Friday, June 14, 2019 / 09:00AM / NESG Fiscal Policy Commission / Header Image Credit: The News
Since 1956 when crude oil was discovered in commercial quantity in Nigeria’s Niger Delta region, a flurry of economic experts have continually pitched the benefits of economic diversification to no avail. The immediate fallout of this negligence seesaws between a government perennially starved of funds for capital projects and a citizenry disillusioned by the absence of the social contract they expect from strict compliance with government policies.
At present, the federal government is reportedly grappling with a budget deficit of N3.8 billion and debt profile of N2.7 billion in a country that boasts 57 million economically active citizens, among whom only 15,000 are tax compliant. The International Monetary Fund (IMF) reinforced this argument in 2016 when it estimated revenue collected across all tiers of government at 6 percent of GDP (70% from the oil sector) and 30 percent from the non-oil sector (30% of GDP). Small wonder the government has shifted its focus to alternative strategies for revenue generation from the non-oil sector in its 2020 inclusive economic agenda. The Better Tax campaign launched by the Nigeria Economic Summit Group (NESG) in Lagos recently is one such revenue generation initiative.
With the benefit of hindsight, the average Nigerian may be understandably sceptical of tax reform. After all, several initiatives launched previously were long on execution but drastically short on sustenance and impact. In 2017, the President Muhammadu Buhari administration sought to include more Nigerians in the tax net with the launch of the Voluntary Assets and Income Declaration Scheme (VAIDS). To facilitate the process, government set up tax clinics to offer free service, consultation and legal representation for defaulting companies wishing to voluntarily file their tax returns. However, analysts argue that the euphoria over N30 billion sourced from the initiative was short-lived because compliance was primarily incentive-based and did not outlast the 11-month lifespan of the project.
The Federal Inland Revenue Service (FIRS) has also done its bit by introducing several digital payment platforms such as e-Registration, e-Filing, e-Tax Clearance Certificates and e-Stamp Duty, among others. But it is instructive that of the 4,926,053 taxpayers in the FIRS database, only 13,131 are registered for e-Filing and of that number, only a paltry 3,064 actually use the service. This development calls for a more wide-ranging system that will not only sustain tax compliance but also close knowledge gaps.
At the launch of Better Tax recently, the Chairperson of the NESG Fiscal Policy Roundtable Dr. Sarah Alade argued that contrary to general perception, Nigerians are not necessarily averse to paying taxes. In fact, the NESG Citizen Perception Report, which is the product of a tax survey cutting across households and small businesses in the revenue value chain, found that about 70 percent of respondents had no reservations about paying taxes. Rather, they would prefer that the process is sustained by proper education and transparency on the allocation and application of resources by the government. Tax officials, on their part, are constrained by inconsistent tax policies, limited resources, unrealistic targets and inability to influence service delivery from tax proceeds.
The “Better Tax” Strategy
Better Tax recommends a five-pronged strategy to roundly address these challenges: simplification, accountability, capacity, communication and delivery.
This is obviously a step in the right direction. For too long, tax reform has been lopsided. The government expects citizens to be consistent in tax payments without adequate tax education or social amenities that will justify same. Citizens likewise expect government to provide basic infrastructure without realising that their taxes collectively form a vehicle to actualise this objective, especially with the threat to crude oil as an economic mainstay following the 2014 crash in global oil prices.
As explained by Dr. Alade and other high-profile economic analysts at the Better Tax launch, the project evolved from the need to help the Nigerian government and citizens understand how tax can deliver the socio-economic development envisaged with all hands on deck. The taxpayer education and advocacy planks leveraged by the project should ultimately stimulate better investments in healthcare, education, and youth and women empowerment.
For the rest of us, this is not the time to be overly cynical. The only way to go is forward when national interest and our collective wellbeing are on the front burner. Better Tax deserves our support as its drivers continue to disseminate the findings from the Citizen Perception Report among critical stakeholders and drive government-citizen engagement where it matters.