Naij.com Author About Challenges Of Tax System In Nigeria

Naij.com Author About Challenges Of Tax System In Nigeria

Editor's note: Legit.ng guest author Maxwell Adeyemi Adeleye addresses challenges of tax system in Nigeria, and explains why effective tax system is the major instument for the country to remove the numerous impediments on the way to sustainable development.

Story highlights:

- "Great nations have developed through taxation."

- The Nigerian government have lost quite a number of opportunities to benefit from the properly functioning tax system.

- Several examples (Lagos and Osun states) clearly demonstrate how by running a well thought-out tax policy the above mentioned states have become economically self-sufficient in serving their people's needs.

Unarguably, ever since crude oil was discovered in Nigeria on January 1956 by Shell Darcy, the country has changed completely. Nigeria has strategically abandoned other sources of income that could generate trillions of naira annually.

Prior to the discovery of crude oil, Nigeria’s major sources of income were majorly agricultural products such as groundnut, cocoa, cashew, palm oil, etc. These products were free gifts of nature extracted and exported overseas under the import-export substitution policy of the then Nigerian government.

Using the money made on cocoa and other agricultural products the late Obafemi Awolowo, the first premier of the Western Region of Nigeria, built Airport Hotel, Ikeja, Lagos; the University of Ife (now Obafemi Awolowo University); Cocoa House and the Western Nigeria Television Authority (Now NTA), Ibadan; Oodua Textile Mill, Ado Ekiti; Ifon Ceramics Industry, Okitipupa Oil Palm Plc, Oluwa Glass Company Plc, Ondo state, etc.

With strong agricultural sector at hand Nigeria hit the ground running immediately after being granted independence on October 1, 1960. Now the main source of profit in Nigeria is crude oil. Other income generating sectors have been jettisoned for oil boom which is now more of a curse than a blessing for the Nigerian people.

The panacea

Great nations have developed through taxation. America and Britain live almost solely on tax system. I can say relying on direct and indirect observations that the Nigerian tax policy is too weak and archaic. The Nigerian leaders have allowed more money to be taken out of Nigeria by the neo-colonialists pretending to be owners of multinational corporations in the country than they (the neo-colonialists) pay as taxes.

Providing that crude oil one day dries up, and agricultural sector is totally ruined, the effective tax policy will be able to remedy the quagmire militating against the development of Nigeria. With adequate tax policy we can get more funds to withstand the infrastructural decadence presently battering the country.

Pay as you earn

First, pay as you earn policy should be rigorously pursued. The more one earns the bigger tax they should pay. I also recommend the Nigerian government to introduce pay as you have system; in other words the more properties one has the more they should pay. Thus Nigeria would be able to benefit from taxing multimillionaires and billionaires.

READ ALSO: Mansion Owners, First Class Travelers To Pay More Taxes

I am aware of the country’s tenement rate policy, however, the government should ensure that the privileged Nigerians possessing as much as 40-60 mansions in the choice areas of Abuja, Kano, Lagos, Port Harcourt, etc. pay taxes according to the number of houses they own. In fact, they should pay not only according to the number of properties, but also according to its quality. It is very unfair the one owning a N5m house on a plot of land in Ojodu, Lagos, and the one possessing a N100m house in the same location pay equal tax and tenement rate. The tax system in Nigeria is a total antithesis of the developed tax polices worldwide.

Vehicle registration

The government has failed to boost its revenue through vehicle registration. The policy of duties designed by the Nigerian Ports Authority and the Nigeria Custom Service should be adopted by those in charge of vehicle registration in Nigeria.

In the Nigerian ports and on the border, duty is imposed on the imported cars based on their production years. The size of duty for a car manufactured in 2010 is bigger than that for a car manufactured in 2014 even if the price of the former is higher. Consequently, it is totally unacceptable and economically unwise for the Nigerian authorities to charge the same amount for the registration of a 1998 Honda and a 2012 Toyota Camry.

Moreover, the Nigeria Police Force and the Federal Road Safety Corps should not charge the same amount of CMR and roadworthiness for a 2001 Hyundai and a 2014 Hyundai. Oh! This is a self-exploitation. The Nigerian authorities should wise up. A billionaire driving a car worth N20m is obviously able to pay N200, 000 for the registration. After all, the rich and the poor never get equal treatment in Nigeria.

Deliberalization of tax system

I call on the Nigerian government to deliberalize our tax system. Nigeria is too liberal with multinational corporations and foreign companies. We allow these conglomerates to evade taxes enticing them to invest in our economy so that the unemployed youths could get a job. These expatriates bribe our government officials to get tax waiver. They pay less than 20% of what is due for Nigerians.

Apart from evading taxes, multinational corporations in Nigeria have denationalized their promotion and recruitment policies. Instead of providing Nigerians with jobs, these tax evaders practice employment casualisation. Unfortunately, these aberrations happen under the watchful eyes of the obviously oiled Nigeria Labour Congress and Nigeria Trade Union Congress.

Corruption

Another quagmire waging war with the Nigerian tax system is corruption. Tax collecting agencies are too corrupted, insincere and unfaithful to the Nigerian people. No doubt Nigeria would have achieved more in terms of infrastructure and employment if 60% of what is due to the three tiers of government is remitted by the tax collecting agencies.

Today Lagos and Ogun states have proven the cure for the Nigeria developmental challenges lays in the effectiveness of its tax system. For instance, under the administration of Governor Bola Tinubu (1999-2007) the internally generated revenue of Lagos state was between N800m to N2.7bn.

Nonetheless, when a former governor of Lagos state, Tunde Fashola assumed office in 2007 he created a ministry of budget and economic planning saddled with responsibility of reforming the state tax system. Just as it was predicted, the monthly IGR of Lagos state increased from N2.7bn to N18bn within two years, and by 2015 Lagos state was already generating N32bn.

In Ogun state Governor Ibikunle Amosun inherited a monthly IGR of N600million from his predecessor. Today Ogun state is generating N7bn per month. What Fashola and Amosun did was leakages blocking and ensuring there was accountability in the system. Today Lagos and Ogun states are solvent enough to deliver dividends of democracy to their people with an amazing ease without the statutory allocations from the federal government.

Central and state governments of Nigeria should act now!

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Source: Legit

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