Federal revenues spiked in June to the elation of the three tiers of government, as they shared N559 billion at the Federal Accounts Allocation Committee meeting in Abuja. This was remarkable, and an unexpected departure from preceding months’ performances. In May, they had shared a miserable N305 billion. More could have been generated if a robust tax regime that makes the rich to pay proportionately had been in place.
However, the new symphony is as a result of more companies and individuals being etched in the tax net. Interestingly, 70 per cent of the N559 billion came from non-oil sources, an area the country has neglected for decades, as it narrow-mindedly makes oil revenue its financial backbone.
Now buffeted by economic headwinds, triggered by a steep drop in crude oil prices in the global market since mid-2014, federal, state and local governments in Nigeria have been finding it difficult to meet their financial obligations. Therefore, an aggressive revenue generation strategy has become imperative. The main targets are the corporate bodies and ordinary citizens, some of them already protesting against multiple taxes, amid the prevailing sclerotic economic climate.
According to the Chairman, Federal Inland Revenue Service, Tunde Fowler, 700,000 new corporate accounts have been added to the tax net since he assumed office in 2015. With the audit of five critical sectors: banking, aviation, power, telecommunications and oil and gas swelling up tax returns, Fowler says the target of the Joint Tax Board is to add 10 million new taxpayers to the existing 10 million payers by the end of December.
However, one critical segment of the taxpayers is the super rich. They own private jets, yachts, luxury cars, palatial homes and estates in Abuja, Lagos and major cities across the country, as well as even abroad. Ironically, they are grossly under-taxed in Nigeria, just as many of them evade tax through a medley of tricks. Yet, our law is against such delinquent behaviour. The state has not paid attention to this criminality, thereby robbing itself of huge tax revenues.
Public revenues can be shored up with the appropriate taxing of these people, just as it would assist in mitigating ostentatious lifestyle, which has a corrosive effect on society’s moral values. Unfortunately, corruption and elite conspiracy had undermined all efforts to achieve this in the past. This is exemplified in the oddity of property tax not being paid in Abuja, where the high and mighty live, especially politically exposed persons, who have built all sorts of mansions and skyscrapers with funds looted from public treasury.
The Nigeria Labour Congress launched a campaign against this aberration in 2015. Its President, Ayuba Wabba, said government should “institutionalise the payment of property tax, especially here in Abuja, because people have looted our funds and bought property they are using.” He stressed that it was more expedient to do this than increase Value Added Tax to 10 per cent. It is a plot that has endured. But we have consistently objected to it, as it will encumber those at the lower rungs of the economic ladder, who are actually in the majority.
As Wabba’s call reverberated, the then Minister of Finance Ngozi Okonjo-Iweala’s response was deplorable, incredulous and protective of the rich. During her presentation of the 2015 budget breakdown and how it would be used to tame luxurious lifestyle and ultimately increase revenue, she revealed that an Abuja property with a N300 million value and above, would attract just one per cent tax. Revenue target from this stream was only N360 million. Again, 10 per cent surcharge was placed on a new private jet; 39 per cent on yachts, for which government was to earn N3.7 billion and N1.6 billion respectively. Tax on luxury cars was estimated to fetch N2.6 billion. Outside this, the proposed five per cent VAT increment targeted N614 billion in earnings.
Fowler, therefore, has a lot of work to do to put in place an ingenious mechanism that will get rid of this disproportionate and perfidious tax system. Nigeria has lost huge revenues from questionable import waiver policies that ceded so much to these privileged castes. In 2012, for instance, the Akwa Ibom State Government received a N271.2 million waiver for a private jet; Taraba State got N13 million for a helicopter; while Rivers State, in 2013, got N2.18 billion for a Bombardier aircraft and two Bell 412 helicopters. Some Nigerians are reported to have multiple jets; how much tax they pay should be a subject of serious scrutiny in this age of “Pay Your Tax.”
Fleecing of the public purse has been a preoccupation of the rich here. The Nigeria Customs Service, in an advertorial in 2013, confirmed this much when it lamented the loss of N603 billion to curious waivers in just nine months. Tax evasion by the wealthy, either through individual designs or official support, encourages other Nigerians not so endowed to be indifferent to discharging this civic obligation.
To contain this perverse behaviour, Nigeria should begin to enforce the law that criminalises tax evasion, as it is done in the United States. An individual convicted of such an offence in the US is liable to five years in prison, or $250,000 fine or both; while the wilful failure to file returns or supply information attracts a one-year jail term, or $100,000 fine, in addition to other penalties.
The US tax system has always placed a heavier burden on the wealthy. How to increase what they pay, and eliminate tax breaks on inheritances was canvassed by President Barack Obama in 2013. He had planned to channel funds realised to tax credits for the middle class.
Because the Nigerian state is lax, politicians still present forged tax certificates for electoral contests and get away with it. Apparently, the rich ride on the crest of Nigeria to their fortunes. Therefore, they should be made by the state to adequately give back to the society that made them.
