By SUNNY IKHIOYA 

Chief Blakey Ijezie quoted Benjamin Graham’s famous words: “In this world nothing is certain but death and taxes”. The question then is: if taxes are so certain, why are people finding it so difficult to comply with tax regulations? This is the big question experts at the Blakey’s tax conference tried to unravel during December 12, 2023 edition that took place at the Banquet Hall of Banex Mall, Lekki, Lagos. Papers were presented by Professor Friday Ndubuisi, of the University of Lagos. He spoke on ‘Tax evasion and promotion of public good’. Dr Tunji Adeniyi, former commissioner of finance, budget and economic planning, Ekiti State, spoke on ‘Designing incentive based measures against tax evasion’. 

Pastor Felix Jarikre, radical social critic presented a piece titled: “Taxation versus foreign debts, viable choices as engine of Nigeria’s growth”. The Chairman’s address was delivered by Ranti Omole, chartered accountant and Chairman/CEO, Radial Circle group, while Blakey Ijezie Okwudili, lead sponsor of the conference, delivered the keynote address. According to Ijezie: “The aim of this second edition of the national tax conference is for experts to brainstorm on how best to find a solution to tax evasion in Nigeria”. The common thread in the whole presentations is for both government and tax payers to come into a proper understanding of their individual roles and make sure that tax administration flows effortlessly. 

Tax is important but government must be able to create the necessary environment for citizens to willingly make payment. It is important for all parties to be factored in as the Tinubu government focuses on 18 per cent to GDP ratio target. Blakey Ijezie said: “Tax evasion has had a severely detrimental influence on the economy of Nigeria. Tax evasion is the illegal withholding or under-payment of taxes, typically accomplished by intentionally providing false or no evidence to tax authorities”. It is the illegal behaviour of tax payers who fail to pay or underpay taxes in violation of the provisions of the tax law. Tax evasion can be prevented by strengthening the tax structure, improving tax regulations and laws, creating more awareness and reducing tax rates. 

Blakey also quoted Calvin Coolidge who said: “Collecting more taxes than is absolutely necessary is legalised robbery”, and Bob Dole who posited thus: “The purpose of a tax cut is to leave more money in the hands of the working men and working women who earned it in the first place”. For Ranti Omole: “Taxation can either be direct tax, which is a type of taxation levied on the production or consumption of goods and services or, on transactions”. He identified the goal of the conference as “creating awareness that will ensure tax compliance and tax planning rather than tax evasion “. 

He buttressed his argument with the relevant statistics: 49.78 per cent of GDP by MSMEs (micro, small and medium enterprises) which is about $220 billion, showing fertile base for tax collections. If we imagine one per cent of this for taxation, it will be $2.2b which is an equivalent of N1.7 trillion. To him: “A lot could also be done to improve the productivity and value addition of the Nigerian MSME for greater contribution “. He also quoted  tax to GDP ratio of the following countries: Egypt 14.1 per cent; Ghana 14.1 per cent; South Africa 27 per cent; Nigeria 6.1 per cent, with the Africa average being 15.6 per cent. He also highlighted a “low correlation on PITA (personal income tax act) and untapped taxes on sole trading enterprises and informal sectors due to inadequate database and mechanism to bring untaxed to being taxed. 

We could see that our CIT (companies income tax) ratio is almost highest in Africa, as few recognised SMEs and large enterprises are over audited and stretched for full compliance, with adequate collection mechanisms of WTH (withholding tax) and VAT (value added tax) at sources that trigger reasonable compliance, compared to the informal sectors”. For Dr Adeniyi: “Tax avoidance is a legal way of reducing tax liability before tax liability is incurred or through planning. Tax evasion is an illegal means of not paying tax liability- due after tax liability has been established; false declaration of income, assets or profits, falsifying records, under payment of taxes, deliberately keeping business off the books, exaggerating expenditure, etc.” 

He proposed for tax incentives to continue,  such as rural location incentive, gas utilisation incentive, export incentives, foreign tax credit, tourism incentives and so on. On why citizens evade taxes, he attributed it to the following: low tax education, complex tax regulations, economic pressures and leadership insensitivity, high tax rates and multiplicity, informality – huge informal sector of the economy, weak consequences of mismanagement, lack of integrity, inefficient tax administration, economic digitization outpacing tax digitization. 

For Adeniyi,  “efficiency in tax collection must be balanced with efficiency in tax utilization “. There is a need to motivate citizens to pay taxes in the correct amount on due dates and some of the measures recommended for this are as follows: right and transparent government  spending, transform huge informality to formality, investment in and adoption of innovation, citizens education and national orientation, restructure the country, restructure public service, retrain and refocus civil servants to facilitate efficiency, institute effective and efficient consequence management and creating conducive business environments. Pastor Felix Jarikre dwelt on the topic, ‘Taxation versus foreign debts ‘. He asks: “Does it take any application of special genius for a country’s leadership to acquire foreign debts as a pretext of funding its economic activities?” He answers: “I don’t think so.” 

He went further to say: “..When we widen our production base through strategic and compassionate measures, we can widen our taxation base. Payment of tax to government is both compulsory and voluntary. For the case of one’s conscience, voluntary tax compliance is paramount”. In the face of dwindling financial resources, whereby a huge percentage of the country’s revenue is used to service debts, why do you think there is no alternative but a resort to more external borrowings? If we refuse to acquire more foreign debts to fund needed infrastructure, would Nigeria not survive? Would this country suffer economic decline? “It is a fallacy to embrace the proposition that Nigeria’s infrastructure deficit can only be corrected through the acquisition of foreign debts.” 

Quoting John Kenneth Galbraith in his book ‘The Affluent Society’. He said: “The vulnerability of the weakest members of the society could not entirely be ignored. An economic system, which of constitutional necessity was so intolerant of weakness, was troubling. And, even in the best of causes, compassion is difficult to control. At every turn, they showed their inclination to press collectively or with the aid of government for measures designed to make life more secure. “ What is being advocated for here is for the government to take measures to ensure balance in the society, especially as it concerns the weaker segment of society.” 

On his part, Professor Ndubuisi said: “Taxes and taxation could be seen as necessary evil. Just as tax evasion could be seen too as a natural spontaneous reaction by men to interference to his hard earned resources and freedom. It is a social contract between the people and government. There is bound to be crisis and chaos in the state when there is absence of fidelity to this doctrine by either party. The tax system can be seen as a universal one that enables the state to impose on their citizens, a mandatory financial levy or contribution for the promotion of public good and welfare, no more, no less.” 

He identifies three essential features of tax: it is a compulsory levy, it is imposed by government or sovereign authority, and thirdly,  the proceeds are intended for public good. It is essentially meant to promote social justice in society. “If the need for the target project is well founded and known to all, and the government itself has a record of probity and sincerity of purpose, incidence of evasion should be very low.” This means you will have low incidences of tax evasion if the citizens are properly enlightened and carried along with the intentions and purposes for which the tax is collected. He listed causes of tax evasion as follows: complex tax system, high tax rates, corruption, and informal economy. 

He gives the following solutions: tax reforms, strengthened enforcement, integration of informal sectors, anti corruption measures, public awareness, and education. 

We will conclude this piece with a striking observation by Professor Ndubuisi: “There is no sector in the national life that you can give a thumb up, in spite of huge budgetary allocations to them. Even the tax from the exploitation of oil resources are hardly accounted for. “ 

Therein lies the burden in our tax administration. We hope the authorities are reading this.

*Ikhioya wrote via: www.southsouthecho.com