TAX EVADERS LACK CONDUCIVE ENVIRONMENT TO PAY TAXES - KUNLE QUADRI
Tax evasion is an offence frowned at, home and abroad. In many countries of the world, where complaints of poor infrastructure is virtually non-existent, convicted tax evaders may spend the rest of their lives in jail. In Nigeria, do people deliberately shun tax payments for the fun of it? No! According to the President of Chartered Institute of Taxation of Nigeria (CITN), Mr Rasaq Adekunle Quadri, it is not that they wanted to but because they don't have conducive environment to actually pay those taxes.
His words: 'A lot of people have been said to be evading tax. It is not that they want to but because they don't have the conducive environment to actually pay those taxes. In developed economy, it is 'pay as you consume'. If you are not consuming, you are not paying. Once you are consuming, you are bound to pay.'
Quadri, however, is optimistic that the problem of tax evasion may be a thing of the past if the National Assembly passes the Personal Income Tax bill into law.
'The significance of the bill is that it would move us from the obsolete law to new law that will be in conformity with reality. But it may not necessarily move us away from the direct tax regime we have been longing for into the indirect tax regime. The national tax policy mentioned the fact that for a good tax system, there must be emphasis on the tax regime in direct taxation and there must be emphasis on indirect taxation,' Quadri explained.
Perhaps the major source of worry for CITN is the issue of touting and quackery within the tax system. He blamed this on the fact that CITN has not been able to implement the charter to the letter. 'And we have been discussing with stakeholders, revenue agency, members of JTB and some other stakeholders too, that the only way we can professionalize the system is to implement CITN's Charter,' he said.
My name is Prince Kunle Quadri. I am the president and chairman of Council of the Chartered Institute of Taxation. I am currently the first president of the West African Institute of Taxation (WAIT).
Prince Rasaq Adekunle Quadri came on board on June 2, 2009, which means his tenure will be over as the president of the Chartered Institute of Taxation of Nigeria on June 1, this year, after spending two years of his presidency already. That also means that by this year, he would have become a past president of the CITN.
He has helped the institute to achieve a lot in the area of tax issues, and he still wants to see the CITN as a professional body of repute that would have taken its position in the comity of professional bodies in the country and across the world, after his tenure expires this year.
Perhaps the major source of worry for CITN is the issue of touting and quackery within the tax system. Right now, we have not been able to implement the charter to the letter and we have been discussing with stakeholders, revenue agencies, members of JTB and some other stakeholders, so that the only way we can professionalize the system is to implement CITN's charter. The charter says we should regulate tax profession in Nigeria in all its ramifications. There is no provision like this in any other charter. Until we have CITN members as the only people that can practise, it's going to be difficult for us to really flush out the touts and quacks. Like I said, we are already discussing with quite a lot of stakeholders…and we are having good results. Maybe in the next one or two years, if we have not been able to eliminate quackery, we would have been able to reduce it significantly.
The issue of updating the Nigerian tax law, especially where you are talking about obsolete probations in those laws, came up as part of recommendations of a study group set up by the Federal Government in 2002 and recommendations are also limited to another working group who submitted its papers to the Federal Government in 2004. And between that time and 2007, nine tax bills went to the National Assembly, out of which one was withdrawn. By the end of the 2007 tenure, four of the bills were passed. But, unfortunately, Personal Income Tax, which happened to be very critical bill, was not passed though it was re-presented at the House, and this Personal Income Tax Act now came up again in 2010 for mentioning. We are expecting that before the end of this tenure, the National Assembly would pass the bill of Personal Income Tax Act.
Now the significance of the bill is that it would move us from the obsolete law to new law that will be in conformity with reality. But it may not necessarily move us away from the direct tax regime we have been longing for into the indirect tax regime. The national tax policy mentioned the fact that for a good tax system, there must be emphasis on the tax regime in direct taxation and there must be emphasis on indirect taxation. With the rate in the personal income tax amendment bill, you will find out that they have now exhausted one per cent from 25 per cent to 24 per cent. When we are talking about the threshold for the personal income tax bill, we want to increase the VAT and other indirect taxes to about 100 per cent. I am not sure if Nigerians want to really accept this because if we are talking about shifting emphasis, we should be looking at increasing consumption tax rate and, of course, reducing direct tax rate.
When we are talking about direct tax rate, we are looking at only the personal income tax. We are also looking at company's income tax. So we still need to do a lot of work on that bill. That is why during the Joint Committee on Finance Public Hearing held recently, we proposed, as a body to the tax committee, that there must still be issues in respect of the rate, that the rate should be lower and we should lay emphasis on the indirect taxes. In advanced countries, they lay more emphasis on taxation because they believe that that is the only way to see their economies grow.
For example, in other developed countries, they lay more emphasis on indirect taxation and reduced to the barest minimum on the direct taxation because when we are talking about direct taxation, you need to start filling forms, you need to start getting a consultant. But when we are talking about indirect taxation, we are talking about taxation whereby you are paying according to consumption. A lot of people has been said to be evading tax. It is not that they wanted to but because they don't have conducive environment to actually pay those taxes. In developed economy, it is paying as you consume. If you are not consuming, you are not paying. Once you are consuming, you are bound to pay. So I want to believe that apart from this bill scaling through between now and the end of May, we are praying to God that that will happen. We are looking at a situation where on constitutional basis, all our tax laws will be looked into.
The bill is not meant for professional bodies. It is meant for individuals, both employees and self-employed. In terms of affecting professional bodies, it would really affect the staff or the employees of professional bodies and it would affect them positively. Like I said, there is a lot of obsolete probations in the Act we have right now and these obsolete probations have not been making people to comply voluntarily. What we are talking about is a release of N1000 as allowance for dependent relative, we are talking about N2,500 per child, we are talking about housing allowance of N150,000. Those are the issues we have been looking into all along. So positively, it is going to affect Nigeria because they will now see that the release has been relevant as regards the reality of the bill. The other problems we pointed out to the National Assembly was the way the release was brought in.
This might not been too convenient especially when you are having an economy going through inflationary period. Why not just we have a 40 per cent as a release allowance instead of saying, we are going to be having 200,000 plus so, so and so percentage. So, we should have a consolidated release of 40 per cent allowance. In terms of inflation, even where the Naira is eroded, you still have the percentage to talk about and I think this is one of the positions we canvassed at the National Assembly Public Hearing. Like I said, it is not meant for professional body but it is meant for employees and self employed people.
Internally Generated Revenue
The bill will affect the amount of revenue generated right now in the sense that the release will be increased thereby reducing the taxes collected from both the employees and self-employed. But it will have another effect because people will now have better understanding of the Nigerian tax system. People will now have better tip of what the system should be and people will now want to really comply more in this end because they will now look at whether the Tax Act has been tax friendly because when we are talking about the release now being a reality and they will look if the system has been encouraging, they will want to really put in more into the system. It has the result of reducing the amount that is coming in in-terms of the release that is now being given out, and then the bill will now be more realistic and people are bound to voluntarily comply and this will of course increase what is even being collected now.
Increase in MPR
I think we need to be practical towards this end. I want to believe that government will have a lot of work to do as far as encouraging the manufacturing industries. The manufacturers need capital quite alright but what they need is beyond capital. They need infrastructure to actually make them survive. Infrastructure in terms of energy, they need security, they need transportation and those are the major things required before we start talking about capital. If they don't have conducive environment, then it might be difficult for them to really get assistance and fund from their bankers because no bank will want to introduce capital into any place where the system cannot generate both the interest and the capital.
Those are the issues government should first have to look into. Then coming to your question, I want to believe that for now, we don't have much choice when we know exactly where the fund is coming from because the Central Bank of Nigeria (CBN) has done a lot to improve the system and trying to encourage people to now bring in the fund. The 7.5 per cent is quite alright, but the major thing that will impact in the manufacturing sector is not only the capital but making conducive environment for the manufacturers to really carry out their operations.
The budget is still the same old wine in new bottle. That is the way I will look at it. We are talking about moving the economy from the oil sector to non-oil revenue economy. I looked at the whole budget, I could not see any impact that is expected to be made as far as tourism is concerned, as far as agriculture is concerned and as far as the manufacturing sector is concerned. Yet we want to provide employment for people and the way to provide employment is not by giving out money. We are not against giving out capital to people but please provide the conducive atmosphere for the people to be able to carry out their operations.
Before the advent of oil, we had agriculture booming in Nigeria.
So, why did we leave agriculture and concentrate only on oil? In this country, we are having enough solid minerals and some countries subsist just only on solid minerals. In this country, if we develop our tourism sector, we can live on it. Some countries are living on just only that. So, we need a budget that will make a statement that, 'look at this particular year, we want to bring up our agriculture sector; this particular year, we want to bring up our tourism sector'… and I have not seen this in the 2011 Budget.
The 2011 budget is predicated much more on the oil and gas sector. I think if we are looking at a sustainable economy for the country, if you are looking at an economy that will bring much more revenue and also if we are looking at an economy that will employ people gainfully. Then, of course, the area of agriculture, the area of solid minerals, the area of tourism and some other areas have to be looked into.