Nigeria is inept in revenue collection and reckless in spending. It has a voluptuous spending appetite but is reprehensibly lethargic to revenue generation. In the first half of 2021, government missed its revenue target by a whooping N1.48 trillion and overshot its spending for the period massively. That has become an annual ritual.
The strange phenomenon saw the federal government spending 98 per cent of its miserable revenue on debt service for that period. An odd combination of low revenue generation and voluptuous spending appetite is largely responsible for government romance with bankruptcy. Nigeria probably has the lowest tax to gross domestic product (GDP) ratio in the whole of the Economic Community of West African States (ECOWAS). While the average tax to GDP ratio among the impoverished states in ECOWAS hovers around 17 per cent, Nigeria trails with a deplorable 6.5 per cent.
Last week the whole world saw why Nigeria is reprehensibly low in revenue generation. The rich corruptly evade tax and import duty payment. With government on the throes of bankruptcy, the presidency ordered the Nigeria Customs Service (NCS) to collect import duties on 91 private jets that have traversed Nigeria’s air space for 15 years without import duty payment.
Consequently, NCS ordered Nigeria civil Aviation Authority (NCAA), Federal Airports Authority of Nigeria (FAAN), and the Nigerian Airspace Management Agency (NAMA) to ground the 91 private jets until their owners pay import duties on them. Import duties on the 91 private jets is estimated at N30 billion.Some of the private jets operating without import duty payment are owned by men who preside over Nigeria’s booming Pentecostal churches. Nigerians are fanatically religious but scandalously ungodly.
The heads of the Pentecostal churches exploit that weakness in the system and rake in fortunes from everyone including the poor. They fleece the uninformed flocks and operate fleets of private jets and armoured limousines.
The federal government is responsible for the lawlessness in the land when it comes to tax and import duties collection. It has for decades treated the crass lethargy and appalling corruption in the Federal Inland Revenue Service (FIRS) and NCS with incomprehensible apathy.
Nigeria is capable of generating N6 trillion from import duties annually. Ironically the federal government nods in apparent approval when the NCS chips in N1.2 trillion and roll out the drums to celebrate imaginary exceeding of revenue target for the year.
FIRS can conveniently raise Nigeria’s tax to GDP ratio to 15 per cent, if it is challenged by the federal government. Ironically government sees no reason to push the tax collectors who are mired in deep slumber and stoic corruption.
There are 146 private jets in Nigeria. Out of that number, only 46 are registered locally. Private jet owners spend N30 billion annually on maintenance of the jets that confer them the needed status symbol but craftily evade the payment of import duties on them.The late Temitope Balogun Joshua, an accomplished magician who founded the Synagogue Church of All Nations, was reputed as owner of the most expensive private jet among Nigeria’s religious leaders.
His Gulf Stream G550 was acquired in 2015 and it flies around Nigeria with U.S. registration number N131LK. The jet is maintained annually at a princely sum of $3 million or N1.6 billion at current parallel market exchange rate.With an American registration number, it is obvious that the import duty on the jet is still outstanding as it is regarded as operating on lease. The federal government’s state of bankruptcy is a self-imposed tragedy. Tax collection is appallingly languid, and no one is complaining. Three years ago, FIRS discovered well over 6,000 bank accounts where their operators pay no taxes at all. The minimum balance in each of the accounts is in the range of N2 billion.Ten per cent tax on each of the account would give government something close to N2 trillion in a year. No one knows how much the FIRS has collected as tax from the billionaires evading tax with impunity.
In other lands, they would pay the taxes on the deposits for as long as the money was in the banks. They would even go to jail in addition for the heinous crime of tax evasion. Everyone breaks Nigerian laws with impunity because no one enforces the laws.
Nigeria’s tax burden is inexplicably skewed against salary earners especially civil servants, while the rich in the private sector evade tax in collaboration with corrupt tax collectors. Lagos state government is very ruthless with its workers on tax deductions.A civil servant with a monthly take-home pay of N360,000 faces monthly tax deduction of N60,000. Business men in the private sector with daily turnover of N10 million pay next-to-nothing as tax.
Even the daring young men who fry akara (beans cake) at busy street junctions make daily turnover of N20,000. At the end of the month they make more income than the civil servant who is forced to surrender N60,000 monthly as tax to the state government.The young men who fry akara earn anything from N500,000 per month and pay no tax. The civil servant earns less and pays more tax.
A highly informed source estimates the daily turnover in Computer Village, the electronic market in Ikeja, Lagos at N1.5 billion. That puts the annual turnover in the market at something close to N500 billion. Lagos state government gets pittance in terms of tax from the market because it lacks the data base to collect taxes on transactions in the market.
The government of the state of Massachusetts in the United States gets five per cent as tax from every transaction in similar markets within its domain. If Lagos state copies that it would rake in a minimum of N20 billion annually from transactions in Computer Village alone. That would give the state government enough revenue to enable it to ease its merciless grip on civil servants.
If Nigeria rejuvenates its tax collection machinery and makes it capable of raising the tax to GDP ratio to 15 per cent, it would be generating N40 trillion as tax revenue annually. That is about four times the revenue projection for the 2022 Appropriation Bill.
That would simply end the crippling budget deficits being funded through debts that are serviced with 60 per cent of annual revenue. The order for the grounding of private jets without import duties is a good starting point. The offenders should pay 21 per cent interest as penalty. If executed impartially, it would send a strong signal to tax evaders that there is consequence for the heinous crime.