The federal government is facing what probably is Nigeria’s most calamitous financial crisis in the last 30 years. Even when the kleptomaniac Sanni Abacha was selling oil at $10 per barrel and stealing $5 billion from the dwindling income, government was not as broke as it is today.
The revenue crunch is so excruciating that government lost N1.2 trillion in the first quarter of 2020. Government responded to the cash crunch with drastic income generation measures that could prove counter-productive. One of such measures is the stamp duty on property rent and leases. Government has slammed a six per cent tax on property rent and leases.
The lay man understanding of the resurrected levy is that the yearly N100, 000 rent on a two-room apartment of a family of nine whose bread winner’s monthly income is N30, 000, would now rise by N6, 000. The additional N6, 000 could cause rent default and force the family into debt. The levy is unpopular, untimely, inconsiderate and incorrigibly incongruous.
Nigeria probably has the lowest tax to gross domestic product (GDP) ratio in Africa. The country’s tax income is a paltry 6.5 per cent of its GDP.
Nigeria can collect tax revenue amounting to 20 per cent of its GDP without slamming undue burden on the millions pushed into abject poverty by endemic corruption in government circles and a weird income distribution system designed to sustain the indecent opulence of government officials.
The major problem with the low tax revenue is that the rich in Nigeria evade tax with impunity. The Federal Inland Revenue Service (FIRS) recently discovered more than 6, 000 billionaires who are professional tax evaders.
In a country where billionaires are above the law, no one has lifted a finger in protest against the high velocity criminals. Some of them are cronies of top politicians and cannot be touched by tax collectors.
Some of them are the top politicians themselves. Dapo Apara, a former managing director of Alpha Beta Consulting, a leading revenue collecting firm in Lagos petitioned the Economic and Financial Crimes Commission (EFCC) that his former employers, who collect revenue for Lagos State government at 10 per cent commission had evaded tax to the tune of N100 billion.
EFCC dismissed the petition with the lazy excuse that the petitioner did not supply enough facts.
If an alleged tax fraud of N100 billion is too complex for the thief catchers in EFCC to investigate, one wonders why the tax collectors in FIRS cannot wade in, examine the company’s books and collect the appropriate tax.
The six per cent stamp duty on rent and leases is government’s weird manner of transferring aggression to the poor in a bid to allow the influential minority to relish their loots. The levy is expected to compensate for the revenue lost to billionaire tax evaders.
The tyrannical levy should therefore be restricted to rent of N2 million and above and kept in abeyance until the current economic storm abates.
The federal government has no moral right to slam its hypocritical stamp duty on property rent and leases on the poor if it fails to investigate the alleged N100 billion tax fraud by a company owned by top politicians.
A company that earns as much as N36 billion annually without paying tax is worse than a murderer.
That is why Americans argue that if a man evades tax and another man shoots somebody to death in the streets of New York, the police would first go for the tax evader before looking for the murderer. The logic in the rather weird alignment of priorities is that the police need the money from the tax evader to prosecute the murderer.
The federal government must treat rich tax evaders as murderers if it must meet the tax revenue target of 15 per cent of GDP by 2023 envisaged by its Strategic Revenue Growth Initiative.
It is very easy to widen and deepen Nigeria’s tax net. There are millions of millionaires outside Nigeria’s tax net. They must be brought into the net before we start slamming merciless stamp duty levies that would only hike the rent of the impoverished inconsequential majority and worsen their plight.
Corruption is at the root of Nigeria’s abysmally low tax revenue. Tax collectors in FIRS are richer than some states. They collect more into their pockets than what is remitted to the federation account.
After examining the books of a tax defaulting firm, the tax collectors would tell the directors of the company: “your tax liability in N500 million. Give us N50 million and we reduce it to N100 million”. The defaulters almost always bribe their way out of their tax liabilities.
Besides, thousands of employers deduct their workers PAYE but fail to remit it to the federation account. The FIRS knows the employers who are neck deep in tax fraud but ignores them for obvious reasons.
Nigeria’s unwieldy informal sector is a major obstacle to tax collection in a country with chronic dearth of data. A study by PriceWaterHouse, a leading accountancy firm suggests that 73.2 per cent of Nigeria’s workforce is in the informal sector.
With the dearth of data in the country no one knows what people in the informal sector earn. That makes it impossible to assess them and tax them appropriately. Ironically Nigeria’s tiny neighbours in the Economic Community of West African States (ECOWAS) collect tax even on items purchased at road sides. Senegal has a tax system that recognizes its thousands of road side traders. The traders tax consumers who purchase taxable items from them and remit the money unfailingly to government. Nigeria can do it if government officials shun greed and selfish ambition. Tax collection is not rocket science. It is about data collection and transparent enforcement of standard rules.
The ill-timed rush to slam merciless stamp duty on the poor might truncate growth in the property industry which has a high potential for job creation. Nigeria cannot afford to inflict more burdens on its feeble property industry which is battling 35 per cent lending rate on mortgage transactions.
While Nigeria toils to widen and deepen its porous tax net, there is need to strike a delicate balance between tax collection and growing commerce and industry through tax incentives.
