TAX NEWS - 2010

Nigeria Tax: A Tax Payers' Democracy?

A major outcome of last week's three-day seminar of the Governors' Forum was the resolution by their Excellencies to implement, beginning from the 2010 fiscal year, a new tax regime for the purpose of generating additional revenue and creating an enabling environment for investments in the states. This development is not unexpected, given that all the states, excepting a few, depend almost entirely on their statutory allocations from the Federation Account, funded primarily from crude oil proceeds. In fact, the plummeting revenue from petroleum exports, caused by the global financial crisis, necessitated the Governors' seminar.

Since the beginning of the Fourth Republic, it has become the norm for Commissioners of Finance from the 36 states to gather in Abuja monthly for the purpose of sharing accruing funds available in the Federation Account. Consequently, the week following the return of the Finance Commissioner is usually the busiest in each state, as political office holders, contractors, civil servants and political hangers-on jostle for their share of the 'national largesse'. Thereafter not much activity takes place in government, as everybody waits for the next month's trip to Abuja by the Finance Commissioner. However, with dwindling oil revenues available for sharing by the three tiers of government, service delivery has become tougher, giving rise to the desperate search for alternative sources of funding.

But if the presentation by the Edo State Governor, Comrade Adams Oshiomhole, at the Governors' seminar is anything to go by, it is obvious that more serious challenges still await the states' helmsmen as they set about their quest for realistic options to fund government activities. Our frank view is that given the country's flawed electoral process, where the people's votes hardly count, it will be an uphill task for some of the governors to convince citizens to pay tax. We say this, however, mindful that any true democracy is sustained principally by taxpayers' money. This is in cognizance of the fact that citizens in a democracy willingly submit their rights and privileges, and jointly contribute resources, to their elected representatives, on the understanding that these resources will be employed for the common good. Unfortunately, this has not been so with Nigeria, where public officials generally treat issues of transparency and accountability with disdain.

Besides, the nation's collective mistakes may lie at the root of its present difficulties. For instance, because we have never seriously addressed the issue of evolving a true people's Constitution, just as most of the ruling elite today kick, for selfish reasons, against the need to implement fiscal federalism in the country, the country has continued to be haunted by chronic ailments. Arguably, the day of reckoning has come. With a near empty treasury, the state governors are now forced to seek more ingenious ways of sustaining their large bureaucracies.

But the problem is a complex one. Aside from having leaders who lack legitimacy, foisted on the people by fraudulent electoral processes, the structure of government in Nigeria is over-bloated and wasteful. The Governors' Forum should therefore focus on how to sharply cut down the cost of governance, as no amount of internally generated revenue will be enough to sustain the salaries and perquisites of the present army of public office holders. Secondly, the country's present tax system is outdated and unwieldy, characterized by inefficiency, gross abuse and widespread evasion. It is a tax system that hurts the people and harms the state: which taxes severely those least able to pay, while letting high net-worth individuals and corporate bodies relatively off the hook. We do not see how any effort to boost internally generated revenue through taxes, in a way that will remove the states' slavish dependence on the Federation Account, can record any significant and sustainable success until this basic challenge is addressed. 

More importantly, our governors must guarantee the enabling environment for economic activities to thrive. In the long run, it is taxes from businesses and value added services that will swell the states' treasuries. Our tax administration must therefore aim at reinforcing savings, encouraging investments, while avoiding negative impacts on the distribution of resources and reducing cost of management. It should be fair, simple and efficient, avoiding all forms of extortion, multiple taxation, inefficiencies and fraud.  

We challenge the Governors' Forum also to be in the vanguard of building a new Nigeria: where citizens' votes genuinely count in the electoral process; where the public's voice is heard and respected; where political leaders are accountable, honest and devoted to public service; where rights are protected and basic needs are met; where people are empowered and their active participation in community and government affairs drives public decision-making; a nation that ardently aspires towards prosperity and progress by investing in its people.