Government has the constitutional duty of providing several services to the governed. These services include health, communication, defense, sanitation, energy, salaries of civil and public servants and many other similar functions. Such services require huge budgets .The health sector for instance require the building and equipping of hospitals. To have a secured state, the Armed forces must be provided with armaments while the provision of energy and communications mean ensuring joules of energy and several broad bands.
Taxes are collected by the government from people, organizations, establishments, companies and institutions of a country. Taxes are important to cover the cost of administering a state, to raise revenue, to reduce disparity between income distributions, to protect young industries as well as to correct balance of payment problems. Other reasons for tax imposition are, to hamstring the consumption of harmful products, to check inflation, to achieve the economic aspirations of government, minimize inequality in governments and to implement policies of government.
In Nigeria, there are several means of income on which tax is levied. The Personal Income Tax is demanded of Nigerians or Non-Nigerians who make their earnings in Nigeria. An individual is eligible to pay such tax if he is a Nigerian making his earnings in Nigeria or if he is a non-Nigerian whose source of earning is in Nigeria.
Corporate bodies have a mandate to pay tax under the Corporate Income Tax. An incorporated body is deemed to be a person in Law. It is separate and distinct from the shareholders of such company. Companies situate in Nigeria are taxed on their worldwide income while foreign companies are taxed only in their profits. It is not clear why such disparity exists but let’s not spoils a good story by getting ahead of ourselves.
Where a particular profit or income is taxable in Nigeria and another country, the income statutes show the possibility of the tax payer getting a tax relief. The Income Tax Relief is aimed at encouraging investment by pioneer companies. Pioneer status is conferred on companies that invest in industries that are considered to be less active despite their role in the growth of the economy. The Mineral and mining Act also confers tax relief to companies in that sector.
There is also the Value Added Tax(VAT). Purchases of chargeable products and services pay 5% of the purchase price as tax. The net of this form of tax are distributed to the federal, state and local governments by the Federal Inland Revenue Service which is the official receiver of such tax. In the petroleum sector, persons who engage in activities in the petroleum, oil and gas industry in compliance with the petroleum Profit Tax Act (PPTA) are excluded from any payments levied as tax.
The Customs and Excise Management Act provides for the levying of customs duties on importers of specified goods. This tax is received by the Nigerian Customs and remitted in the Federal Revenue Accounts. Documents and Transactions have taxes imposed on them through the Stamp Duties. Buildings are also required to be taxed through the payment of Tenement Rates. Property owners are required to pay charges to the government before the Governor grants consent in consonance with the Land Use Act of 1978.
If taxes are so important and citizens have a duty to pay them, why is the payment of taxes in Nigeria such a huge challenge? One of the challenges, one would imagine, has got to do with the tax collectors. Tax Collectors have had a long easy earned reputation of skewing the process. The famed short, mean Zacchaeus in the Holy Book often cheated on people. That tax collector milked others to have the biggest houses, flamboyant resorts, latest car models and a host of other exotic stuffs that were at variance with his paycheck. Thanks goodness, he had a change of heart. That change of heart is not very easy to find in Nigeria.
A vast population of Nigerians are made to pay too many illegitimate taxes. Commercial drivers pay a variety of taxes. By what laws and with what computation are those taxes evaluated? Hoodlums force people on highways and city roads to pay taxes; to what coffers are those taxes remitted? Incidentally, Government agents are exempt from paying taxes. So if those who should serve as examples of tax payment are protected by Law, what then is the motivation for others?
A good tax system should meet the broader objectives of social justice and should comply with Adam Smith’s cannons of equity, certainty, convenience and simplicity. Tax should be imposed on the ability to pay for it to be equitable. The tax payer should know the exact amount to pay as well as the time and method for payment .The manner and time in which taxes are paid should be convenient and simple enough for everyone to understand. A good tax system should also not discriminate between people.
There are several reasons many Nigerians fail to pay taxes. There are no uniform laws to check incessant and indiscriminate taxes people are made to pay. Every tout on the street is holding on to some receipt and holding out as a tax agent. Local Governments are imposing taxes on almost everything. People are not properly enlightened on the uses of taxes neither are there checks to high tax rates.
The stronger arguments are that Nigerians do not see the need to pay tax because each man is his own government-powers generator for electricity, drills borehole for water, pays guards for security, and finances every other social service that should connect him to the government as enshrined in the social contract. Second, most taxes are embezzled. We know that for a fact because the taxes collected from us are not the figures reflected in official documents more so, many pool funds are embezzled by corrupt government officials who carry on brazenly because our weak laws will protect them while preying on a poor public.
Nigerians love their country. They would not mind paying tax (Lagos state is a classic example) but they have been let down far too many times to believe anything could be done differently. Yet, we cannot carry on like this. Our tax system needs a complete overhaul. The starting point is to build trust in the Nigerian populace that our tax system can work. Corrupt tax officials and other embezzlers of public funds should be punished in a manner that serves as deterrence. There should be uniform tax laws to check hoodlums who steal from the public. Public enlightenment programmes on taxation should be done to educate people on their civic duties and responsibilities. Payment of tax is supported by religion. The Koran encourages the payment of khums which ought to be duly paid. The Bible encourages Christians to give unto Caesar (the State) what is Caesar’s and to God what is His. And it is to that end that this column encourages fellow Nigerians to live up to this obligation.
