After decades of slumber and parasitic reliance on allocation from the centre, state governments in Nigeria are gradually waking up to their responsibility of maximizing their internally generated revenue potential. Many states are rejuvenating their tax systems and structures and with the Federal Government also championing various tax reforms, taxation is gradually taking its place in the scheme of economic activities in the country.
But for the pervasive graft and impunity, aided by collusion, that permeate the entire Nigerian system, I could have declared that in Nigeria now, the question is no longer whether you can evade taxes, but whether you can do so and escape, now or in the future. Taking a cue from Lagos, other state governments have also set machinery in motion to optimase their revenue potential. The Rivers State has been on a high drive, and announcing earlier this year a monthly collection of close to 10 billion naira, more than three times the amount it raked in monthly in the past. Delta State recently launched ‘Delta Beyond Oil’, taking the campaign even to the traditional institutions. Edo State also recently signed a tax bill into law, threatening to plug all holes in the tax system, with severe penalty for defaulters. Many other states are also threatening fire and brimstones for defaulters. I have applauded this awakening in recent articles. But there is something that worries me: knowledge.
Tax is governed by laws, tons of laws and interpretations. It is driven by knowledge. Unfortunately, there is a mismatch between the recent efforts of the state governments and the intellectual resource needed to make it a success. Rather, aggression seems to be the tool. Watching the scenarios unfold, overdrive is the term that comes to my mind. I felt ashamed watching on the television recently revenue officers of a state engage in a brawl with officers of the Federal Airport Authorities of Nigeria over closure of an airport situated in the state due to ‘tax default’. At this point, the matter is not even who is right and who is wrong, but why do we have to go so low? The scene looked like Motor Park touts engaging bus drivers in fight over loading fees.
In a tax audit exercise recently, a revenue officer from one of the South-South states lost his temper and almost fought with me, as I sweated to make him understand the position of tax laws on some basic tax issues. His grudge: how can a small boy that graduated decades after him explain tax to him, an experienced Revenue officer. It doesn’t get funnier.
Other than the Federal Inland Revenue Service, experience with other tax authorities in Nigeria has been anything but palatable. While the state governments have been increasing the tempo of revenue maximization, they have fallen short in terms of manpower training. The compliance enforcement mechanism today is only a little better than what obtains in the National Union of Road Transport Workers motor parks. A friend described the situation as ‘using political thugs to harass people into compliance’. This should not be so. State governments should know that having the best hands or rigorously training the hands they have is key to optimizing their revenue potential. It is not by giant billboards alone.
But in fairness to some of them, I recognise that in Nigeria laws are generally difficult to enforce, least of all tax laws. I also recognise that taxpayers are also as guilty of the knowledge gap – basic knowledge needed for voluntary compliance. Back to the airport closure example, from the facts reported in the media, it does appear that the state’s Revenue agency was indeed right. I listened to a communications executive of the FAAN on the matter and I heard him quoting the Act that established the body as exempting it from taxes. I don’t know the type of tax that the Revenue and the airport authorities have in contention, but at the least, the quoted law does not exempt the airport’s staff from Personal Income Tax. It is like saying a civil servant will not pay income tax because his ministry is not subject to tax. This is where the FAAN appears to be missing the point. There is a difference between the FAAN/Airport as an agency and its workers. The fact that FAAN is not subject to tax does not mean its employees are not too. The Personal Income Tax Act does not exempt airport workers from PIT; in fact, some hitherto exempted persons like the President, Vice-President and Senate President, have been brought into the PIT net by the 2011 amendment. This is where knowledge still remains a critical gap in tax compliance and enforcement in Nigeria. Yet, such disagreements should not degenerate into a physical brawl as we witnessed on TV recently.
State governments still have a lot of work to do on intellectualising their tax collection drive. An effective tax system is not built on aggression, it is built on knowledge.
Oyewale, a Chartered Accountant, wrote in via oyewalesuraj@gmail.com