August 12, 2013

Evading tax responsibility

ON Tuesday, July 30, 2013, a bizarre drama played itself out at the Benin City airport when passengers coming into or leaving the ancient city found to their dismay both the entrance and exit points under lock and key.

Initial reports had it that the action, roundly condemned, and quickly too, by travellers and observers of the country’s socio-political events, was the handiwork of officials of Edo State Internal Revenue Board, led by its chairman, Chief Useni Elamah. Indeed, the social media, almost hijacked by agents provocateurs, ceaselessly riled the agency, and of course, the state governor.

But as more clarifications filtered in, it was made clear that the action was the handiwork of the management of the airport, led by its Managing Director, Sunday Ayodele, in an attempt to divert attention from the real issue–tax evasion.

The agency is being accused of collecting monies to the tune of over N15 million from its employees under the pretext of the Pay As You Earn, PAYE, tax, without remitting same to the state government.

That much was established two days later when a conciliatory team from FAAN, managers of the airport, led by Mr. George Uriesi, the director, came to Dennis Osadebey Avenue, seat of Edo State government to, in the main, apologise for the incident.

The team which also included Yakubu Dati, General Manager and Ayodele Sunday, Benin Airport Manager, the same man at the centre of the drama, left no one in doubt when it announced its reason for visiting the Governor.

It was made explicit in the words of the Managing Director. “We deeply regret the events of yesterday and we will like to find out how to avoid a situation like this arising in the future…”.

Importantly, if the visit achieved anything at all, which it did, the most significant is that it put paid to speculations that it was the state government that erred in attempting to carry out a legitimate responsibility.

Let me state categorically that even though it is very tempting to celebrate FAAN’s conciliation visit and apology as a victory for the state, which indeed it is, the main reason for this piece is to examine the real issues leading up to the face-off, vis-a-vis the seeming reluctance by corporate organisations, particularly federal agencies, to pay statutory taxes and also their tendency to cry wolf when being compelled to do so.

This is the case in Edo State where most corporate organisations, having operated for so long without paying or being compelled to pay a dime as tax to the state government, have come to the erronous conclusion that they are in a tax-free state, a reason for which it is now wrong for anyone to ask them to pay up.

The first point to be made here is that with the inception of the  Comrade Adams Aliyu Oshiomhole administration, the state did away with the era whereby individual and corporate citizens milk public funds without paying tax.

The Governor made this point repeatedly each time he had the opportunity. Yet, many of them chose to ignore the message arguably on the assumption that like previous administrations before it, the statement would end as mere rhetoric. Down the road however, he has demonstrated the resolve of the state not only to talk the talk but also walk the talk. In so doing, it sealed off  many offices in order for them to realise how important it is for them to pay up.

Though most of them, like the Benin Airport, usually resort to subtle blackmail in an attempt to paint themselves as being unfair victim of state high handedness, they ended up paying.

For others that have not paid, there is no doubt that sooner than later, they will pay because refusal to pay up is both a sad commentary on their status as socially responsible corporate citizens and an affront on the laws that attracts serious sanction.

There are more reasons why corporate citizens cannot afford not to pay taxes. In a nation like Nigeria where states and the federal governments are having a not so rosy relationship arising from unfair balance in matters relating to fiscal distribution, it is particularly imperative as it is one of the few legitimate avenues for raising internally-generated revenue development.

Indeed, since Abuja regularly emptied their monthly allocations, at source, over sundry charges, leaving them with so little, they cannot but place more emphasis on raising the bar on the enforcement of tax payment if they are to execute any meaningful  programmes for their people.

Tax is a statutory responsibility as contained in the Constitution. Thus, one would have expected that in particular, our corporate citizens will not find it difficult or out of place to pay, particularly because it is a compulsory creation of the law which prescribed sanctions for violators or evaders.

Albeit, most corporate citizens in Edo State, particularly federal agencies, have conveniently excused themselves from paying taxes. Even when they have consistently deducted PAYE from their employees’ monthly salaries, they refused to remit same to the state.

Sadly, when challenged, they usually resort to creating the impression that they are being hunted by the state. Some of them go the extra mile of politicising the matter by giving the impression that it is a reprisal act orchestrated by the state government, as insinuated over the airport saga, to avenge the not-too-distant incident in which FAAN ordered back the aircraft conveying the state governor to Awka, the Anambra State capital.

The time has come for Nigerians to be prepared to witness more state governments, with the intention of offering real development to their people, to rise up and legitimately compel recalcitrant corporate organisations to pay taxes.

Edo State, in particular, has got to a point of no return because the Oshiomhole administration has been sentenced to compulsorily turn the state around for the better.  That explains its resolve in adopting the no-going back attitude on the need to make all defaulting organisations pay their taxes particularly because of the huge amount of money it is being owed.

As at the last count, it was being owed over N2 billion in unremitted deductions collected from staff salaries as PAYE. Many of them have, so far, refused to respond to notices served them, but surely, the relevant arm of the state government will be visiting and enforcing payment sooner than later. Lastly, it is important to clearly state here that tax is a federal issue.

In particular, state government are mandated by the constitution to act as collecting agents of, for instance, PAYE. Individuals, including the President Goodluck Ebele Jonathan, Adams Aliyu Oshiomhole and the ordinary man on the street, pay PAYE. The same rule applies to corporate citizens.

Even where there is an express permission that excludes them from paying tenement tax, as is the case with FAAN, the said exclusion has no effect on collecting and remitting PAYE deductions from employees’ monthly salaries. It is a responsibility non of them can run away from.

Mr. ERNEST OMOARELOJIE, a public affairs analyst, wrote from Benin City, Edo State.