With most states in the federation struggling to meet their recurrent bills courtesy of the shrunk federal distributive pool, the story of how Lagos State managed to turn the tide of its Internally Generated Revenue (IGR), aside re-affirming the historic primacy of taxation in the development matrix, has merely driven further home the point about its place as foundation pillar of public finance. It deserves the attention of any serious government.
Only last week, Tunde Fowler, chairman, Lagos State Internal Revenue Service (LIRS), announced that the state’s average monthly IGR increased from N20 billion in 2013 to N23 billion last year. While disclosing that the number of voluntary taxpayers also increased from 3.8million in 2013 to 4.5million last year, his insights are particularly instructive: “In 2013, we had approximately N236 billion while in 2014 it was N276 billion…we went from an average of N20 billion in 2013 to an average of N23 billion. And that was one of the things that have kept the state working.”
Obviously, the Lagos example has gone beyond merely being a model of how tax revenue should drive development; in a more specific sense, the development is a stinging rebuke to the warped fiscalism under which states converge monthly in Abuja for their share of oil revenue – a reminder of how far the states are from weaning themselves off dependency on the federal pie.
At this time, it seems easy to forget that prior to 1999, the entire machinery of tax collection in the state could barely rake in N600 million a month. Perhaps, fewer would even recall that the Bola Ahmed Tinubu administration took off with this lowly figure to a whopping N10 billion – a feat at the time. To celebrate the quantum leap from that N10 billion to the current average of N23 billion – all within a space of eight years – is merely to acknowledge the efforts of the successive administrations in this regard.
Agreed, a lot could be said about how the state has been helped in part by its huge population, the number of industries and finance and commercial houses all of which represent a huge tax base. But then, the same tax base more or less existed pre-1999. The main difference was that the state was blessed with a leadership that not only saw the need to re-engineer the state’s finances, but actually took concrete steps to harness its tax revenue as part of an overall strategy to wean itself off reliance on the federation account.
Beyond investing in technology and human capital, we saw successive administrations in Lagos go the extra mile to educate the citizens on their tax obligations, with emphasis on voluntary compliance, while imposing stiff penalties whenever it became necessary. Those initial but critical steps are what have since translated into the results that we see today – and which we commend to other states.
We are sad to note that with perhaps few exceptions, most states in the federation have done little else than whine about the dip in their finances attendant to the slump in global oil prices. If there was ever a time the state authorities needed to put on their thinking caps, the time would be now. While it is admitted that tax bases would differ across state boundaries, it is also a known fact that a number of the states, perhaps hung on the forlorn hope that oil prices would somehow rebound, have not even started on the idea of looking at the possibilities.
Such attitudes, which are at the heart of the current crisis, must give way to one in which citizens see themselves as active partners in the development process through the performance of their tax obligations.
