Mrs Zainab Ahmed, Nigeria’s docile minister of finance, budget and national planning, made a casual remark last week that inadvertently exposed the gross ineptitude and selfishness of Nigerian rulers.
While presenting the 2023-2025 medium term expenditure frame work to the finance committee of the House of Representatives, the minister warned her audience not to draw an analogy between Nigeria and South Africa in terms of tax revenue because Nigerian elite do not pay tax. That is a lame excuse.
With that statement, the minister had insipidly authenticated a standing rule in Nigeria’s tax evasion. Tax evasion by Nigerian elites is an eccentricity enjoying government’s informal endorsement. It is practiced by politicians and businessmen alike.
Nigerian senators are probably the world’s best paid senators. Their monthly pay is a princely sum of N27.7 million. Ironically, their tax is just about what is deducted from salaries of level 17 officers in the civil service.
Conversely, tax is very serious business in developed economies. No one toys with it. Sometime in 2018, a British NGO fighting poverty in northern Nigeria sent one of my friends to Nigeria to head its outfit. The young man was on a monthly pay of 15, 000 pounds sterling. From that pay, the British NGO was deducting 1,500 pounds (more than N1 million at today’s parallel market rate) monthly and remitting it to Lagos State government as tax from the man working for them in Lagos.
Given that analogy, Nigerian senators should be paying N6 million monthly as tax. No one cares to enforce that. They have bullied the tax collectors into deafening silence.
No one in the federal government bats an eyelid over the swindling of Nigeria by the elites through tax evasion. The reason is that almost everyone in politics, business and civil service evade tax in different ways.
Ahmed lamented that Nigeria has one of the world’s lowest tax to gross domestic product (GDP) ratio because the elites evade tax. Nigeria’s tax revenue is a paltry 6.5 per cent of GDP. South Africa, a country with lower GDP than Nigeria’s collected $86.4 billion as tax revenue in 2018 because it flaunts a tax to GDP ratio of 26.3 per cent. Nigeria has never earned $10 billion from tax revenue even with a GDP far in excess of South Africa’s.
Nigeria’s ineptitude in tax collection is at the root of the abject poverty plaguing the federal government. For the 2023 budget, the federal government expects total revenue of N8.4 trillion while salaries of federal civil servants are projected at N8.5 trillion. The projected revenue cannot even pay the salaries of Nigeria’s bloated civil service workers.
For the 2023 budget the federal government is already projecting a yawning deficit of N11.3 trillion. The deficit is about 130 per cent of the expected revenue. Nigeria services its debt with 119 per cent of its annual revenue. When one adds civil servants salaries which hovers around 102 per cent of the expected revenue, Nigeria’s budget deficit portrays a nation perilously close to bankruptcy. Nigeria borrows to service its debt. It cannot fund capital projects.
Nigeria’s poverty is the consequence of gross economic mismanagement. Corruption is at the root of the indigence plaguing the federal government and 130 million Nigerians living below poverty line.
Besides the unabashed looting of the treasury by politicians and top civil servants, Nigeria’s poverty is caused by oil theft and tax evasion.
The federal government knows those who load Nigerian oil in barges and sell them to international criminals, but it is not bold enough to challenge the thieves. It would rather wring its fingers in absolute helplessness complaining to the whole world that oil thieves have ruined the economy.
The truth is that a government that cannot protect its only source of revenue has no business being in office because it cannot protect the business of investors coming into the country.
That is precisely why foreign investors treat Nigeria as a pariah nation and move to smaller economies where their investment is safe.
The persistent depreciation of the naira which has taken it to a humiliating rate of N700 to the dollar is caused by government’s inability to protect its only revenue source from bare-faced oil thieves.
The low tax revenue is the consequence of an odd combination of corruption and ineptitude. Nigerian tax collectors lack the data base that would guide them to collect tax from the rich and those at the lower rung of the social strata.
In the impoverished tiny economies constituting 99 per cent of the Economic Community of West African States (ECOWAS), even street traders pay modest tax.
In Nigeria, each of those roasting ripe plantain or frying akara (beans cake) at busy road junctions make daily turnovers of N20,000. That adds up to monthly income ranging from N500, 000. They pay no tax. A civil servant with that level of income pays N65, 000 monthly as tax. The whole burden of taxation is borne by salary earners in the civil service and organized private sector.
Nigeria’s unwieldy informal sector is a major problem to tax collectors because no one is willing to build the data base that would facilitate tax collection there.
Millions of people in the informal sector make millions of naira in daily turnovers. They do not pay tax because no one knows their turnovers.
Besides ineptitude, corruption takes a huge toll on Nigeria’s tax revenue. A huge chunk of the revenue from the few payers captured in the nation’s porous tax net is siphoned into private pockets.
Tax collectors coerce big corporate bodies into accepting illegal tax cuts in return for bribes to the assessors.
The leakages are almost innumerable. Four years ago, the Federal Inland Revenue Service (FIRS) announced the discovery of more than 6, 000 bank accounts with average deposits in the range of N2 billion each. Owners of the accounts have successfully evaded tax for years.
A paltry 10 per cent tax on each of the accounts would rake in trillions of naira annually for the federal government. No one knows what FIRS has done to the billionaire tax evaders.
In developed economies, owners of the accounts would not only pay tax for the years they evaded, they would also spend time in jail to serve as deterrent.
Last year, FIRS complained that the South African parent company of DSTV had tax arrears of N2.6 trillion to settle. Time has swept that into the oblivion.
The federal government is tepid about oil theft and tax evasion because it has opted for massive debt acquisition as a line of least resistance. That is calamitous to the economy.
