Tuesday, November 11, 2008

Taxes to the Rescue of Nigeria

Federal Government's pronouncement the other day of its decision to fund the 2009 Budget through non-oil revenue sources, especially taxes, is remarkable. Even before the current plunge in the price of crude oil, the country's major income base, government at all levels should have consistently explored alternative means of funding.
President Umaru Musa Yar'Adua spoke the minds of many people who are concerned over the country’s over dependence on oil when he addressed the First International Tax Conference organised by the Joint Tax Board in Abuja. As he put it, "for a nation to carry out basic functions of government, pursue and implement its development programmes like our Vision 2020 and the Seven-Point Agenda of this administration, it requires a stable, predictable and sustainable source of revenue. This leaves us with no choice than to conform with international best practice and make taxation the primary source of revenue for the government... States and local governments should henceforth depend less on the monthly allocation and intensify their internally generated revenue drives."
That governments in Nigeria have so far not given taxation the attention it deserves because of the complecency over oil revenues. As governments and citizens of progressive nations around the world know, proper development and societal cohesion are largely dependent on social contract which derives its legitimacy and vitality in part from the prompt payment of taxes by one party and their judicious utilisation by the other. Curiously, it is not even that the Nigerian people and the authorities are totally ignorant of this complementary relationship.
Under an existing Nigerian law - Taxes and Levies Decree of 1998 - the three tiers of government, namely federal, state and local, are empowered to enforce taxation, with the jurisdiction of each segment clearly spelt out. That way, taxes like Value Added Tax (VAT), Personal Income Tax, Capital Gains Tax, Education Tax, Withholding Tax and Companies Income Tax ought to serve as channels for regular buoyant revenue generation for the various governments. Sadly, however, this is not the case as the nation has remained fixated with income from the sale of crude oil. Diversification had not seemed urgent until the present gloomy economic realities.
But for government to record any meaningful success in making taxes a reliable source of revenue, it must first tackle the apathy of the citizenry towards taxation, an attitude deeply nurtured by the failure of successive administrations to deliver their key constitutional responsibilities. The provision of basic ammenities and safety of the people are the responsibility of government. At the moment, Nigerians are individually and collectively responsible for virtually all their needs: Schools, hospitals, electricity, water, security and even roads. The more the impact of government on their lives vanishes - ironically in the midst of abundant petrol dollars - the more calls for their response to government programmes and the projects becomes unreasonable. Companies also groan under a similar fate. After paying taxes, they are made to shoulder the cost of basic infrastructure that should ordinarily be borne by government.
Since the country has little to show for its past four oil booms, what is the guarantee that any robustness in other sectors now would be well utilised for the overall good of its people who have suffered for too long? That question should be well addressed if the nation must pick up its pieces and move towards the long over-due prosperity.
Now is the time for government to demonstrate sensitivity to the plight of the people. On their part, both individual and corporate citizens should rise above the frustration of the past and the apparent official ineptitude and embrace timely tax payment. That would give them a strong moral ground to demand accountability from their leaders.
Both the government and the people should not miss this chance to give the country a more realistic, enduring fiscal foundation.