Nigeria’s deepening frustration in her bid to boost non-oil revenue is a self-inflicted morass. Apparently finding it difficult to meet its revenue projections, the Federal Inland Revenue Service has vowed again to clamp down on wealthy tax evaders. The FIRS chairman, Babatunde Fowler, recited this mantra at his inaugural meeting with the acting Inspector-General of Police, Mohammed Adamu, saying that the service will pursue affluent tax defaulters in 2019. In an era of volatility in the prices of crude oil, which contributes the bulk of Nigeria’s earnings, this is a sound statement of intent.
Nevertheless, in Nigeria’s pathetic enforcement milieu, Fowler’s avowal seems superficial. Irritatingly, the FIRS had missed almost all the previous deadlines to act decisively in reining in tax offenders. Although it generated a record N5.32 trillion in 2018, as many as 85,000 millionaires and billionaires, and corporate organisations still refuse to pay tax, Fowler stated.
Through a scrutiny of 45,000 tax debtors in 2018, the FIRS collected N23 billion, but several more debtors are escaping the dragnet. “So far, we have 45,361 that have TIN (Tax identification Number) and are making payments,” Fowler said. “We have 40,611 that have TIN that made tax payment and, we have 44,504 that have no TIN and no payment. We have close to 75,000 in this group that are still not taxpayers and we have said the payment of tax is not only for the civil servants, it is for all Nigerians.” This, really, is the bottom line.
A habitual indulgence, the rich in Nigeria get away without paying tax. Thus, Nigeria’s non-oil tax-to-Gross Domestic Product of six per cent is very low. Comparatively, South Africa has a tax-to-GDP ratio of 28.5 per cent; Kenya 18.4 per cent; and nearby Ghana 18.2 per cent. Among the developed economies, the United States boasts 26.0 per cent, the United Kingdom 34.4 per cent and Germany 44.5 per cent, the World Bank said.
Therefore, a chunk of the tax here is derived from the public sector workers. A one-way traffic, it lopsidedly imposes a heavy burden on this group and the few compliant private sector workers. By bringing in the rich into the net, a 2018 report said the Federal Government could generate an additional $1 billion.
Over the years, this complacency has cost the country dearly in revenue, apparently because the income from crude oil lulled the managers of the economy into shifting attention away from taxes. Vice-President Yemi Osinbajo told a bewildered nation in 2017 that just 214 Nigerians, all based in Lagos, paid a tax of N20 million and above each, annually. In all, 914 others paid N10 million in tax, with two of them based in Ogun State and the rest resident in Lagos. Out of a population of almost 200 million, in which 69 million are taxable, only 14 million paid taxes. This is ludicrous. It makes the target to achieve a tax-to-GDP rate of 15 per cent by 2020 a tall order.
Cyclically, the government gives an impression that it is deadly serious about improving tax revenue. To make up, it proposed various schemes, including its intention to raise the value added tax and other taxes. This is poor thinking, a lazy way out that is likely to harm the economy the more. With criticism attending the VAT increment, government touted the Voluntary Assets and Income Declaration Scheme.
A sensible scheme, it allowed tax defaulters to voluntarily pay what they owed without penalties. In the first 11 months of the amnesty period, it brought in N30 billion. That figure was 90 per cent to the government at the centre and 10 per cent to the states. It also increased the national tax base from 14 million tax paying adults in 2017 to 19 million in 2018, Fowler stated.
Ominously, all seems to have gone quiet since the grace period elapsed in August 2018. In Nigeria, that silence is a bad sign; it is often an indication of the lack of political will to enforce the law, especially when the rich are involved.
In contrast, the wealthy are being heavily subjected to taxation in Europe, the United States and Australia. Revenue, Ireland’s tax body, offers a sterling illustration. Periodically, it publishes a list of defaulters. The agency said it pursued 101 listed cases of under- and non-declaration between April and June 2016, which netted €17.44 million. Other settlements within that period yielded €125.3 million for the authorities.
Spain, in the past two years, has brought famous sports stars to book for tax evasion. Among others, Cristiano Ronaldo, the world’s richest footballer, upon conviction, settled his case by paying €19 million last January. The trial judge turned down Ronaldo’s request to be accorded the privilege of using a backdoor entry into the court to avoid the prying eyes of the media on the day judgement was delivered. Nothing is left to chance in these countries and no one is above the law.
Every Nigerian must pay tax. The FIRS and state revenue agencies should act creatively and firmly, bringing in more people into the tax net. It is scandalous that public office holders who earn jumbo remuneration pay unusually meagre tax. Government should intensify policies on progressive taxation, in which case, the richer you get, the more you pay, as is the practice in Europe.
