Order signed last week by Acting President, Yemi Osinbajo, to make the payment of taxes mandatory for Nigerians at all levels. We heartily welcome this development as part of efforts to shore up national revenue. Payment of taxes is a civic duty for all citizens and corporate organisations.
Explaining the rationale behind the appointment of the tax advocates, Minister of Finance, Kemi Adeosun, said the government is more determined now to increase revenue by focusing on non-oil sources. Few will disagree with her lamentation that majority of Nigerians are not in the tax net and, therefore, evade tax. The tax advocates have the huge responsibility of getting more Nigerians to pay their taxes.
The tax advocates are to be deployed to the rural communities, including churches and mosques, to sensitise the people to the need to pay tax. In the words of the Finance Minister, “we need people to know that paying tax is a law, and not paying is breaking the law.” She also reminded Nigerians that without taxes, government’s ability to provide social services will be limited.
The Finance Minister was right when she said that when you look at the nation’s population, the population of taxable Nigerians and the number of people and institutions paying tax, there is so much government needs to do to persuade Nigerians to pay tax. Government says it wants to realise at least $1bn (about N388bn) from this initiative and has assured the people that the funds will be judiciously and transparently spent.
Without doubt, tax evasion and tax avoidance have become twin-evils bedeviling the country. As a result, government has given tax evaders December 31, 2017 deadline to turn a new leaf and begin to pay their taxes, or face dire consequences. This decision may not be unconnected with the country’s poor tax profile, which is reportedly affecting government’s ability to execute key projects, despite recent efforts by the Federal Inland Revenue Service (FIRS).
For instance, in 2016, out of a projected N5trillion, only N1.2trn was realised at the end of the financial year. This is a 12-year low. In terms of Internally Generated Revenue (IGR), statistics show that N398bn was realised, against the projected IGR of N1.5trn. Company Income Tax (CIT) continues to tumble. Last year, N299bn was realized from CIT, against the N867bn projected. The amount projected from the tax advocacy initiative is believed to be part of the N5.2trn that the FIRS expects to get from new taxpayers.
The agency says it has identified about 700,000 tax dodgers it is targeting to bring into the tax net this year. A recent report by the FIRS revealed that the “super-rich” are among the biggest tax evaders in the country. Many small business operators in the informal sector also evade tax. Currently, Nigeria’s tax revenue ratio to GDP (Gross Domestic Product) is only six percent, one of the lowest in Africa. That of Ghana is 20.8 percent, Egypt, 15.3 percent and South Africa, 15.8 percent. Experts say this is not good enough for development purposes.
It is in this connection that we welcome the Executive Order signed last week by the Acting President to enforce tax collection. Under the unveiled Voluntary Asset and Income Declaration Scheme (VAIDS), tax defaulters have been given nine months within which they can settle their tax liabilities without having to pay interest and penalties, or face prosecution.
We believe that this grace period will facilitate tax collection by revenue generating agencies. It bears repeating that taxation is a key method of raising public revenue. Sadly, majority of Nigerians do not pay tax, even when statistics say “70 percent of Nigerians are economically active”. While making every Thursday of the week a “Tax Day” for the next one-year could be a step in the right direction towards raising tax payment awareness, government should be quick in providing social services for people in both rural and urban areas.
Majority of Nigerians feel alienated from the government. They see the payment of tax as a benign way the country’s leaders raise funds for their private use. They see little or no connection between their failure to pay taxes and the deterioration of public infrastructure. Those who pay their taxes feel they are not getting the requisite services from the government.
They are, therefore, not encouraged to meet this important obligation, hence the shortage of funds to execute government projects. This is why these fresh initiatives to improve tax compliance deserve the support and cooperation of all the people. Strong media advocacy campaigns should be undertaken to sensitise the public to tax matters.