There is need to bring more people into the tax net
Due to the slump in the cost of oil in the global market, the pressure on the tax authority has never been greater, particularly in our country. The Minister of Finance, Mrs. Kemi Adeosun, was perhaps responding to this pressure when she said last week that the federal government might adopt “name and shame” strategy to expose tax defaulters in the country. We wait to see how that would work.
Nigeria is a country of mostly tax dodgers. “We have about 13 million tax payers in Nigeria,” said Adeosun, “and about 12.5 millions are those who have their taxes deducted. Are we saying all the wealth and self-employed are 500,000? We are going to be more aggressive on tax collection.”
The idea of “naming and shaming” as tax enforcement strategy works on the principle of damaging the reputation of those involved, in the public domain. In this instance, the tax authorities will likely publish the names of the delinquent tax payers in the newspapers or on their website. Indeed, not too long ago, some finance houses tried this combative measure of shaming defaulters by publishing their names in the newspapers. But it soon dawned on them that the method was unhelpful and counterproductive.
There is no doubt that the nation’s tax to the Gross Domestic Product (GDP) ratio, currently put at six per cent, is one of the lowest in the world. Countries the world over depend largely on taxation to drive their economy. Indeed, some countries are up to 70 per cent dependent on tax revenue. Ghana’s is not too impressive but they at least realise about 15 per cent of their revenue from taxation.
That is why we support the government tax drive in order to prop up the country’s sickly economy. There is urgent need to expand the taxation net and bring in more people into its fold. Yet, there are no easy ways out. For instance, the erstwhile acting executive chairman of FIRS, Mr. Sunday Ogungbesan believes it would be counterproductive to seal up defaulting companies because such a course of action would affect workers and ultimately, the GDP.
However, the FIRS under the leadership of Mr. Tunde Fowler is doing more to ensure that companies and indeed individuals perform their civic responsibilities. At perhaps one of the most trying times in the nation’s economic history, the FIRS reportedly realised a record N3.3 trillion in tax revenue in 2016. This was possible because the tax authorities were able to broaden the tax base and brought in more than 800,000 additional taxpayers nation-wide by the end of last year. Some 3.4 million tax payers were also brought into the net by the States Internal Revenue Service.
Fowler attributed last year’s haul in tax revenue to partly simplifying the process of payments. Tax payers were simply asked to file their returns at the nearest FIRS offices close to them instead of travelling long distances. The automation of its system in the introduction of the integrated tax administration system (ITAS), automation of taxpayer registration and issuance of tax identification number (TIN) to both corporate and individuals and for tracking and remittance of value added tax (VAT) from key sectors have also helped over the years. So was the introduction of e-tax payment, an online electronic system.
However, not much can be done to enhance tax administration if there is no comprehensive database of the tax payers. Moreover, there is urgent need to revise existing legislations and simplify our tax laws, some of which are out of tune with present realities. Besides, tax expenditure must be transparently governed. Many people will gladly pay their taxes if their “money” is seen to be appropriately spent.
