Millions Of Dollars Lost In Nigeria To Tax Evasion Due To Incoherent Policies
The Federal Government is mustering the political will to coerce revenue generation through high-profile individuals, Ministerial Departments and Agencies and others to fittingly submit to the federation account what is due to government. ODIMEGWU ONWUMERE unearths that millions of Dollars have been lost to tax defaulters and the private sector is dogged to say that businesses provide for themselves power, water, roads etc. being the reason taxes are paid upon the many tax policies by the successive governments suggesting the contrary. However, this article traces that Nigerians would be profitably inclined to paying taxes only if the revenues ensuing from such taxes are wisely utilised for socio-economic infrastructure development of the assorted parts of the country
It was a season of fear and desperation as the Federal Government (FG) vowed not to leave any stone hiding tax defaulters unturned, especially among the political class. Hence, the FG mounted its satellite at all corners to apprehend tax violators.
In an effort in making sure that the FG’s promise was kept, the Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Tunde Fowler urged the Nigeria Police Force to assist the agency in the battle against tax defaulters.
The livid Fowler was not happy that over 40,000 people or so in the rank and file were yet to pay their tax. He told the Acting Inspector-General of Police, Mohammed Abubakar Adamu when the later paid a courtesy visit to the Revenue House in Abuja in February this year that the agency would not allow tax violators to rest till they comply with the directive of the agency.
From its check of tax evaders from 45,000 persons on FIRS record, the heated Fowler said that the sum of N23 billion was realised through a close-up of over N100 million owned by each as turnover in their accounts.
It was grasped that such foray as the Government Integrated Financial and Management Information System and Remita put defaulters at a corner when they noticed that the authorities had evidences against them.
Expensive and expansive buildings at choice places across the country were beamed with government’s searchlight. In some states, the FG had the support of governors with state governments reveling building documents of owners. Lagos and Abuja became the first where the FG mounted its battle in the fight for tax compliance.
It was less than three weeks in the month of March 2018 to the expiration of Voluntary Asset and Income Declaration Scheme (VAIDS), a Federal Government amnesty programme keyed in from July 1, 2017 to March 31, 2018 for tax defaulters to voluntarily regularise their tax profiles.
This pet programme was however attended to with pressure from politicians, ex-governors and other dignitaries for the authorities to extend the tax amnesty expiry date.
Before she was disgraced out of office over alleged certificate forgery last year, the then Minister of Finance, Mrs. Kemi Adeosun had amplified that defaulters of tax who refused to comply with the amnesty programme would be named, shamed and prosecuted.
They were majority among the political class, research revealed. In the same vein, Fowler had in an interview on February 26, 2018, advised high-flying Nigerians with tax burdens to take lead of the VAIDS, as political, social or economic distinction would not separate them from sanctions for non-compliance.
While at the first annual lecture of the Lagos State Professorial Chair of Tax and Fiscal Matters held at the Ade-Ajayi Auditorium of the University of Lagos, in December 2017, Adeosun said that only 40 million taxable adults in Nigeria pay taxes, out of 70 million. She went further to say that about 13 per cent of Nigerians who were active tax payers only paid given that their taxes were deducted under the Pay as You Earn (PAYE) category.
But in a speech delivered on June 29 2017 by the then Acting President of the Federal Republic of Nigeria, Professor Yemi Osinbajo, titled "How tax-paying Nigerian can curb corruption, make govts responsible", it was a different version to the claim by Adeosun.
Professor Osinbajo said, "According to the Federal Inland Revenue Service, the total number of tax payers in Nigeria is just 14 million. Of this number, 96% have their taxes deducted at source from their salaries under the P.A.Y.E system while just 4% comply under Direct Assessment. So the vast majority of Nigerians do not pay taxes.”
There was experts’ opinion revealing that over 180 million Nigerians living in Nigeria, BVN exposed that individual account holders were more than 30.5 million as at January 2018. The National Identity Management Company (NIMC) showed a data base of 22 million Nigerians. According to statistics, it was believed that infinitesimal number out of the working population paid taxes.
This exposition was made through data which was mined. It was further gathered that the government was able to get the assets of many of the high-profile individuals through its data mining programme dubbed ‘Project Lighthouse’. High-profile individuals were not at rest when they observed that government had exhumed their net-worth with proof of where they hid many of their assets. Many tax defaulters were however contacted by the VAIDS office.
The tax war went berserk concerning taxing Nigerians abroad but Adeosun in August 2017, during a Facebook LIVE video chat tagged “Tax Thursday” seemingly cleared air on the Nigerian government’s plan on diaspora taxes.
She said, “It is not (for) every Nigerian; it is for Nigerians resident for tax purposes…If you are a Nigerian resident for tax purposes, it means you live in Nigeria for 195 days of the year.”
The highlight of the double statements from officials was a proof that there were many challenges and prospects in the tax system in Nigeria. Evidence was the lack of statistical data. Experts said that poor tax administration andmultiplicity of taxes characterised the system: something that Nigeria inherited from the colonial administration based on 1948 British tax laws.
These laws were mainly structured on revenue generation and it prompted the income tax management act (ITMA) of 1961, where personal incomes were taxed throughout the country. Since then, many amendments have been made to the 1961 ITIMA Actthat yielded little or no result.
Seemingly, the ‘Project Lighthouse’ was able to be successful through data harvested from government agencies such as the Corporate Affairs Commission, the Nigeria Customs Service and, the Nigerian Communications Commission.
Outcome Of VAIDS
Some politicians complied with the VAIDS; many others were yet to comply. But the outcome of compliers boosted the image of Nigeria in the world tax ranking index. Fowler was also happy with the VAIDS.
The World Bank was first to recognise this when it upgraded the country’s tax collection ranking from number 171 to 157.
Analysts believed that the ranking was the efforts of the government of President Muhammadu Buhari through its reformed National Tax Policy in making sure that Gross Domestic Product gained above six percent from tax revenues.
It was believed that the World Bank supported the country so much in the reform. Our reporter learnt that because of VAIDS, number of tax payers was raised to 42 percent, or from 13 million to 19.2 million in 2017.
This boosted the morale of the FIRS and it geared up to push Nigeria above 14 of its contemporaries; resultant of the ranking from number 171 to number 157.
While Fowler thanked the Nigeria Police Force for the aid they have been rendering so far in the cause to battle tax evaders, he pointed out that the agency collected a total of N5.320 trillion of tax revenue in 2018; being the highest in the history of revenue gathering of the commission.
But in an interview of January 27 2018, Mr. Oseni Elamah, Executive Secretary, Joint Tax Board, had said Nigeria targeted N320bn revenue from VAIDS. This was against N3, 307 trillion it made in 2016 and N4, 027 trillion it made in 2017.
However, while these huge sums were collected, Fowler showed uneasiness that there was decrease in the percentage of the taxes collected.
For example, it was 2.6% in 2016 as against 2.48% in 2017 and, 2.14%in 2018.
Before Buhari Government
It did not meet the eyes why these huge sums of money were recovered from tax evaders in 2018 and many of the high-profile individuals were yet to comply with the amnesty programme for tax defaulters.
Exactly seven years this year, there was the “new Personal Income Tax (Amendment) Act” that mandated workers that included President, Governors, their Deputies, Ministers and bigwigs in politics to pay taxes out of their incomes.
The then Chairman, Joint Tax Board, Ifueko Omoigui Okauru disclosed this at a media briefing to officially uncover the ‘new Act’ in Abuja.
This patronizing project was aimed at bringing the Personal Income Tax Act to match with the Nigerian economy with regards to understanding how the Act was affecting low and middle income earners.
The then President Goodluck Jonathan was it who signed this into law in June 2017 and also, evaluated income excused from tax to include bonds subjected by government and corporate entities.
Mrs. Omoigui -Okauru, who doubled then as the executive chairman, Federal Inland Revenue Service (FIRS), highlighted the amendments were after over 19 years such exercise was conducted which was dubbed “Personal Income Tax Act (PITA) 1993.”
Checks revealed that the ‘new tax’ table buttressed that the primary N300,000 of income garnered would magnetize seven per cent tax rate.
The source went further to say that about 11 per cent was earmarked to be paid as tax on N300,000 preceding the former income.
15 per cent on N500,000; 19 per cent on the next N500,000; 21 per cent on N1.6million and, 24 per cent tax rate on incomes that were more than N3.2million.
In 2011, the Lagos State Government started the implementation of its land use charge law, where landed property owners were forced to pay a percentage of the value of their property to the government yearly, in order to shore up their Internally Generated Revenue (IGR). And many states joined Lagos in this chorus.
Everybody, group and could be noticed to be looking for a soft ground or reason to evade or collect tax in the country. On October 28 2018, some stakeholders in the private sector like the Manufacturers Association of Nigeria, MAN, Lagos Chamber of Commerce & Industry, LCCI, were a thorn in the neck of government not to heed to any advise or call to increase Value Added Tax, VAT. Rather, government should carve a niche for itself to build on tax net and not the other.
These bewildered groups hinged their view on what they described as Nigeria’s weak economy which would not be in tandem for increase in tax rate in whatever language used in doing so.
It was learnt that the stakeholders were bemused when the International Monetary Fund, IMF, lent its voice to the government to review the country’s tax policies.
The call by IMF was that the richest should be taxed three percent of the country’s population, broadening the tax support and supplementing conformity on VAT.
Those who knew better told the authorities that the IMF increase in VAT was a bad advise at a time Nigeria was grappling with economy difficulties.
According to a presentation by the Director General, MAN, Mr Segun Ajayi-Kadir, “Businesses do not like tax given that it is not favourable to their costs and it devours into their profits. However, the IMF advise came at a wrong time when the country was struggling with flimsy economic growth.”
Ajayi-Kadir went further to state that it’s unfortunate that businesses were already providing for themselves the services the government ought to have given them been the reason taxes were paid. According to him, “Businesses are covering the areas of power, water, roads etc. for themselves being the reason taxes were paid. Therefore, pushing up VAT will be devastating at this period.”
Tax System Hijacked By Politicians
When the Oyo State Government sealed up former President Olusegun Obasanjo farms and over forty other business firms in the state in September 2018, some politicians and political analysts labeled the move as a political witch-hunt.
But the government in a swift reaction through the Chairman, Oyo State Board of Internal Revenue (OYBIR), Mr Bicci Alli said during the OYBIR sensitisation and enlightenment meeting with the members of the Organised Private Sectors and Chambers of Commerce under the aegis of Manufacturers Association of Nigeria (MAN), Oyo State Chapter, at MAN House, Jericho Road, Ibadan, that the move was occasioned by the recalcitrant behaviour of the affected firms to habituate with the tax laws of the state after a resounding long notice were given to them.
By September 11, 2018, the Peoples Democratic Party (PDP) through its spokesman, Kola Ologbondiyan, showed anger that the Economic and Financial Crimes Commission (EFCC) had not investigated and prosecuted the All Progressives Congress (APC) leader, Asiwaju Bola Tinubu, over allegations of tax fraud amounting to N160 billion taxes by a company linked to him.
According the source, “Nigerians can now see how the same Ibrahim Magu-led EFCC, which rushes to pounce on, arrest and lock up innocent Nigerians, particularly, perceived political opponents of President Buhari, without investigation, has practically gone frozen and toothless because a member of the APC cabal is involved.
“Does it not smack of hypocrisy that President Buhari, who boasted that he was going to jail more looters, has been looking the other way, while Presidency officials suppress investigations since whistle blowers alerted that Alpha Beta, a company linked with his party leader, Asiwaju Tinubu, allegedly swindled Nigerians to the tune of a whopping N160 billion in tax fraud?
“Is it not equally hypocritical that under the same President Buhari’s watch, where the Federal Inland Revenue Service (FIRS) has threatened to block the bank accounts of tax evaders, a leader of his party had been dragged before the EFCC, yet Mr President is pretending to be unaware?”
In November 2018, while at the signing of memorandum of understanding, MoU with the Association of National Accountants of Nigeria (ANAN), in Lagos, Dr Cyril Ede, president, Chartered Institute of Taxation of Nigeria (CITN) hinged the need to remove hijackers in the tax environment in synergy with other expert financial bodies.
By July 21 2017, Executive Director of the Civil Society Legislative Advocacy Centre (CISLAC), Mr Auwal Rafsanjani, in Abuja, had called on the Independent National Electoral Commission, (INEC) to force political parties to include tax agenda in their manifestos ahead of 2019 elections. This was part of an eight-point communiqué, said Rafsanjani, issued at the end of a Stakeholders’ Interface on the National Tax Policy.
“The Federal Government is commended for adopting a consultative approach in the development of the new policy and reflecting inputs from stakeholders, including the National Tax Justice and Governance Platform.
“The review of the National Tax Policy was long overdue considering the challenges identified in the tax system under the previous policy.
“The new policy emphasises the ability to pay principle, focus on progressive tax rates, promoting equality, avoidance of multiple taxation, explicit grievance mechanisms, transparency and accountability frameworks,’’ said Rafsanjani.
On November 6 2017, a former Deputy Governor of the Central Bank of Nigeria and 2019 presidential hopeful, Prof. Kingsley Moghalu in an interview, blamed the federal and state governments of being lame-duck in their approach to revenue generation.
While this lasted, a tax expert, Mr Abulazeez Musa who also heads Public Engagement Department of Oxfam in Nigeria, on May 3, 2018, advised the Federal Government to espouse progressive taxation system to heighten revenue generation for evenhandedness in the country’s fiscal governance system, using VAIDS as a case study.
With the federal government applying to the National Assembly to grant it permission for $5.5 billion in borrowing, Moghalu hinted that it was not farfetched to say that over 60 per cent of revenues earned by Nigeria were already meant for debt servicing.
Why Nigerians Hardly Pay Tax
In a public presentation of March 13, 2018, by a public figure in Nigeria, Reuben Abati, titled, “Lagos state and the politics of taxation”, our reporter traced the cause many Nigerians hardly pay their taxes.
Abati buttressed that given the temerity, nobody enjoys to pay taxes. He went memory lane to point out the many historical and cultural features to this. He gave an instance that the community always frowned at the taxman owing to the fact that he was not a well-known member of the community.
Against this backdrop, investigations showed that many countries of the world had been into wars and revolutions in their attempts to collect or not to pay taxes. Abati voiced that in the Yoruba land for instance, there were wars in the 18thand 19th centuries in rejections of what was known as “isakole” (ground rent to the sovereign), or owo asingba (service to chiefs and kings as a form of tribute).
He translated these to mean “symbols of dominance over political authority and/or economic activities, creating a slave/master relationship among dominant/dominated groups.”
Abati gave another instance in the area of what he called “the famous Aba women’s riot of 1929.”
He narrated that the riot was in protestation against what he called “the draconian warrant chiefs” saddled with power by the rapacious colonial administration who were in the habit of direct taxation of market women.
There was the Abeokuta Women’s Union (AWU) led by Mrs Funmilayo Ransome-Kuti in late 1940s that objected to the taxation of women in the Egba Division.
Abati gave instances of the many rebellions against taxation in Nigeria and surmised that the introduction of VAIDS and a new National Tax Policy (NTP) in 2017 by the Buhari administration, many Nigerians would consider the VAIDS, a joke, given the historical and cultural features why Nigerians refused to pay tax.
However, opinion leaders considered the near-failed tax policies in the country as a detestable indictment. They were of the belief that Nigeria had lost focus and was out of touch with reality. They pointed out that Nigeria abandoned common sense to utilise revenue from crude oil when oil was booming. Rather, the country's spurious leaders allegedly stole billions of dollars that accrued from oil to their foreign bank accounts. They frowned, saying that lawmakers and top civil servants were laws unto themselves unlike in countries like America and Britain where lawmakers paid income tax on their earnings and were ever ready to present any extra income outside their parliamentarian duties. They pointed out that such income was taxed and well documented by their tax authorities.
Nonetheless, the good-looking Moghalu was amazed that the country was becoming heavily indebted, after a former president Olusegun Obasanjo (1999-2007) cleared the inherited debts that the governments before his accumulated.
Moghalu did not believe in the economics which stated that with Nigeria's debt to Gross Domestic Product (GDP) ratio at 19 per cent that the country was safe to incessant borrowing. "What matters is the debt service-to-revenue ratio," he said.
Just like Moghalu, the Chairman of BGL Plc and former Minister of Finance, Dr Kalu Idika Kalu had in August 18, 2010, at the 6th AELEX (Legal practitioners and Arbitrators) Lecture in Lagos, taught that Nigerians would be constructively predisposed to paying taxes if the revenues accruable from such taxes were sensibly utilised for socio-economic infrastructure development of the assorted parts of the country.
Odimegwu Onwumere writes from Rivers State. E-mail: [email protected]