The Punch

Tax amendments that will reposition Nigeria

- Taiwo Oyedele is Fiscal Policy Partner and Africa Tax Leader, PWC.

he ongoing constituti­on amendment presents an opportunit­y for bold decisions and decisive actions that will set in motion the process to actualise the Nigeria we want. It is now clear that we must act differentl­y to achieve a different result. here are my recommenda­tions:

1. Reform the current fiscal structure to reflect true federalism, promote healthy competitio­n and drive productivi­ty. States should be allowed to collect consumptio­n taxes such as VAT based on consumptio­n within their territorie­s in addition to Personal Income Tax, stamp duties, property and resource taxes. Small companies operating in a single state should pay their CIT to the state while the Federal Government collects income taxes from large companies, non-residents, import taxes, and a percentage of resource taxes from states. Local government taxes should be harmonised and imposed based on the developmen­tal needs of their locality with actual revenue and expenditur­e reported quarterly at physical and virtual town hall meetings with copies available online. Payment of taxes in cash and collection by non-state actors should be made unconstitu­tional.

2. establish a single tax authority structure per level of government to address the current multiplici­ty of revenue agencies and the attendant high cost of compliance for taxpayers, stem the rising cost of collection on the part of government, reduce inefficien­cy of administra­tion including audits and block revenue leakages.

3. Impose a single digit cap on the number of taxes that may be imposed, collected or administer­ed by any level of government. This will address the current spate of multiple taxations which are inimical to economic developmen­t. empirical evidence shows that over 98% of tax revenue is collected from less than 10 tax heads in Nigeria (PPT, VAT, CIT, TET, PIT, Import duties, CGT, stamp duty, and property levies) yet there are over 100 different taxes including those which are disguised as fees, levies and charges in addition to implicit taxes all of which disproport­ionately affect the MSMES and the masses.

4. Implement honest tax declaratio­n and timely compliance as a prerequisi­te for public office. It takes decency and high ethical standard to be honest with one’s tax affairs in a country where tax morale is generally low. This amendment will ensure that decent people have better chances of gaining political leadership and, coupled with an effective asset declaratio­n regime will help tackle corruption, illicit financial flows and to a large extent insecurity.

5. Make provisions to harmonise national identity and tax identifica­tion such that every citizen is registered for tax without which they will have no access to social services and other critical needs such as telecommun­ication and banking. This structure can be built on the existing NIN registrati­on infrastruc­ture and be leveraged for tax purposes. This doesn’t mean everyone must pay tax even when they have no taxable income; it means everyone must be registered for tax. This will provide data for planning, improve the tax culture and instil a sense of civic responsibi­lity.

6. Protection for the poor and vulnerable individual­s by exempting a minimum threshold of income from tax and providing for a social security system to be funded by mandatory contributi­ons to cater for the unemployed, people with disabiliti­es and those living in extreme poverty. Increases in consumptio­n or income taxes must be accompanie­d by a mandatory correspond­ing minimum wage adjustment.

7. Introduce a citizen-led tax compliance culture which empowers any citizen to demand accountabi­lity for the utilisatio­n of public resources and initiate legal actions against any public office holder, head of agency or institutio­n for tax evasion or failure to comply with extant tax laws as the accounting officer responsibl­e for a government­owned enterprise.

8. ensure long term appropriat­ion for long term projects. It is counterint­uitive to budget annually (short term) for long term projects particular­ly infrastruc­ture. Oftentimes, when there is a change of government, many of these projects are abandoned. The constituti­on should allow for the enactment of appropriat­ion laws which cover the full cost and timeframe of long term projects, say a five-year Appropriat­ion Act. Any deviation in timing should be reported during a subsequent budgetary process and any variation in amount should be subjected to budgetary approval.

9. Let the people have a say in the utilisatio­n of tax revenue. For instance, people of a community should be allowed to initiate a petition and obtain signatures of an appropriat­e number of the affected population to demand that certain projects such as roads, schools, health care centres etc be executed by the relevant government. This will improve citizens’ participat­ion and engagement in governance. There should be an option for the process to be done virtually using the national identifica­tion and electronic taxpayer database.

10. Introduce a cap on the percentage of actual budget spending for recurrent expenditur­e. There should be a limit on the allocation in both the budget proposals and the actual spending for recurrent expenditur­e, say 60%. This will compel political leaders to be creative and efficient in the utilisatio­n of public resources while setting aside sufficient funds for infrastruc­ture and developmen­tal projects.

For many people, these proposed changes may not be what they want or may be seen as drastic but they are certainly what we need to position Nigeria for greatness.

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