Nigeria doesn't need another tax reform now, says Adebayo
The Guardian
Ahead of the Chartered Institute of Taxation of Nigeria ( CITN)' s yearly tax conference starting in Abuja today, President Chairman of Council of the Chartered of CITN, Adesina Adebayo, spoke with on the challenges and prospects of the country’s tax system, arguing that Nigeria has the best tax policies in the world and that there is no need for reform now. What issues will you focus on at this year’s annual tax conference?
YOU will recall that the Institute celebrated its 40th anniversary in February this year. It wasn’t an easy journey but we return all the glory of God that our great Institute has continued to wax stronger in its contribution to the tax legislation, policy and economic growth of Nigeria. Being the 15th President and Chairman of the Council of the CITN, I have 14 predecessors before me, who have all made immense contributions to the success of the different Annual Tax Conferences ( ATCS), right from conception to implementation. As a major flagship of the Institute, the 24th ATC focuses on how to fully digitilise the Nigerian tax system, following the global disruption occasioned by globalisation and the COVID- 19 pandemic. The business environment has changed and so must our tax system. It is against this backdrop that this year’s ATC is tagged ‘ Global Disruption, Taxation and Digitalisation: Implications for SocioEconomic Development. To effectively digest this theme at the conference, subthemes were developed. They are: re- engineering Nigeria’s tax system: implications for taxpayers and tax administration and the emergence of digital currencies: current realities, future expectations and tax implications for stakeholders.
From these, you can deduce that this year’s ATC is in response to the changing world order and how Nigeria as a country can leverage the digital responses to this global disruption to improve its tax system. There must be a collaborative approach to fully grasp the challenges, implications, opportunities and solutions that the new digitalised economy presents. I can assure you that by the end of this year’s ATC, stakeholders will begin to put in place workable strategies for digitising Nigeria’s tax system for optimum performance.
Looking at the theme, where does the institute stand in terms of tax legislation, administration and fiscal intervention in the business environment?
The role of CITN in these areas is dynamic. As a professional Institute whilst developing the tax profession, we carry out research and conduct strategic gap analysis of the policy, legal and institutional frameworks regulating tax in Nigeria. We have developed policy papers as well as recommended actionable policies and strategies for improving the tax system in Nigeria, to the extent that investors are attracted to doing business within our shores. Another strategic role of the institute in this regard is to advise government in areas of fiscal interventions as they affect the tax system.
If you are familiar with recent developments in Nigeria's tax system, you must have noticed the deliberate action of the government to implement the Institute’s recommendations in the recent Finance Acts 2019, 2020, and 2021. We have seen some of our recommendations forming part of the tax legislation and policy documents of this administration. Tax legislation, tax policy, administration and fiscal intervention to create a business- friendly environment capable of attracting investors will always be a work in progress.
As earlier mentioned, the theme of this year's conference was carefully scrutinised to proffer more solutions to the global disruption that may affect our tax legislation, policy, and administration. Therefore, you can consider the conference a major contribution to improving extant policy, legal and institutional frameworks. Let me quickly emphasise that robust tax legislation, effective business- friendly administration and policy will automatically protect the business environment and accelerate economic development. I am convinced that if the government continues to implement all the key recommendations of the Institute on a timely basis, the impact will leave us in good fortunes.
Where do we get our tax policy wrong – framework or implementation?
It will be unfair to say Nigeria is getting its tax policy wrong. In truth, we arguably have one of the best tax policies in the world. The problem has not been with the policy framework. We constantly get it wrong at the point of implementation and therein lies the problem. You must understand that a policy, no matter how well construed, is like a toothless bulldog without effective implementation. In assessing the performance of a policy, you must consider so many factors such as the policy coordination and roles of stakeholders, effectiveness of monitoring and evaluation frameworks and most of all the adequacy of the fiscal environment. All these factors contribute to the performance of policies. Gleaning from this, all stakeholders in the Nigerian tax system must take seriously the issue of policy and programme implementation, if the overall objectives of national and economic development must be achieved. More so, our leaders can always do more in terms of taxpayers' expectations which is more or less a social contract.
Moreover, going by the OECD globally accepted criteria for policy evaluation, of relevance, coherence, effectiveness, efficiency and impact, we cannot fault our tax policy. If we are to critically examine the performance of the policy vis- à- vis recent strides in tax revenue collection and improvement in the overall tax system, you will agree with me that the problem is not with the policy. I know there is still a gap between policy e x p e c t a - tions in t e r m s o f required outcomes, but I am confident our framework has all the components we need to improve our tax system. All we need now is effective implementation and periodic review of the policy.
Stakeholders have called for an overhaul of the country’s tax system to plug leakages? Do we need reform to deal with leakages?
Seriously speaking, you talk about overhauling a system only when there is system failure or breakdown or imbalance or lack of cooperation. I can authoritatively tell you that we have navigated beyond that phase. There is no need to call for reform, we have had several within the last three decades, which I think are enough for now. The introduction of a yearly- finance act along with the appropriation act is enough to always correct the wrong after a fiscal year which will help us even in the international taxation. Agreed, a lot of issues have led to leakages and gaps in service delivery, considering taxpayers' perspectives and expectations as well as this affected the willingness to pay taxes.
However, the clamor for an overhaul is rather unnecessary at this point. We are improving gradually, which is a good thing. Slow and steady progress is more promising than frequent changes. As I have said, the taxpayers' concern is to see government judiciously spending taxes. If this was settled, I assure you that we would not be here discussing the issue of overhauling. Especially, not after what the government has spent on tax legislation, tax education, enlightenment, enforcement and the likes.
Let me also put this in proper perspective, that expecting significant growth in tax revenue as a ratio to GDP without the masses seeing the impact of taxes, they hitherto paid is neither fair nor realistic. Taxation is a social contract between the people and the government. Therefore, when citizens pay their tax, they expect some level of development as a reflection of the judicious use of their monies. Therefore, while we advocate for people to pay their taxes, we are equally appealing to the governments at all levels to improve their service delivery.
How can Nigeria achieve a competitive tax system?
The strategy for achieving this is simple and clear. Globalisation and the recent COVID 19 pandemic have transformed the way things are done in the 21st Century. To remain relevant and competitive in the global world, the Nigerian tax system must align with global best practices, which are hinged on digitisation. The complete digitisation of our tax system and developing a robust tax database, where every taxable person is captured remains our best bet for achieving global competitiveness.
Nigeria is among the countries with the lowest tax revenue to GDP. Is this caused by evasion, restricted tax net or poor administration? Where do we start in the efforts to improve?
Several factors contribute to Nigeria’s low tax revenue to Gross Domestic Product ( GDP). However, it is imperative to note that, these causes go beyond tax evasion, administration and restrictive tax net. The principal cause for Nigeria’s low tax revenue to GDP index as I mentioned earlier is poor digitisation of the process and inadequate tax database. Let me emphasise that, Nigeria, has over 200 million people, these people should not be anonymous. We cannot tax people that are not known. How then can we have the required tax revenue when all we do is increase the taxes and levies of those paying instead of expanding our tax base and coverage? We need to have a system that tracks every taxable person within the shores of Nigeria, such that even when a taxpayer or business changes location, the tax history can be effectively tracked and reconciled.
Let me also put this in proper perspective, that expecting significant growth in tax revenue as a ratio to GDP without the masses seeing the impact of taxes, they hitherto paid is neither fair nor realistic. Taxation is a social contract between the people and the government. Therefore, when citizens pay their tax, they expect some level of development as a reflection of the judicious use of their monies. Therefore, while we advocate for people to pay their taxes, we are equally appealing to the governments at all levels to improve their service delivery.
The Finance Act is becoming a yearly ritual. Is this not an anomaly in the fiscal space? Does it help business organisation in long- term planning?
Let me state clearly that changes in the finance act are also aimed at creating a favorable business environment. For instance, the Finance Act of 2020 brought sweeping changes to Nigeria's tax and regulatory landscape and lay to rest any confusion regarding the Finance Act 2019. Some of which are the right of Shareholders to claim for dividend, exemption from Payment of Minimum Tax and goods liable for excise duty among others.
Similarly, the 2021 Finance Act introduced about 10 changes, one of which spells out the roles of the FIRS, which is also favorable to the business world. We have to understand that taxation is all about laws, policies and administration. Each of these elements, especially tax laws, must be consistently updated to align with current trends in taxation. It is hazardous for the Nigerian tax system to operate under the regulation of obsolete legislation. Moreover, in long- term business planning, a very important element to factor in is the trend in taxation.