Minister of Finance, Mrs Kemi Adeosun, gave conflicting signals recently when she said Nigeria will no longer borrow to fund the budget, only to recant shortly after. We are fully in support of the need to apply more caution in our current craze for borrowing because the economy is being increasingly over-burdened by debt.
We strongly hold the view that we must diversify our revenue base and build our revenue profile as projected in the Economic Recovery and Growth Plan (ERGP), to ensure that we do not continue to rely on oil revenue and debt to fund budgetary spending.
Consequently, we support the focus of the Ministry of Finance on expanding the nation’s tax base, with some good initiatives such as the Voluntary Asset and Income Declaration Scheme (VAIDS) and recruitment of Community Tax Liaison Officers (CTLOS) to improve tax compliance in the long-term.
We are, however, concerned that the long-standing crises of multiple taxation appear to be getting less attention as the three tiers of government get more aggressive in the bid to raise internally generated revenue (IGR),which is just about imposing more taxes and levies on those already in the tax net. This should be addressed as a matter of top priority.
The tax policy should also take cognisance of the need to drive economic development through tax incentives. Areas of special development interest such as micro, small and medium enterprises (MSMEs), value-added minerals and raw materials industrialisation as well as import substitution industrialisation, should be pursued along the lines of tax holidays as they would have further multiplier effect on employment and the taxable economic activities at maturity.
We must not forget the issue of social contract where those who pay tax expect commensurate value for their money. A situation where, for instance, companies pay huge sums as corporate tax, yet spend their money on services the government should provide with the taxes (such as water, electricity and others) is not only unjust but also antithetical to the quest for voluntary tax compliance.
The resort to more taxation must also be followed with frugality and accountability in the spending of public finance. It should leave very little room for the profligacy and mindless corruption that is the order of the day. It will be difficult to drive voluntary tax compliance under such an environment.
Governments at all levels should not put all their revenue eggs in one basket of taxation. It is still a virgin economy in Africa where natural resources are not only huge but largely untapped. We have to strike a prudent balance between the diversification of the economy and the taxation of start-up enterprices to ensure we open up more for private investments.