Early this year, about N30 billion was reported to have been stolen from the Nigeria Social Insurance Trust Fund (NSITF). The allegation is still unravelling, but the credibility of any tax reform in Nigeria has seriously been damaged.
For a country infested with looters of the nation’s treasury, paying any form of tax is unhabitual. Nigerians are weary of paying to their governments—local, state, or federal. Those authorized to collect and remit the funds do steal most of the money. There is no form of retribution for those who engage in national resources theft. Most of them even flaunt their ill-gotten wealth and, they are socially accorded accolades.
The Federal Inland Revenue Services (FIRS), Nigeria’s own internal revenue service, has of recent, woken up to an aggressive revenue collection paradigm. The modus operandi includes outright closure of business premises and other forms of legal actions, especially for business taxes. The notion to employ extreme aggression is unnecessary and unrealistic, when the nation’s economy is obviously in shambles. The effects are felt everywhere, yet the FIRS is unfettered. If income per person does not exist or has significantly decreased because businesses are unproductive, then the tax agency must carefully evaluate why and how to prop the economy to support the tax assessment of an individual or a company. Using rough-looking Special Anti-Robbery Squads (SARs) police force cannot milk money from an unemployed man/woman, or from a business already in a state of bankruptcy. The act of belated calculation of what a potential enterprise would have paid, does not equate to cash at hand.
The idea of a tax reform system is laudable, only if it is not to exploit the struggling entrepreneurs. Those in charge of the nation’s taxes have, in the past, looted the treasury after exploiting the payee. Nigeria’s business owners have been subjected to the guillotine, to cough out taxes for those who did embezzle the funds. It is equally ironic that all those who have stolen heavily from the nation’s coffers paid zero taxes, and they are walking free.
The challenge facing Nigerians is not whether to pay their taxes or not, but how to earn money to pay them. Government must, first, create the enabling business environments for prosperity. But a situation whereby industries have closed down, unemployment is at its highest figure, the metrics of back taxes don’t make any sense. First, incentives to stimulate the economy must be restored, lending through banks, at affordable and reasonable interest rates will propel growth and business developments that will spur robust taxes. But if the FIRS continue to offer largesse in the form of tax break for voluntary past revenue disclosures, only those who looted with excess to throw away will cynically offer some payments to legitimize their shady enterprises. Genuine investors and business owners in Nigeria today are cash-strapped; nothing can come out of the escalated threats.
Tax advocacy in an economically healthy country, with less than this corruption rate should be tolerable, but in a country with over-blown rate of corruption, there is natural inclination to defect. Citizens tend to opt for defection if the bureaucrats lack credibility like ours; others defect because they do not see reasons to pay tax, while some cannot simply afford the tax bill.
Nigerians are not tax conscious; it has not been part of the social and economic culture. The discovery of oil in the 1970s shifted our view of the fact that tax revenue augmentation would have created a healthier economy for all. But oil has become the biggest nemesis for Nigeria: introduction of corruption with impunity, and neglect of other sources of revenues as opposed to fossil fuels.
Despite the massive earnings derived from oil rent, successive governments have done very little to entice Nigerians to contribute directly to government treasury; the funds are guaranteed to be stolen by those enforcing the law.
It is, therefore, the responsibility of those advocating for expansive tax reforms to properly prove to Nigerians that their monies will be used for infrastructural development that will support future generations. The process of motivating the populace to pay their taxes must be hinged on gradual, purposeful tax education. If the wanton theft in the system remains unstoppable, it will be foolhardy to force anyone to pay his/her tax bills.
In other parts of the world, taxes are paid to governments at the local, state and national (federal)levels. These governments have various parts to them, including legislators (who make laws), executives (who enforce laws), judges, and many others. The money these government workers receive to do their jobs comes from taxes.
Taxes take many forms, too. When you work at a job to make money, you pay income taxes. Depending on how much money you make, a certain percentage (part) of the money you make is withheld (kept out of your paycheck and sent to the government).
When you buy things at a store, you also usually pay sales tax, which is a percentage of the cost of the item charged by the store. If you own property, you also pay property taxes on the value of your property.
Paying your taxes is considered a civic duty, although doing so is also a requirement of the law. If you do not pay your taxes, the government agency that oversees taxes — the Internal Revenue Service or IRS — will require you to pay your taxes or else face penalties, such as fines or going to jail.
The money you pay in taxes goes to many places. In addition to paying the salaries of government workers, your tax money also helps to support common resources, such as police and firefighters.
Tax money helps to ensure the roads you travel on are safe and well-maintained. Taxes fund public libraries and parks. Taxes are also used to fund many types of government programmes that help the poor and less fortunate, as well as many schools!
If you haven’t had enough tax money withheld from your cheques throughout the year to cover the amount of tax you owe, you will have to send more money (“pay in”) to the government. If, however, too much tax money was withheld from your paychecks, you will receive a check (get a “refund”) from the government.
While adequate enlightenment is the most reasonable way to educate the citizens of their responsibilities to the sovereignty, those in government must also be seen to judiciously utilize the funds. In a situation like Nigeria where government workers directly steal from the system, it is difficult to motivate people to pay.
The exploitative and aggressive models designed by the FIRS can only lead to more defections, if the cyclic, negative economic conditions prevail.