The newly appointed Nigerian government is promising all sorts in its effort to legitimised itself and convince Nigerians that it is ready to provide the required infrastructure in order to achieve Nigeria developmental objectives. A greater emphasis would be placed on power generation and supply, roads and healthcare. These are what Nigerians are yearning for. Promise is one thing but delivery is another. I am not so much worried about the will to deliver as I am of the availability of the required financial resources. Would Nigerians put their money where their mouth is and pay more tax?

{mosgoogle}As the British High Commissioner to Nigeria said in a recent interview, the Lagos-Shagamu-Benin Expressway is far more dangerous than whatever you could encounter with the Nigeria version of armed robbery. Some of the road bridges are frightful due to years of neglect. I was on holiday to Nigeria in November 2006. I saw the horror that these roads represent. This experience is equally true across the country. Having not maintained these roads to the standard considered safe for years the cost of reconstruction will be monumental. This begs two questions: can our government finance these road works from the current revenue it’s able to generate? How can the motorists effectively and efficiently contribute towards this investment?

Nigeria has an underdeveloped healthcare delivery system. The overall Nigeria health system performance is abysmal. Lest Nigerians forgot, we are in the 21^st century.  Most Nigerians, perhaps due to financial reasons, still have a treatment seeking behaviour that is geared towards seeking self-remedy. Most Nigerians will only seek the help of a physician when the situation becomes highly acute. The level of investment required to bring both the primary and secondary healthcare delivery systems to a fairly reasonable standard is quite significant. This again begs another question: Why can’t people contribute towards their healthcare via taxation?

Education is another sector where the level of investment has not kept up with the growth and demands of the sector. Nigeria government thinks education is only about approving more universities and providing less than adequate grants for them. How many local governments and educational institutions (from primary schools to universities) in Nigeria can boast of a decent and well-equipped library? I do not subscribe to the perverted belief that libraries are social amenities rather educational facilities. An average Nigerian politician can’t explain to you what benefits one derives from public libraries. This bizarre state of affairs affects the position of libraries in their list of priorities. Public libraries are non-profit making and have to be supported financially. The question one needs to ask is: can the government afford it, considering its other equally important commitments?

The Federal Government of Nigeria recently reported a deficit of N121.8 billion for the fourth quarter of 2006. A deficit occurs when government total expenditure exceeds total revenue that it’s able to generate, whereas a surplus is when revenue exceeds expenditure. A balanced budget, which every sensible government aims to achieve, is when total budgeted revenue equals total budgeted expenditure. Of course, an accountant or economist will be quick to tell you that a budget always balances.

The reason is that government can borrow the shortfall in revenue to fund expenditure. A prudent government will normally set some operational guidelines, determined by its monetary policy, on how much it can borrow and the purpose for which it can borrow money. Borrowing is only recommended for investment. It should never be used to pay, for example, salary arrears.

When Government wants to borrow (or encourage savings), it issues Treasury Bills (short-term instruments) and Bonds (long-term instruments). The Nigerian bonds market is developing rapidly, helped to a large extent by the Central Bank of Nigeria (CBN) inspired banks re-capitalisation exercise. As treasury bills and bonds are loans, Government will have to pay them back at some time in the future, from the revenue it generates. It is for the above reason that emphasis needs to be placed on generating income through taxation rather than borrowing.

The three tiers of government generate most of their revenue from:

1. Oil receipts (by far the largest source)
2. Excise duties
3. Company income (corporation) tax
4. Value Added tax
5. Income tax (PAYE)
6. Licensing fees

Other revenue sources have remained relatively untapped. State and Local Governments can derived significant revenues from rates (payable by households and businesses) and property tax if the will is there to implement the relevant tax laws.

The questions I raised earlier in this article is not meant to discourage or create the impression that all the listed development programmes are impossible. It is just a wake up call to you that behind this government rhetoric and silence on tax issues there is the unfortunate reality that you have to pay more taxes in order that government can do all that you ask it to do.

In Nigeria, mainly those in employment, with responsible employers, pay income tax. A significant proportion of Nigerians are in self-employment and hardly ever pay tax. Some only remember that they ought to pay tax at that one-off occasion when they require tax clearance. The rot in the system is so deep and widespread that any investigation of all legislators and ministers today will reveal significant tax liabilities outstanding to the Inland Revenue services.

The difficulty in engaging Nigerians to understand the need to pay taxes in order for government to fund infrastructure development programmes is their resolute but misguided belief that revenue from Oil is sufficient to fund all infrastructure projects, healthcare, education, housing and security needs of Nigerians. The other frequently cited reason (excuse?) for not paying tax is corruption. It is a vicious circle.

The government itself doesn’t help matters. When the Federal Government of Nigeria announced an increase in VAT from 5% to 10%, it said the increase was necessary because 5% VAT was the lowest in the African sub-region and that the rate has not changed since 1993. Whose fault is that? Since when has living conditions in other African sub-region ever mattered to the Nigerian government? The increase of 100% is absurd and also the reason given for the increase is appalling. This is a typical example of how successive governments in Nigeria have failed to educate the people to enable them understand the essence of taxation. The more people understand the link between taxation and infrastructure the more they are willing to dip their hands in their pocket to pay tax.

Sadly those we thought are in the know of how taxation can help development programmes seem to confuse the taxpayers each time they give a press interview. Let me quotes a report from The Guardian of 6^th June 2007, an interview with Biodun Ajayi, an associate member of the Chartered Institute of Taxation of Nigeria (CITN) whilst commenting on the Vat increase: “…… these policies are aimed at enriching a few people and that all these will not help the corruption crusade especially in the area of revenue generation”.

“The associate member lamented the deplorable nature of infrastructural facilities, decrying transportation system, failure of power and water system and other things, which make companies spend fortune on cost of production”.

Can you make sense out of Ajayi’s comment? If you think you do, please think again! Ajayi should be required to re-sit his taxation exams. Ajayi needs, like some Nigerian market traders and street hawkers, an understanding of taxation and taxation objectives. Here was an opportunity for Ajayi to educate the masses on the relationship between taxation revenue and the expenditure to solve the “deplorable nature of infrastructural facilities” in Nigeria. He blew it. Taxation is the underlying reason why Ajayi’s professional body (CITN) was set up and continues to exist.

Corruption in Nigeria is endemic and affects every facet of the society. Just as we separate the need for police from corruption in the police force so we have to separate the need for taxation revenues from the corruption in the Inland Revenue. It is our joint responsibility to ensure that the corrupt elements in the system are exposed and got rid off. No amount of corruption excuses anyone from fulfilling his taxation obligations. If we take a moment to think, we will realise that the corruption in the Inland Revenue is aided and fuelled by the same Nigerians who do not want to pay their taxes.

I am of the firm belief that the reason why corruption is endemic in the civil service is partly because people do not pay enough direct tax. If the direct tax that people pay is high enough for them to feel it in their pockets, the chances are they will be mindful of how the money is spent. In other words, the taxpayers will become more vigilant and demand more accountability from the government. Any failure by the government to provide the required accountability will be challenged by a genuine (as opposed to sponsored) mass action.

Thank you for reading this article. If you haven’t paid your tax, please do so now!

Robot  Villager

# 1 var sbtitle2265=encodeURIComponent(Nigerians N...Read the full article. Posted by Robot| 09.06.2007 09:17

Mikky jaga  Villager

# 2 Pay Direct Tax? God forbid!! Why in hell should I pay any tax. What does the government do for me? What has the government done with the billions received from oil exports. The government collected tolls from motorists plying Benin Sagamu highway for years. Did that have any impact on the Benin Sagamu Highway? The money just vamoozed as soon as it was collected. The associate member you talked about is better than many of your so called experts in that he not only understands what the books say, he understands the environment in which he is expected to apply the theory. Importing economic theories wholesale from the west without considering our local factor is the bane of most of our economic experts, and it is the underlying cause of most of our economic woes. Nigeria government does not need more money. All it needs is prudent management of what it has already. You do not put millions inside the house before you think of burglary proof. You ensure the house is adequately protected before you put any money in it. Let our leaders show they are capable of managing the money they have, then people like me will be willing to pay taxes to help them achieve more. But wait a minute! When I provide the electricity that I use to run my business, when I have to grade the road to provide access to my office, when I have to dig my own borehole to provide water for drinking, when I have to hire private security men to watch over my properties, when I have to pay through the nose to get medical attention from private clinics because government hospitals are mere consulting clinics.....etc, etc. why should I pay any tax. Indeed, I actually pay some tax to the Local Government. And that is because I am forced to do it. If I have my way, no dime. Posted by Mikky jaga| 09.06.2007 10:50

ithinkbetter  Villager

# 3 Mikky jaga: nna a...na your papa born you well well....:D:D:D...tax for what...:confused1 ...man dey for big HELL...you dey askam mak him pay tax...i go die o! Posted by ithinkbetter| 09.06.2007 14:09

I Love Nigeria  Villager

# 4 This is the ENIGMA that Nigeria is or has become! What exactly comes first? 1.) What we are willing to do for Nigeria? 2.) Or, the benefits that we inherits from an improved Nigeria, due to what we do for Nigeria? NEWS FLASH! All the things that all the new ex-Nigerians enjoy and drool over, abroaa are paid by the taxes Nigerians abroad pay alongside with citizens of those locales! Taxes are the "penalties" "costs" "overhead-costs" "sacrifices" and "investments" that we make as citizens for total wellbeing of Nigeria... when Nigeria wins, we all win. Show me free lunch, I will show you Nigeria! Nigerians Should Pay Taxes, is tough love! and I thank Mr. Nosa Olotu for his efforts in this regard. Posted by I Love Nigeria| 09.06.2007 14:20

UglyMan  Villager

# 5 As Mikky the jaga jaga man wrote, pay taxes for what? Posted by UglyMan| 09.06.2007 14:39

Sapele Man  Villager

# 6 =Mikky jaga;182526>Pay Direct Tax? God forbid!! Why in hell should I pay any tax. What does the government do for me? +++++++++++++++++++++++++++++++++++++++++++++++++++++++++ The associate member you talked about is better than many of your so called experts in that he not only understands what the books say, he understands the environment in which he is expected to apply the theory. Importing economic theories wholesale from the west without considering our local factor is the bane of most of our economic experts, and it is the underlying cause of most of our economic woes. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Indeed, I actually pay some tax to the Local Government. And that is because I am forced to do it. If I have my way, no dime. Hello Mikky jagga, Tell me the truth. Do you pay tax or you don't pay tax? It can't be both! I think you missed the point Mr Olotu is making. You seem to agree with him on most points but you end up with a wrong conclusion. I cannot see the points made by Mr Olotu that can be attributed to imported economic theory. Babaginda used to say that a lot. I worked in Nigeria for a government ministry that did not pay NEPA and NITEL bills for over 4 years. I also know how my fellow senior managers moaned at NEPA when there was power failure and at NITEL when the phone was down. I used to laugh at these managers who could not see the errors of their ways! Finally, can I ask you to work out how much Nigeria earns from oil annually and how much is needed to provide all the required infrastructure, healthcare, security, education and environmental services. My initial calculation shows a budget deficit of N10 trillion. Posted by Sapele Man| 09.06.2007 16:20

bjdon  Villager

# 7 The point Nosa makes is fine in theory but not in practice. Payment of tax is a contract between the individual and the state. The individual pays and expects the state to deliver. In Nigeria the state has long since abandonded the people. People now have to fend for themselves, provide electrict power for themselves via generators and water via boreholes. In such a society the state has lost the moral right to claim tax from the citizens. The only way forward is for the state to set out a clear vision of what it intends to provide for the people, with firm targets. For now the burnden is on Nigeria to show that it can deliver the basics to it's people. If after a couple of years Nigerians see real improvements in infrastructure provison, then of course the state would then have the moral authority to raise taxes. By and large Nigerians are a fair people, if the see a GENIUNE effort by Govt to improve their living standards, they will respond accordinlgy. N Posted by bjdon| 09.06.2007 18:06

Sapele Man  Villager

# 8 =bjdon;182606>The point Nosa makes is fine in theory but not in practice. Payment of tax is a contract between the individual and the state.............................................................................................................................................................................................................................................................The only way forward is for the state to set out a clear vision of what it intends to provide for the people, with firm targets. ....................................................................................................................................................................................................If after a couple of years Nigerians see real improvements in infrastructure provison, then of course the state would then have the moral authority to raise taxes. By and large Nigerians are a fair people, if the see a GENIUNE effort by Govt to improve their living standards, they will respond accordinlgy. N Hello bjdon, Are you winding me up? 1. A "theory" is an observed fact........in practice! They are one and the same! 2. Tax is a statutory obligation. Those who default are committing a criminal act. 3. Political parties publish their manifestos where they lay out what they want to achieve whilst in office. So the people know already what the targets are. 4. "After a couple of years" of no money? Nosa used the word "a vicious circle". Can you see his point here? 5. Are you sure those aren't paying tax now will actually pay after the "couple of years"? I think the citizens should pay their tax in order for them to have the "moral authority" to challenge the government, should it fail to deliver. If you don't pay your tax politicians can use that to blackmail you or threaten you with arrest if you challenge them to perform. Is this not enough incentive for you to pay your tax? You live in the UK where some elderly people have been sent to jail for not paying their council tax. They refused to pay becasue they were protesting against poor council service. You see the point here? Posted by Sapele Man| 10.06.2007 03:23

Palamedes  Villager

# 9 >>As the British High Commissioner to Nigeria said in a recent interview, the Lagos-Shagamu-Benin Expressway is far more dangerous than whatever you could encounter with the Nigeria version of armed robbery Ambassadors are supposed to maintain a low profile in their host country. I cannot imagine any British High Commissioner making such comment about a host country in Europe and not taking to the cleaners by the host media. Why do all these foreigners break all diplomatic etiquette and niceties when they are in Africa? >>If the direct tax that people pay is high enough for them to feel it in their pockets, the chances are they will be mindful of how the money is spent. In other words, the taxpayers will become more vigilant and demand more accountability from the government. I agree but in the Nigeria context, I find the collection of PAYE rather immoral: How can any government (with straight face) ask the people to pay income tax, when the money is subsequently embezzled or/and mismanagement by politicians. State governors embezzle money, enough to pay off the PAYE bill for their state. Posted by Palamedes| 10.06.2007 05:07

ariteni  Villager

# 10 Federal Govt and other States should follow the Lagos example: pursue an aggressive revenue policy. Defaulters are free to go to court and argue that because of corruption they are not liable: simple! A revenue approach to the anti-corruption war will also be beneficial. Those who evade tax lack the moral standing to seek public office and its just a shame that some Political Parties sponsored tax defaulters for elections and then argued in Court that INEC must not disqualify the candidates. Only in Nigeria! Thanks to Mr Nosa Olotu for this timely reminder. Posted by ariteni| 10.06.2007 06:01

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