Monday, 07 April 2014 4.56 PM / by Taiwo Oyedele, The Guardian
In his 1986 address to the White House Conference on Small Business, former American President - Ronald Reagan said, “the government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it”.
I dare say that this was the ideal philosophy of taxation at the time although the world has moved on since 1986. Tax regimes are now designed to gain competitive advantage with focus on simplification, sustainability, and transparency. Ironically this is not the case in Nigeria where tax matters are relegated to the background, treated with disdain or totally ignored. We tax individuals and businesses that are struggling to survive, but subsidize those that are thriving, while we overregulate others that should have kept us moving until they became comatose.
With the on-going National Conference consisting of about 500 delegates, there is not a single person with the right knowledge to focus on tax matters. In fact, about 15 professional bodies were invited to the exclusion of the Chartered Institute of Taxation of Nigeria. This is quite unfortunate given the overwhelming tax issues of national importance plaguing the country. These issues range from the defects in constitutional provisions regarding taxation, the complexity of fiscal federalism, the menace of multiplicity of taxes, the granting of arbitrary tax waivers, to derivation and revenue sharing formula, difficulties in establishing the right framework for the taxation of natural resources, and so on.
It is difficult to see how we can truly re-launch Nigeria without discussing the way and manner in which revenue will be generated to fund the economy through taxation rather than the usual habit of focusing on how to share revenue from crude oil. It is conventional wisdom that you cannot build something on nothing. We will all be forced to be on perpetual hunger strike if everyone continues to focus on sharing the national cake and no one is thinking of how to bake more.
To remedy the situation, I have put together some salient tax issues for consideration by delegates at the National Conference. Given the very tight schedule of the Conference I have limited this to what I consider the top three issues.
Tax Agenda Item #1 – Review the Fiscal Provisions of the Constitution
As presently constituted, Nigeria is a federation without fiscal federalism. The taxation of incomes, profits and capital gains is in the exclusive legislative list except as it relates to persons other than companies. The latter is contained in the concurrent legislative list. The State House of Assemblies can also legislate for the collection of taxes, levies and fees by local government councils. This creates ambiguities and confusion leading to multiple taxation and endless earmark taxes. Had earmark taxes been the answers then the Tertiary Education Tax should have resolved the incessant problems in our education sector.
The Constitution should be amended to ensure fiscal federalism and address multiple taxation. The Approved Tax and Levies Act predates the 1999 Constitution raising issues of legitimacy. This should also be addressed. It should be mandatory for the President to announce fiscal policy measures every year along with the budget. This should flow from a tax policy framework covering the short, medium and long term perspectives.
A special tax court should be created to avoid the controversy around the jurisdiction of the existing Tax Appeal Tribunals to entertain cases bothering on federal taxes.
Tax Agenda Item #2 – Embark on a Comprehensive Reform of the Tax System
A comprehensive tax reform across all tiers of government is required. This should cut across tax legislation, adjudication and administration. Tax laws should be written in plain language and translated into the major Nigerian languages. Tax dispute resolution should be expedited and tax administration should be simplified and be taxpayer friendly.
There should be a harmonisation of federal revenue authorities and coordination with and among states. Create robust tax institutions which should be empowered and respected. These institutions should be resourced with professionals rather than staffing based on federal character. There should be continuity and succession planning. It is not ideal to have the position of the FIRS Chairman vacant for 3 years as is currently the case. In addition, we should give legal teeth to the Joint Tax Board and enlarge it to include private sector representation.
There should be clarity regarding tax audit and not the current state of confusion with spate of tax audits by every and anybody from the National Assembly to EFCC, NEITI and so on in addition to FIRS and states tax authorities. Incentives and waivers should be strategic, sectorial but sparingly used and monitored for desirability based on cost benefit analysis.
Overall, we should keep the tax system under constant review through periodic reforms. Tax committees should be created at the state and national assemblies to focus on tax matters. This will prevent tax bills dragging endlessly.
Tax Agenda Item #3 – Set Key Tax Performance Indicators and Monitor Implementation
Review and implement the National Tax Policy and set key performance benchmarks in key areas including competitiveness (say to become a top 20 country by ease of paying taxes ranking, currently Nigeria ranks 170). Other areas of performance measurement include tax transparency and accountability. Tax can be used as a panacea for corruption or at least complement the efforts to deter it. Political office holders must have a history of full tax compliance before, during and after holding public offices.
The Personal Income Tax Act was amended in 2011 to impose tax on the President, Governors and their deputies but it is doubtful if they are complying. Even lawmakers tend to only vote for a tax and then escape the obligation to pay it. I challenge any of these public officers who have paid the right amount of taxes to publish their records.
Taxation is the sustainable life blood of any nation, income from natural resources is only a complement. Even countries with no income taxes charge levies and hidden taxes to fund their government. As a nation we have ignored taxation for too long. We must now seize the moment and write the tax history of our future. Let’s use the opportunity of the on-going National Conference to launch Nigeria into a new era of fiscal prosperity for the current and future generation.