Experts Advocate Improved Tax System to Tackle Tax Evasion, Foster Economic Prosperity
Industry experts have advocated for an improved tax system to tackle tax evasion and promote a culture of voluntary tax payment compliance for economic prosperity in Nigeria.
They made this known at the second edition of the National Tax Conference held recently at the Banquet Hall of Banex Mall in Lekki, Lagos, with the theme, ‘Tax Evasion in Nigeria; The Solution is Here’.
The conference attracted fiscal policy experts who engaged in robust discussions on possible ways to harness the huge tax revenue potential of Nigeria to boost the provision of public goods as well as find a lasting solution to the problem of tax evasion in the country.
Speaking at the conference, industry experts revealed that preventing tax evasion requires implementing a multidimensional strategy that includes, among other things, better tax legislation, improved reporting, education, effective enforcement, incentives, international collaboration, and corporate accountability.
They also agreed that societies can establish effective tax systems that are fair and supportive of social welfare and economic prosperity while reducing tax fraud by promoting a culture of voluntary compliance.
In his opening remarks, the Chairman of the conference, Otunba Ranti Omole, described taxes as the most important source of government revenue in modern economies, stressing that it is important that all citizens of a nation regard taxation as a civic duty and part of the sacrifices and contributions towards nation building.
Citing the SMEDAN/NBS studies and PWC of 2020 studies on micro, small, and medium scale enterprises (MSMSE), Omole noted that 59.65m people, which is about 76.5 percent of total workforce of Nigeria, are employed by MSMEs.
He regretted that out of about 41.543m SMEs in the country, only about 73.081 (those with greater than N20m and less than N500m turnover) are being overtaxed along with large organizations, while about 41.470m (with less than N20m turnover) are not within the tax net.
He said with a contribution of 49.78 percent ($220b) to the nation’s gross domestic product (GDP), SMEs are the fertile base for tax collections.
“If we imagine 1% of this for taxation is $2.2b, it means N1.7 trillion’, Omole said.
‘’However, a lot could also be done to improve the productivity and value addition of the Nigerian MSMEs for greater GDP contribution compared to about similar number of MSMEs in the USA contribution of over $10 trillion to the US GDP. This will have an exponential effect on tax revenue from the MSMEs in the country.’’
According to Revenue Statistics in Africa, a collaboration of the African Tax Administration Forum (ATAF), African Union Congress (AUC), and OECD, an EU-AU funded initiative, Nigeria’s tax to GDP ratio is currently at 6.1%, Egypt is 14.1%, Ghana is 14.1%, South Africa is 27%, while African average is 15.6%.
Making a comparative analysis of the company income tax ratio to total tax revenue of select African countries, Omole observed that Nigeria has almost the highest CIT ratio in Africa at 35% compared to Egypt’s 27%, Ghana’s 23%, South Africa’s 18%, and continental average of 19%.
“We could see that our CIT ratio is almost highest in Africa as few recognized SMEs and Large enterprises are over audited and stretched for full compliances with adequate collection mechanisms of WTH and VAT at sources that trigger reasonable compliances compared to the informal sectors”, Omole noted.
In his presentation, one of the guest speakers, Dr. Tunji Adeniyi, former Commissioner of Finance, Budget & Economic Planning, Ekiti State, stressed that while the people should endeavor to pay their taxes, the government must utilize the tax revenue in a way that will encourage voluntary compliances.
He identified low tax education, complex tax legislation, economic pressures, and leadership insensitivity, high tax rates, and multiplicity. huge informal sector of the economy, weak consequence management, lack of tax integrity, inefficient tax administration, and economic digitization outpacing tax digitization as some of the causes of tax evasion in Nigeria.
Adeniyi explained that while only a lack of tax integrity requires an attitudinal change of the people, it is the government and the tax authorities that should work on the rest of the factors fueling tax evasion.
The former Managing Director of UBA Kenya, who spoke on the topic: ‘Designing Incentive-based Measures Against Tax Evasion’, listed some of the incentive-based measures to include right and transparent government spending, the transformation of huge informality to formality, investment in and adoption of innovation, citizen education, and national orientation.
Others, according to him, include restructuring the country, restructuring public service, instituting effective and efficient consequent management, and providing a conducive business environment.
He regretted that “the pattern of government spending today does not reflect the mood of the economy, insisting that a situation where about ‘’98 percent of the revenue goes into running the government’’ does not give the people reasons to pay their taxes.
Another guest speaker, Prof Friday Ndubuisi, immediate Past Vice Chancellor, of Christopher University, Mowe, Ogun State, observed that tax evasion is a universal challenge that continually thwarts the government’s efforts to collect the revenue they require for public services, infrastructure, and socioeconomic development.
He, however, described as naked oppression a situation where the government collects all the taxes from the people, while the latter still has nothing to show for all the sacrifices.
According to him, “Nigeria’s economy harbors a substantial informal sector, where businesses operate without formal and proper registration which enhances tax evasion.
“This vast informal economy poses a considerable challenge in terms of taxation. Encouraging formalization through incentives, coupled with efficient enforcement, can help reduce tax evasion.’
He further stated, ‘’Nigeria’s tax structure is characterized by its intricate and multifaceted nature, involving a multitude of taxes levied at both the federal and state levels.
“This intricacy often perplexes taxpayers, leading to inadvertent non-compliance or creating opportunities for evasion. Simplifying and streamlining the tax system is essential to mitigate this issue.’
Prof Ndubuisi, who spoke on ‘Tax Evasion and Promotion of Public Goods’, stressed the need to enhance public awareness and education as an effective way of tackling tax evasion.
“Promoting tax education and awareness campaigns can help shift the culture of tax evasion by educating citizens about their tax obligations and conveying the benefits of tax compliance’’, he said.
He urged the Federal Government to embark on a comprehensive overhaul of the nation’s tax system to simplify its complexity and reduce the tax burden on individuals and businesses.
“A more straightforward tax system, complemented by reasonable tax rates, can serve as an incentive for tax compliance”, Prof Ndubuisi said.
In his submission, Pastor Felix Jarikre stated that Nigeria can widen its tax base by widening its production base through strategic and compassionate measures.
Jarikre, an ardent critic of foreign debt, described as fallacious the proposition that Nigeria’s infrastructure deficit can only be corrected through the acquisition of foreign debt, insisting that the country can thrive and enjoy economic growth without acquiring any foreign debt.
Speaking on ‘Taxation Versus Foreign Debt: Viable Choice as Engine of Nigeria’s Growth’, the public affairs analyst cautioned that ‘’Piling of debt by FGN for any reason exacerbates the risk of its bankruptcy or financial failure.”
According to him, “Instead of looking outwards to finance the development of Nigeria’s infrastructure, domestic factors should be mobilized for the purpose. This way, the need for external debt will be minimized and domestic value chains will be energized across the board.”
Jarikre cautioned further: “Taking foreign loans as a means of building critical infrastructure, employment generation, and skills acquisition has repeatedly failed. Let’s have the honesty to admit it. The temper of the country, Nigeria, is a growing impatience and annoyance at the profligacy of lazy, corrupt government bureaucrats.
“What we have not tried is having the discipline, competence, and frugality to correct Nigeria’s infrastructure deficit through national taxation. This is the time for President Bola Tinubu to boldly and persistently wear his toga of fiscal reformer, and try this method. It’s a sure formula.’’
The pro bono National Tax Conference series is part of the Corporate Social Responsibility (CSR) arm of Okwudili Ijezie & Co. (Chartered Accountants), under the Blakey Ijezie Foundation.
According to the chief host, Chief Blakey Ijezie, the third edition of the conference, which is strictly by invitation, has been slated for February 13, 2024, at the Sheraton Lagos Hotel, with the theme, ‘Wealth Taxation in Nigeria – A Veritable Tool for Sustainable Development’.
Source: Business Hallmark
