- Federal Government bemoans high rate of tax evasion but who really loves to pay tax?
That payment of tax is a civic obligation of every adult citizen is a truism. But even truer is the fact that no one really enjoys paying tax for the simple reason that parting with hard-earned income must rank tops in the hierarchy of man’s list of discomforts. This explains why through the course of history, human beings have devised various means of evading the payment of taxes. Again, historically, tax collectors have remained among the most hated public officials.
The modern man has created for himself tax havens and an intricate web of tax-dodging mechanisms. And there are tax consultants, professionals who are permitted by law to help people pay less tax or even no tax at all. They are at home with the arcana of taxation and the labyrinthine passageways of tax rules. Taxation is therefore not a tea party. It is indeed one of the trickiest tasks man ever devised.
This is why we are in no guise nonplussed by the recent report about the Federal Government uncovering about 800,000 companies that never paid taxes.
Minister of Finance, Mrs. Kemi Adeosun, in an article revealed that a little less than one million companies, including government contractors never paid any form of taxes. She said further that the entire country had only 14 million active taxpayers from an economically active base of about 70 million. And at that, a good chunk of the number, indeed, over 90 per cent were salary earners.
This situation is no doubt pathetic and symptomatic of a distorted economic paradigm. And Mrs. Adeosun said so much. The nation’s tax backbone has remained rudimentary, she said, because Nigeria had lived under the illusion of an oil economy for too long. However, Nigeria is far from being an oil economy in the mould of Kuwait, Saudi Arabia and Qatar that have very high daily crude production against small populations.
She opined that these countries can actually do without tax income as revenues from oil sales were more than enough to run their economies. Nigeria, on the other hand, is dogged by a large population contending with a comparatively meagre daily oil production. The earlier the country comes to this realisation and upgrades her tax platforms, the better for her economy.
According to the finance minister: “The historical government apathy towards revenue mobilisation is one of the effects of the mistaken identity that saw Nigeria perceive herself as an oil economy. This administration is determined to correct this identity crisis and all its concomitant effects.”
Going forward, she said the Federal Ministry of Finance had commenced a database project that combines data from various arms of the government, including bank records, property and company ownership, and Customs records. Through this, accurate profiles of taxable individuals and companies would be created.
The minister’s revelation is shocking and should indeed be troubling to any patriotic Nigerian. What she has brought to the fore is the fact that Nigeria’s current tax system is far from being robust, comprehensive and sustainable. The tax base is yet quite minuscule and requires an entire paradigm shift to bring it to its required size as the minister has suggested.
From her narrative, less than one million private individuals, businesses and companies in Nigeria are captured. This is preposterous for a country of about 180 million people. Now that the Federal Government seems to have come alive to the reality of the country’s situation, we say better late than never.
We suggest a more comprehensive reform of the tax system. The issue is not so much about evasion here as the captured sample. We need a regime that must first capture as many of the eligible as possible. Creating a deep database is the tough job. Making people pay has become a lot easier today, especially with improved technology.
Citizens would also pay taxes free-willingly in a transparent and accountable environment devoid of corruption. Besides, if the citizenry are already saddled with providing there basic amenities, it would amount to multiple taxation to make them pay a penny more. No one wants to throw hard-earned money into a sink-hole.