New Global Tax Order: Any Hope For Nigeria?

The need to reform Nigeria’s tax system as part of strategies to improve the country’s economy has since been a major topical issue in the public discourse.

Experts, however, insist that all discussions on the country’s tax system should place considerable emphasis on voluntary tax compliance as a major means of developing the tax system.

They also stress the need for the removal of some provisions in the nation’s tax laws which do not conform to contemporary social realities, as part of efforts to improve the tax regime

According to investigations, discussions on tax systems in advanced countries, including the U.S., begin with an acknowledgment of the fact that tax systems can only be progressive if there is high voluntary tax compliance.

However, taxation experts have been expressing serious concerns over increasing tax evasions in Nigeria.

They particularly stress the need for the country to revitalise its tax system to cushion the effects of external borrowing on the national economy.

Statistics from the Debt Management Office (DMO) put Nigeria’s external debt as at March 31, 2011 at about N5.2 billion U.S. dollars (about N780 billion).

Issues concerning the need to modify Nigeria’s taxation system in line with the new global order were part of the focus of the 13th Annual Conference of Chartered Institute of Taxation (CITN) held in Abuja recently.

The conference’s participants listed corruption, inappropriate use of tax revenue and the lack of tax compliance as some of the barriers militating against effective tax administration in the country.

Mr Kunle Quadri, President of West African Union of Tax Institutes (WAUTI), urged the Federal Government to effect desired changes in the extant tax laws to make them realistic and structured in line with global best practices.

Quadri, who is also the immediate-past President of the CITN, stressed that the Personal Income Tax Act of 1993 (as amended) was among the laws which ought to be reviewed.

He noted that the Act provided for personal reliefs and allowances that were not in tune with the current socio-economic realities in Nigeria.

For instance, Quadri cited the tax relief of N2, 500 per child, with a maximum of four children in a given tax year, as one of the reliefs that had become obsolete and unrealistic.

He also noted that the transport allowance of N20, 000 per annum and a N5, 000-meal subsidy, among others, were no longer pragmatic.

“The figures are grossly inadequate,’’ he said, adding: “It is, therefore, recommended that the introduction of a consolidated allowance of 40 per cent, for instance, would have taken into consideration factors such as inflation.’’

Quadri expressed the optimism that one of the advantages of the proposed tax reform would be a higher level of voluntary tax compliance, saying that unless the recommended changes were made, some citizens would still have the latitude to evade tax.

He, however, stressed that the prompt passage of Personal Income Tax Amendment Bill by the National Assembly would engender the development of Nigeria’s tax system.

“For instance, the low level of tax compliance can be attributed to the structure of the current tax system because the system puts more emphasis on direct taxation than indirect taxation.

“So, a paradigm shift from direct to indirect taxes is advocated,’’ he said.

“Apart from the Personal Income Tax Amendment Bill, the Petroleum Industry Bill, Customs, Excise Tariff (Consolidation) Bill and National Sugar Development Bill should also be passed,’’ he added.

Besides, Quadri called for the re-introduction of the post of “Senior Special Adviser on Taxation Matters’’ at both the federal and state levels to ensure effective tax administration in the country.

On his part, Mr James Gbeho, the President of ECOWAS, noted that ECOWAS member-states were facing a major challenge of how to improve their domestic revenue drive to promote good governance.

He, nonetheless, expressed concern that the ratio of tax revenue contribution to the Gross Domestic Product (GDP) of many West African states was below the ECOWAS prescription of 20 per cent.

Gbeho stressed that in the years between 2001 and 2010, an average of two West African countries satisfied the ECOWAS tax-yield benchmark of 20 per cent in any particular year.

“As at 2010, only Cape Verde and Ghana had met the criterion, recording 23.0 and 23.5 per cent respectively,’’ he said, adding: “The remaining 13 ECOWAS countries recorded a tax revenue GDP ratio of less than 13 per cent.’’

Gbeho stressed that the mobilisation of tax revenue had become an important policy of ECOWAS, urging member-states to strive to meet the 20-per-cent criterion on tax revenue contribution to their GDP.

Beyond that, an economic expert, Dr Adedoyin Salami, said that the dearth of jobs had been a big challenge to Nigeria’s tax system, adding that it constituted a major barrier to using the tax system to achieve the targets of the Federal Government’s Vision 20:2020 programme.

Salami, who is the Director of Programmes in Lagos Business School (LBS), advised the government at all levels to create more jobs so as to fortify the Nigerian tax system, as part of efforts to foster the country’s development via Vision 20:2020.

He urged the Federal Government to aid the various sectors of the economy to develop a value chain that would proffer plausible solutions to the unemployment problem.

Salami implored the government to invest substantially in agriculture, banking, health, communications and transportation to create more jobs, while building an efficient tax system in line with the new global tax order.

Besides, he underscored the need for the country’s tax system to encourage competition, saying that Nigeria should adopt flexible tax conditions for the states.

On tax administration and utilisation, Mrs Ifueko Omoigui-Okauru, the Executive Chairman of the Federal Inland Revenue Service (FIRS), called for the judicious use of tax revenues by the Federal Government to reduce external borrowing.

She stressed the need to minimise external borrowing to promote Nigeria’s economic advancement.

Omoigui-Okauru asserted that the country would be able to check corruption and be free from excessive external debt burden if tangible efforts were made to minimise external borrowing and depend largely on tax revenues.

“Total stoppage or reduction of external debt and using tax revenues absolutely for economic and infrastructural development would, however, necessitate intensive monitoring of what tax revenues are used for by Nigerians.

“Even the Akara (bean cake) seller will like to know how the tax she is paying is being spent,’’ she said.

Omoigui-Okauru, however, urged women from all walks of life to harness their skills and qualities to enhance their living standards, adding that this would also expand the sources of revenue for the  country’s economic development.

“Besides, it will help to curb woman abuse which is still rampant in our society today,’’ she added.

On her part, Mrs Justina Okoror, the Chairperson of Society Women in Taxation (SWIT), called on the three tiers of government to evolve strategies that would foster the growth of old and new businesses to achieve the desired objectives of using tax revenues for the country’s development.

She stressed that such strategies must necessarily include giving the taxpayers a central place in the nation’s scheme of things.

Analysts are of the opinion that at this stage of Nigeria’s development, voluntary tax compliance, effective tax administration and increased tax revenue should be given priority attention.

They believe that the prioritisation of such concerns will facilitate efforts to provide the essential infrastructure and services that will foster national development in a pragmatic way.

Adetoye writes for NAN.

Bukola Adetoye